What are the fees applicable to the life insurance contract?

Life insurance is a tool for wealth management among the most popular, and yet, fees are rarely studied with the attention they deserve. They are in fact present at each stage of the life of your contract and unlike PEA fees, they are not capped. They are divided into 3 types: entry, payment and management.

Entry or subscription fees

This is the amount withdrawn directly when you open your contract. They can represent up to 5% of the amount deposited, which means that for every €1,000 invested, €50 will be taken by your insurer, and only €950 will actually be invested.

However, many institutions no longer apply them. This is particularly the case with online banks and insurers who often offer to exempt you from these entry fees or who make “welcome offers” to this effect several times a year.

Payout fees

Like entry fees, this is an amount deducted for each payment made on your contract. Whether your contribution is one-time or regular, the payment fees are applied in proportion to the amount. They therefore systematically reduce the amount you actually invest from 2% to 5% in general.

Annual management fees

Life insurance management fees are annual and in proportion to the value of the contract, i.e. capital + interest + earnings generated. Their amount depends on two criteria:

the type of investment medium: funds in euros or units of account;
the type of contract: monosupport (entirely in euro funds) or multi-support (euro funds + units of account).

They are recurrent and therefore have a direct impact on the performance of your portfolio. For funds in euros, they vary between 0.35% and 1%, while units of account show fees ranging between 0.5% and 1.20% regardless of whether the performance is positive or negative!

Arbitration fees

Arbitration fees are charged when you change the composition or distribution of your assets. They are generally proportional to the value of the transaction, but can also be subject to an annual fee (5 arbitrations for €30 for example). It is possible to see that fees vary between 0.5% and 1% at most insurers or banks.

Life insurance costs are a trap that is often overlooked by investors. Taken together, they represent a significant amount that affects the performance of your investments. So, be careful when choosing your contract. Beyond 3.5% in management fees, it becomes very difficult to maintain an efficient life insurance contract.Finary's opinion

Are life insurance costs the only ones in your portfolio?

Unfortunately, the costs of managing your life insurance policy are not the only ones in your portfolio. Indeed, depending on its composition, you will have to pay fees related to your investments, to the management solution or to the closure of your contract.

Underlying costs

Depending on the composition of your life insurance, you may have to pay fees on your investments. This is the case in particular for ETF and UCIs whose management fees vary between 0.2% and 1%. Beyond that, they are generally too expensive to be profitable.

In the case of units in UCITS or SCPIs, you should know that they include their own entry fees in addition to their management fees. It is therefore important to be vigilant about the choice of products purchased through your life insurance.

Management solution fees

In the context of life insurance, you can opt for different management methods: managed, advised or autonomous. These solutions are certainly more or less expensive, but can also allow you to avoid certain investment mistakes that are much more expensive! Thus, in the context of a controlled management, you give power of attorney to your broker so that he can independently carry out the necessary arbitrations according to the objectives you have defined. As for recommended management, it is a partnership between you and your broker. The latter offers you orders that you accept or not. The fees applied vary between establishments and are expressed as a percentage. Under controlled management, they can reach more than 3%, significantly reducing your performance!

Comparative management fees managed life insurance — source: Avenue des Investisseurs

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Other expenses

Inheritance, closing, or redemption fees are now relatively rare. Rather, it is taxation that will impact your savings when you transfer your contract, depending on the age at which you made the various payments. It is good to note, however, that if early exit fees are provided by your insurer, they are capped at 5% and only applicable to contracts of less than 10 years.

in a life insurance contract must be part of a genuine strategy.Place your moneyCompare the offers! And above all, ask for details of the fees charged to fully understand what you are subscribing to. **Finary's opinion**

What is the cheapest life insurance?

Life insurance policies are very broad and it can be difficult to find your way around. The easiest way is to create a comparative table of life insurance management fees to estimate which will be the most profitable for you. Find below the comparison of 3 offers compared to an average contract.

How can you optimize your life insurance costs?

Fees are the only part you really have control over to be able to take action. Indeed, they have a direct impact on the performance of your portfolio, so it is more than necessary to control them. Your worst enemy? The accumulation of fees! Between the envelope, the products, the ancillary costs, which can quickly reach 3% or 4%, thus erasing up to the entire return on your investments.

So how can you reduce your life insurance costs? First of all, by carefully studying the various offers and keeping in mind that it is preferable to have high payment fees and low management fees, the latter being recurrent and unavoidable.

The solution Finary Plus allows you to simply analyze the costs of your life insurance thanks to tools for analyzing fees, performance and your investor profile comparable to those used by wealth management professionals. The results obtained give you all the keys to reducing the costs of your life insurance and all your investment products.

And what better than a concrete example to understand the importance of understanding and optimizing your life insurance costs? Take the example of life insurance contract management fees for an investment of €1,000 paid at 3% in a euro fund with an insurer applying average rates, managed independently and without any arbitration:

Initial payment: €1,000;
3% opening costs: €30;
Management fees at 0.8%: €7.99 (999.1 x 0.8%);
3% return: €29.10 ((1,000 — 30) x 3%).

The fee is €37.99. As you can see, after one year, you only have €991.1: you have not recovered the amount of your initial payment! Without a new payment or arbitration, it will take 18 months for you to get back to your starting capital. To these costs will be added the possible managed management fees and the various arbitrations that will increase the performance effort to be made in order to obtain real gains.

FAQ

Can management fees be avoided in a life insurance contract?

Regardless of the institution chosen, management fees are unavoidable. They represent the main method of remuneration for your intermediaries. At best, you can negotiate them by making the competition work or by contributing a substantial amount of money.

How do you calculate life insurance management fees?

This is a percentage applied to the earned value of your contract. On average, they amount to 0.6% for funds in euros and 0.9% for units of account.

How do you calculate the net return on life insurance?

You need to calculate what your contract earns you, but also what it costs you. You must therefore subtract the various banking and management fees from your income. For example, life insurance with a return of 5% but with 2% in fees will actually net you 3%.

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What are the management fees for life insurance?