9 key differences between Assurance Vie and Assurance Décès in France

Published on: November 12, 2024 |  By: @rprasanth_kumar

Assurance Vie and Assurance Décès are two types of insurance contracts often confused due to their similar terms, yet they serve distinct purposes. Understanding their differences can help individuals choose the right contract for their financial and family protection goals.

Definitions

Assurance Vie:

  • A financial savings contract in which the policyholder regularly invests money, building up capital over time.
  • The accumulated funds can be paid out to the policyholder or designated beneficiaries either as a lump sum or annuity.
  • It serves as both an investment vehicle and a flexible, tax-advantaged tool for estate planning.
  • The name can be misleading. An Assurance vie (translation: Life Insurance) is not the same as the Life Insurance options available in India.
  • It has 2 components: Fonds Euro (euro funds generating interest) & Unités de Compte (for investments). The 2nd part can be used to invest in stocks, bonds, private equity, SCPI, ETFs including S&P500, etc. 

Assurance Décès (Death Insurance):

  • A protection-oriented insurance contract designed to provide financial support to beneficiaries upon the policyholder’s death.
  • Unlike Assurance Vie, it does not accumulate investment value for the policyholder.
  • Instead, it guarantees a predetermined capital amount for beneficiaries, helping to cover financial needs after the policyholder’s death.
  • It is similar to a Term Insurance available in India.

Assurance Vie vs Assurance Décès

Assurance VieAssurance Décès
1. Purpose
Financial investment tool, aimed at building a capital over time.Protection tool, designed to provide financial security to beneficiaries upon the policyholder’s death.
2. Structure
Savings placement which allows policyholders to accumulate capital or income over time.Insurance contract that provides a predetermined lump sum to beneficiaries upon death of the policyholder.
3. Beneficiaries
Policyholder or designated person(s) can receive accumulated capital or annuity.Beneficiaries are assigned upon contract signing. The policyholder cannot be a beneficiary.
4. Types of Contracts 
Mono-support (funds in euros) with low-risk, guaranteed returns.Standard coverage includes death and may cover disability due to accident or illness.
Multi-support (unit-linked) with higher risks but potential for higher returns.
5. Investment Flexibility
Highly flexible: policyholders can make partial or total withdrawals anytime (with beneficiary’s consent).Fixed: policyholders pay premiums but receive no capital if they cancel the contract.
6. Income Tax
Depends on the duration of the policy and the period of payment.The capital is exempt to the extent of €152,500. The fraction above € 152,500 is taxable, within the limit of the amount of the last annual contribution paid before the subscriber’s 70 years, at a rate of 20%.
Favorable tax treatment after 8 years of opening the contract.
7. Inheritance Tax
For premiums paid before the policyholder’s 70th birthday, capital is exempt up to €152,500 from inheritance tax. Amounts over this are taxed at 20% up to €700,000 and 31.25% beyond that.Exempt from inheritance tax but conditions apply. The capital portion corresponding to contributions made after the policyholder’s 70th birthday is taxable for inheritance tax.
For premiums paid after the 70th birthday, capital is exempt up to €30,500, with the excess subject to inheritance tax.
8. Premium Usage
Accumulated as capital, investable in various funds like mutual funds or real estate funds.Used to pay for the insurance protection; no return if canceled (lost funds).
9. Suitability
Suitable for long-term capital accumulation and investment, estate planning with partial inheritance flexibility.Suitable for financial protection of beneficiaries in the event of death or disability of the insured.

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