Life insurance for children: advice & selection

Life Insurance: A Swiss Army Knife for Savings

Life insurance stands as the go-to investment for the French, a versatile tool catering to diverse needs. But can you extend its benefits to your children or grandchildren?

• Limitations for Grandparents

Grandparents, unfortunately, cannot open life insurance for their grandchildren, unless they act as legal guardians. Only legal representatives, usually parents, can initiate contracts for minors.

• Complexities in Contract Opening

Opening a contract requires unanimous agreement and signatures from all legal representatives. Disputes among parents can complicate this task. Additionally, a child over 12 must also give consent by signing.

• Fixed Beneficiary Clauses

Life insurance for minors follows a set beneficiary clause, governed by the Civil Code. The child gains control over it upon reaching majority.

Financial Perks and Tax Considerations

• Tax Benefits for Long-Term Contracts

Contracts exceeding 8 years bring financial advantages, with a potential reduction of €4,600 (€9,200 for a couple) on earnings, escaping income tax upon redemption.

• Tax Implications Based on Earnings

Earnings surpassing the allowance face taxation at 7.50% for contracts under €150,000 and 12.80% for higher amounts. The choice of taxing according to the marginal tax bracket applies to all savings income.

• Caution in Premium Payments

Sending unlimited cash to children through life insurance comes with a caveat—premiums must align with your assets to avoid complications.

The Paper Trail of Life Insurance for Minors

• No Online Ease

No online broker offers a 100% online process for minor life insurance due to the absence of electronic signatures. Paperwork completion, signatures by legal representatives, and mailing are mandatory.

• Choosing the Best Policy for Children

Refer to our life insurance policy comparison for insights. Beware of hidden costs, favor ETFs to avoid recurring fees, and consider online options over traditional bank contracts.

• Alternative: The Act of Donation

Consider a donation under private signature for potential cost savings. Consulting an adviser is advisable to prevent errors, and don't forget to declare using the Cerfa 2735.

• Rule Setting for Fund Usage

Implement rules for fund usage, such as re-employment clauses or conditional donations, ensuring funds align with specific purposes.

• No Specific Contract for Minors

There is no specific contract for minor children, eliminating payment ceilings on minor life insurance.

Closing the Chapter: Cancelling or Terminating Minor Life Insurance

• Unanimous Closure Requirements

Closing a life insurance for minors mandates agreement and signatures from all legal representatives and the child over 12.

• Plurality in Contracts

Similar to adults, minors can hold as many life insurance contracts as they and/or their legal representatives desire.

Choosing for the Grandchildren's Future

Selecting life insurance for grandchildren parallels choosing policies for adults. Check our 2023 comparison for the best life insurance options.

• Authorization Constraints

Only legal representatives, typically both parents, can open life insurance for a minor. Consent and signature from the child over 12 are also necessary.

In the realm of finance, Antoine, a former Wealth Advisor and Private Banker, lends his expertise to Finance Héros.

Conclusion

Life insurance, a financial Swiss army knife, holds immense potential for securing your child's or grandchild's future. Understanding the complexities, tax implications, and alternative options ensures a well-informed financial decision for the generations to come.

FAQs

Can grandparents open life insurance for their grandchildren?

• No, unless acting as legal guardians, grandparents cannot initiate life insurance for their grandchildren.

Are there payment ceilings on minor life insurance?

• No, as there is no specific contract for minor children, there are no payment ceilings.

How many life insurance contracts can minors hold?

• Similar to adults, minors can hold as many life insurance contracts as they and/or their legal representatives wish.

Is there an online option for 100% minor life insurance application?

• No, due to the absence of electronic signatures for minors, the process requires paperwork and physical signatures.

What tax benefits apply to long-term life insurance contracts?

• Contracts exceeding 8 years may enjoy a reduction of €4,600 (€9,200 for a couple) on earnings, escaping income tax upon redemption.