A recent study by MoneyVox reveals that life insurance policies from major banks often come with high entry fees, typically taking over a year to offset these costs. While fees are generally negotiable, they’re harder to reduce for public policies. Private and wealth management contracts offer more flexibility and better returns. Some insurers have low or no entry fees, allowing savers to fully benefit from their investments from the start. The article details various costs and returns across different types of life insurance.
Investing in life insurance through a major bank can lead to a substantial cost, with an entry fee of around 2.5% that needs to be accounted for. This fee must first be covered before any gains are realized, often taking over a year to offset. A recent exclusive study sheds light on how these fees impact overall returns.
However, it’s essential to approach the average figures cautiously. Entry fees represent just the first layer of various charges associated with life insurance. These fees are, in fact, negotiable, but this requires proactive engagement from the consumer. Typically, negotiations can reduce these charges, but they seldom eliminate them completely. In practice, while negotiating is common for private bank life insurance or policies sold through wealth management advisors, it is usually not an option for general public bank policies.
What fees should you anticipate with life insurance?
Public Contracts: Breaking Even in Under a Year
When it comes to bank and general public contracts, negotiation opportunities are slim and usually hinge on two main factors: the portion of savings invested in units of account (UA) and the amount being invested. “Entry fees become negotiable with deposits over 10,000 euros,” shares Guillaume Derrien, investment head at Mutuelle Garance, which offers competitive rates, including a 3.5% performance for 2023. This scenario isn’t unique; for instance, SG Bank charges 3% for deposits between 50 and 15,239 euros and 2.5% for amounts exceeding 15,240 euros.
These figures represent averages; some providers, like Garance mutual insurance, charge only 1% on deposits. Similarly, Crédit Mutuel’s Plan Assurance Vie contract applies a low instalment fee of 1%, significantly down from 3.15% in 2018, with a base performance of 2.60% for the previous year.
Interestingly, La France Mutualiste has decided to eliminate entry fees altogether as of September 2023. Online banks and web brokers, like BoursoBank, have never imposed these charges. BoursoBank’s Bourso Vie life insurance, for example, boasts a performance of 3.10% for its Euro Exclusif fund, allowing clients to reap returns immediately with no entry fees.
Is Livret A still the top investment option compared to life insurance?
Mid-Range Contracts Yield Quick Returns
Patrimonial contracts, which are categorized as “mid-range” life insurance, tend to involve higher savings and are typically managed by wealth management advisors. On average, these savers contribute 5,900 euros annually, achieving an average return of 2.93%, with fees being relatively negotiable at 2.33%.
Fees are also more flexible for contracts established through private banks. Given that average contributions are higher—around 23,500 euros—the expected yield sits at roughly 3.06%. According to our estimates, average entry fees come to about 1.78%. For an investment of 23,500 euros, after deducting fees, only 23,081.70 euros will be principal, allowing the investor to break even (and possibly exceed) within the first year. At the close of the year, this capital could grow to approximately 23,788 euros.
For a deeper understanding, check out our comprehensive report on how payment fees impact returns.
(1) Please note that regardless of the contract type, an annual social security contribution of 17.2% is deducted from the euro fund’s interest.