Savings instruments: life insurance policies that can be revalued are increasingly widespread among savers
Savings (Pixabay)
One of the most important decisions people have to make is choosing the right tools to protect their savings . Keeping the money in the current account or under the mattress does not make any sense: it is better to opt for solutions that offer a return, but above all that present a very low level of risk .
There are not many savings instruments that correspond to this identikit, but the revaluable life policies certainly fall into this category. In recent years, savers have shown their appreciation of this type of policy, relaunching a sector, that of life insurance, which had previously shown some signs of decline.
What are revaluable life policies
By subscribing to a revaluable life policy, the insurance company undertakes to invest the premiums paid by the customer in a separate management from the rest of the company's activities. The returns accumulated annually by this management are consolidated and increase the guaranteed insurance benefit by following the percentage fixed on the contract, or rather the retrocession rate .
Thanks to this mechanism, revaluable life policies make it possible to accumulate capital over a medium-long period which the beneficiary can draw on according to the provisions of the contract. This is a guaranteed return and with a very low level of risk, given that the premiums paid are invested in a separate management.
Features, pros and cons
Revaluable life policies can be underwritten by virtually any small saver. The capital paid by the insured through the premiums is revalued each year in relation to the return obtained from the separate management. Interest is calculated not only on the paid-in capital, but also on the interest already accrued previously: this mechanism is called compound capitalization .
When the contract expires, a minimum guaranteed return provided for in the contract is paid on the capital accumulated over the years, which usually is around 2.00%. It is certainly not the most profitable investment solution, but we are talking about a savings instrument, therefore more aimed at the safety of the committed capital than at obtaining a return (which, although contained, is guaranteed).
In the list of advantages of life insurance policies of this type, the tax concessions that the subscriber can benefit from must be indicated. The premiums that are paid to the company are in fact deductible at 19%; in addition, life insurance that can be revalued does not involve the payment of stamp duty. However, it should be noted that in the event of early redemption, the contracting party is required to pay penalties to the company.
The mixed type policies
Revaluable life policies can also be of a mixed type . In practice, a part of the premium paid by the insured is allocated to other guarantees such as death or permanent disability: in this way a capital is paid both in the event that the insured arrives alive at the expiry of the policy and in the event in which he dies before this deadline. In mixed policies, part of the premium is not set aside for the separate management .
A portion of the payment is in fact used to create the capital to be paid in the event of death or permanent disability . This mechanism ensures that the insurance benefits paid upon expiry of the contract are lower than traditional life insurance policies: in fact, the subscriber will have to be satisfied with the repayment of the capital paid with premiums over the years.
Example: how the savings tool works
To better understand how these savings tools work, it may be useful to give an example. A couple of parents decide to create a capital that in the future can allow their child to meet the expenses related to his university education. They then sign a life insurance policy that can be revalued, paying the premiums in the manner and within the deadlines set out in the contract. After the costs, the remaining part of the premium is allocated to a separately managed fund .
Funds are managed in such a way as to achieve a return each year. Upon expiry of the contract, the beneficiary receives the entire capital paid over the years by his parents to which is added the minimum guaranteed return. Furthermore, but only if the separately managed account has had the desired results, it has the right to participate in the profits. For the entire duration of the contract the insurance is obliged to send an annual report , so the insured can follow the progress of the policy.
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The article Savings tools: revaluable life insurance policies are becoming more and more popular among savers comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/strumenti-di-risparmio-sempre-piu-diffuse-tra-i-risparmiatori-le-polizze-vita-rivalutabili/ on Tue, 21 Sep 2021 06:58:22 +0000.