To cope with a lack of cash flow or an urgent need for liquidity, many people make a partial or total surrender of their life insurance. Others take out a consumer loan. Please note, however, that it is possible to request an advance from your insurer without affecting the profitability of your current contract.
The advance: an interesting alternative in the face of the increase in credit rates
By surrendering part of your life insurance to finance a temporary lack of cash flow, you lose all the advantage of its valuation. And today, with the rise in interest rates, using consumer credit is hardly any more beneficial.
If you believe you have the capacity to repay the borrowed capital and interest in the short term, it is more advantageous to request an advance from your insurer.
The advance most often consists of a bullet loan over two or three years, that is to say that the amount of capital and interest is repaid in one go at the end of the granted period. Its rate is generally indexed to the remunerative rate of your contract, to which an increase will be applied. The average government borrowing rate (TME) can also serve as a reference. This stood at 3.25% at the end of 2023. Compared to the borrowing rate for consumer credit, which amounts to more than 7% over three years, the advance is a completely viable and attractive option.
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What is the maximum amount authorized for an advance on your life insurance?
There is no law governing the maximum amount authorized for an advance. However, insurers generally impose a ceiling on the height of the type of contract. Thus, for life insurance placed on funds in euros, the security of which is recognized, the companies grant up to 80% of the capitalized amount. For more dynamic contracts, that is to say positioned on speculative funds, the ceiling is limited to 60% of the capital.
Unlike a buyout,
Important The advance is neither taxed nor exposed to social security contributions.
In addition, your funds continue to generate interest on the entire capital invested. In the event of death or disability, the advance is reimbursed on the amount collected on the support.
To remember
- The advance on life insurance allows you to have capital without having to surrender the contract.
- Its interest rate is more attractive than that of a consumer loan.
- The authorized amount is capped at 60% or 80% of the capital depending on the type of contract.
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2024-02-25 01:22:19
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