Advance on a life insurance contract: how does it work, and how does it differ from a redemption?

A life insurance policy advance is a loan that the insurer grants to the policyholder, provided the policy allows for it. It allows the policyholder to receive a sum of money without drawing on the savings accumulated within the contract. According to service-public.gouv.fr, advances are not taxable, but an unrepaid advance may be considered a partial withdrawal and therefore subject to taxation.

This page describes what the official documents we consulted say about advances. They do not specify the maximum percentage of the contract value, the interest rate, or the maximum term: these elements depend on the contract. Nor do they explain what happens to an advance upon the insured's death. This page does not invent these details.

What the administration says about the advance

An advance payment is not a right attached to every contract. Service-public.gouv.fr states that some contracts may provide for the possibility of granting advance payments to the subscriber. If your contract does not provide for this, the question is moot.

The following points are included in the fact sheets and the BOFiP (Official Bulletin of Public Finances):

• A loan. An advance is a loan that the insurer has committed to granting under predefined conditions. The BOFiP (French Official Tax Bulletin) also defines it as a loan, possible up to the surrender value of the contract, referring to Article L132-21 of the French Insurance Code.
• A percentage of the buyback value. The service-public.gouv.fr website states that the advance is limited to a percentage of the surrender value, without specifying that percentage. The BOFiP (Official Bulletin of Public Finances) states "up to the surrender value." Both formulations are reproduced verbatim: the terms of your contract determine the applicable limit.
• Interests. The subscriber must repay the advance and pay the interest stipulated in the contract. The BOFiP (French Official Tax Bulletin) specifies that the subscriber pays interest on the amount advanced. No interest rate is given.
• A variable duration. The duration of the advance varies depending on the contracts.
• A refund is possible at any time. The BOFiP states that the advance can be repaid at any time by the contractor.
• A deduction at maturity. If the advance is not repaid by the contract's maturity date, it is deducted from the sums paid by the insurer. The BOFiP (French Official Tax Bulletin) describes it as being deducted by the insurer from the sums paid to the beneficiary.
• A written request. You must submit the advance request in writing to the insurance company.

The information sheet adds that the insurer cannot refuse your request for a surrender or advance if the conditions are met. The two-month payment period it mentions applies to surrender requests; it does not apply to advances.

Advance or buyback: two ways to withdraw

The French Financial Markets Authority (AMF) outlines two ways to withdraw money from a contract: an advance, a type of loan, or a partial or total redemption. It describes an advance as a loan offered by the insurer, with a pre-defined interest rate, for a temporary need for liquidity, without withdrawing savings. This document dates from 2022.

The difference lies in the nature of the transaction. A redemption is a withdrawal: the sum is removed from the contract, whose value decreases. An advance is a loan: the sum is advanced and then repaid with interest.

Taxation: not taxable, under certain conditions

Service-public.gouv.fr states: "For tax purposes, advances are not taxable." The same information sheet adds that an unrepaid advance can be considered a partial redemption, which is then subject to taxation.

The BOFiP (BOI-RPPM-RCM-20-10-20-50) adds two points of vigilance:

• Receiving advances can, in some cases, make it possible to have sums equivalent to a total or partial redemption while maintaining the contract beyond six or eight years.
• The administration has the possibility of demonstrating that, under the guise of advances, the taxpayer intended to permanently dispose of all or part of the redemption value, in order to evade or reduce the tax.

The texts read do not detail the mechanics of reclassification. This page therefore does not establish any rules beyond these statements.

Reminder: the tax on a partial redemption

For comparison, here is the rule for a partial redemption. Premiums paid are only retained in proportion to the amounts reimbursed, which gives:

Taxable product = redeemed amount − premiums × (redeemed amount ÷ redemption value)

The standard flat-rate income tax is 12.8%. For contracts of 8 years or more, it is 7.5%, subject to the conditions set by the BOFiP (particularly regarding the insurer and the calculation of the €150,000 premium threshold, which should be verified with the tax authorities). Above this threshold, the corresponding rate remains 12.8%. These rates apply to income from premiums paid on or after September 27, 2017. An annual allowance of €4,600 (single person) or €9,200 (couple filing jointly) applies to income from contracts of 8 years or more.

This page does not give the rate of social security contributions: the official pages consulted do not agree on this point.

Advance on a life insurance contract: numerical example (fictitious profile)

Situation. A business owner holds a life insurance policy with a surrender value of €100,000. He took out this policy on October 1, 2018, and paid €70,000 in premiums upon subscription, therefore after September 27, 2017; as of the date of this page (October 18, 2026), the policy is over 8 years old. He has no other policies. He needs €30,000 for a one-off expense. His policy provides for advances: these assumptions are those of a hypothetical scenario, not of the law.

Issue. There are two options: buy back €30,000 or request an advance of the same amount. What are the tax implications and commitments for each?

Strategy. The firm reviews the terms of his contract with him (limit, interest, duration), calculates the proceeds of a redemption and compares them with the advance, keeping in mind the risk of reclassifying an unrepaid advance.

Result.

The buyback calculation is: €30,000 - €70,000 × (€30,000 ÷ €100,000) = €30,000 - €21,000 = €9,000 in proceeds, representing 30% of the amount withdrawn. The difference between the two rates is €477.

For the advance, the interest rate is unknown and therefore not included in the calculation. If the advance were not repaid by the due date, the amount advanced would be deducted from the sums paid by the insurer; it could also be considered a partial withdrawal. This scenario is hypothetical. The calculation does not take into account the annual allowance or social security contributions. The figures illustrate the mechanism and do not guarantee any specific outcome for your situation.

Advance on a life insurance contract: what changes depending on your case

• Does the contract provide for an advance payment, and under what conditions?
• The surrender value of your contract and its limit rules.
• The interest rate and duration stipulated in the contract.
• The seniority of the contract determines the rate of 12.8 % or 7.5 % in the event of redemption.
• Your total premiums across all your contracts, compared to the threshold of €150,000.
• The presence of an accepting beneficiary: the form does not say whether their agreement is required for an advance.
• The date of payment of the bonuses, in relation to September 27, 2017.

The rule depends on your situation. No results are guaranteed.