How to cancel life insurance to get your money back?

How to cancel life insurance to get your money back?


(Photo credits: Unsplash – bruce mars)

Despite a denomination that can be confusing, life insurance is a savings product. In this sense, speaking of “termination” is not really the exact term because termination concerns so-called P&C insurance contracts, for fire, accidents and various risks. Rest assured, however, it is possible to close your life insurance contract, or even withdraw money if necessary, without closing it. Explanations.

A first reminder: the sums invested in a life insurance contract are not blocked. The eight-year period, which savers often hear about, is not a lock-in period for your funds. You just have to wait for this whole period if you want to benefit from the most tax-efficient withdrawal conditions, but if you want to or need to get your money back before this eight-year date, it is entirely possible. Similarly, after eight years, you have no obligation to close your contract to open another one.

On what date can I close my life insurance contract?

A life insurance contract is a savings product and is not comparable to traditional insurance such as you can take out for your home or your car. If you want to recover your money, that is to say the sums placed on the contract, you will proceed to a redemption, whether total or partial. We are therefore not talking about “termination” but of redemption. Note: the “total redemption” procedure, which is equivalent to withdrawing all of the sums invested in the contract, will cause the life insurance contract to be closed.

Total redemption is possible at any time during the life of the contract, it is not necessary to wait for the anniversary date.

How can I close my life insurance?

All you have to do is send a registered letter with acknowledgment of receipt (LRAR) with a certain amount of information and supporting documents.

Once your letter has been received, the insurer has two months to send you your funds, but in practice, this period is more often between 10 and 15 days. If you have taken out your contract in an online bank, it is most of the time possible to do this process entirely on the internet.

Model letter of redemption / termination of a life insurance contract

As mentioned in the previous paragraph, many procedures for the partial or total redemption of a life insurance policy are now done directly online via a form. If, however, your bank still asks you for a letter (or even a registered letter), here is a model life insurance redemption letter that you can use.

Dear

I hold a life insurance contract (name of contract) no. (contract reference) taken out with your company on (date).

I wish to make a total (or partial) surrender of this contract.

I hereby ask you to pay me the sum of (…) euros, in accordance with article L. 132-21 of the insurance code, within two months of receipt of this letter.

Please accept, Madam, Sir, the expression of my best regards.

(Signature)

How are the sums of my life insurance policy paid out?

It all depends on the choice regarding the exit terms you made when you took out the contract. If you have opted for a capital outflow, you recover the entire amount paid into the contract at once, less any costs and levies.

If you had opted for an annuity, you will receive monthly payments established according to your age and the capital accumulated on the life insurance contract.

The cases in which a tax-free redemption is possible

In certain cases of force majeure, the surrender of your life insurance policy may be totally exempt, including on capitalized interest:

– Economic dismissal

– early retirement

– Judicial liquidation of the company (for an entrepreneur)

– Accident / illness leading to 2nd or 3rd category disability.

What if I need money but don’t want to close my life insurance contract?

In the event of a need for cash, you can content yourself with withdrawing only part of the sums paid into your life insurance contract. This is then referred to as a “partial redemption”. The advantage is that this operation does not lead to the closure of the contract, it allows new payments to be made thereafter and it does not call into question the tax anteriority of the contract. In other words, if your life insurance policy was taken out seven years ago, a partial surrender will not have any impact on the one-year period you have to wait to benefit from the conditions. the most tax-efficient redemption options. For a partial redemption, you will have to define the amount and the media (funds in euros, units of account, other) chosen. This operation can also be done in one or more times.

If this need for cash is only temporary, you can also benefit from an advance in the form of a loan in fine.

Conclusion: we are not talking about termination of a life insurance contract but about a total or partial redemption. This redemption is possible at any time during the life of the contract in order to recover your money, but it is after eight years of detention that it is the most advantageous for tax purposes. The process is done by registered letter or online if your establishment allows it. The insurer has two months to return your funds.

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