Assurance-vie: how a contract works, from subscription to redemption

A assurance-vie contract works in three stages. You pay premiums, which build up savings that earn interest. The insurer invests these savings in the investment vehicles you have chosen. According to economie.gouv.fr, your capital is never locked in: you can make withdrawals, in full or in part, with the agreement of a potential beneficiary. You designate the person who will receive the capital or annuity. There is no limit on the amount you can pay. However, with unit-linked funds, the capital can be lost in whole or in part.

This page describes how a French contract works. It does not cover social security contribution rates, details of death benefits, fees, unclaimed contracts, or the situation of a policyholder living abroad.

The principle: a contract between you and an insurer

According to service-public.gouv.fr, by taking out a assurance-vie policy, you pay premiums that constitute interest-bearing savings. For economie.gouv.fr, assurance-vie is a contract by which the insurer undertakes, in exchange for the payment of premiums, "to pay an annuity or to build up a capital sum to the insured or their beneficiaries." For service-public.gouv.fr, the insurer undertakes to pay a capital sum or an annuity to the beneficiary of the contract.

The policyholder pays the premiums and designates the beneficiary, who will receive the capital or annuity. The contract can also cover someone other than the policyholder: this is the insured.

Subscription: who, with what documents, with what right of withdrawal

Who can subscribe?

If the policy covers someone other than yourself, that person must give their written consent as the insured. Policies cannot be taken out on the life of a minor under 12 years of age.

Documents submitted before signing

Before signing the contract, the insurer must provide you with the Key Information Document (KID) or the specific information document for certain financial instruments. According to service-public.gouv.fr, the risk level of a financial product is classified from 1 to 7. For unit-linked funds, since January 1, 2025, performance information must be provided for the last completed financial year and also on the 5-year annualized average, and the insurer must specify this information for each unit-linked fund.

Thirty days to change your mind

You have 30 calendar days to cancel the contract. This period begins on the date you were informed of the contract's conclusion. The insurer will refund all sums paid within a maximum of 30 calendar days.

Payouts: no limit, three options

Service-public.gouv.fr states that there is no maximum limit on payments into a assurance-vie contract. Economie.gouv.fr specifies that payments, whether regular or not, can be made without any limit on the amount.

The four categories of fees

Service-public.gouv.fr distinguishes:

• application fees fixed, paid upon subscription; ;
• entrance fees deducted with each payment; ;
• management fees : deducted throughout the duration of the contract; ;
• arbitration fees : deducted from the amount of the sums transferred.

Their level depends on each contract. This page does not provide any information.

Where the money goes: the contract's supporting documents

For unit-linked funds, service-public.gouv.fr indicates that the insurer commits to the number of units, not to their value.

A contract single support offers only one investment vehicle. A contract multi-platform combines several investment vehicles in the same contract. In the section of its information sheet dedicated to unit-linked contracts, service-public.gouv.fr indicates that the insurer must also offer you at least one SRI-labeled unit-linked fund, one Greenfin-labeled unit-linked fund, and one solidarity-based unit-linked fund.

The fund euro-growth It protects the invested capital provided it is held for at least 8 years. The protection is total or partial depending on the fund, and limited to 80% of the capital in the partial case.

Self-management or managed accounts

With self-directed investing, you choose your own investments. For a contract that includes unit-linked funds, you can entrust managed investment to the insurer. You can request to switch to managed investment at any time. Service-public.gouv.fr describes three profiles: conservative, balanced, and growth-oriented.

Arbitrate

Arbitration is the process of transferring all or part of your savings from one investment vehicle to another. This is done within the contract. Arbitration fees may be deducted from the transferred amounts.

Designate the beneficiary

The beneficiary is the person designated by the policyholder who, as applicable, will receive the capital or the annuity. A rule applies to your withdrawals: if the named person accepted their designation after December 19, 2007, you must obtain their consent to make a redemption. The drafting of this clause is explained on a dedicated page.

Recovering your savings: redemption and advance

Partial withdrawals can sometimes be scheduled. After your request, the insurer must not pay out within two months. Any surrender charges stipulated in the contract cannot exceed 5% of the mathematical reserve. They are prohibited when the surrender occurs more than 10 years after the contract's effective date.

An advance is something else entirely: a loan that the insurer has agreed to grant under predefined conditions, if your contract stipulates it. If it is not repaid by the contract's maturity date, it will be deducted from the sums paid out by the insurer.

On unit-linked accounts, a redemption does not guarantee that you will recover all of what you have paid in: economie.gouv.fr reminds you that you are likely to lose all or part of the capital invested.

Tax: nothing as long as you don't buy back

If you do not make a withdrawal, your gains (interest and capital gains) are exempt from income tax. Social security contributions follow their own schedule: they are deducted annually by the insurer from the interest earned on euro-denominated investments and are only due upon withdrawal from unit-linked investments. The applicable rate is detailed on a dedicated page.

For premiums paid since 27/09/2017, upon redemption:

The portion of gains not benefiting from the 7.5% tax rate is taxed at 12.8%. For contracts of eight years or more, an annual allowance of €4,600 (single person) or €9,200 (couple) applies to all contracts held by the same taxpayer. According to service-public.gouv.fr, you declare the gains on your income tax return after deducting the allowance. Economie.gouv.fr indicates that it is more tax-efficient to save for at least eight years.

In a partial redemption, only a portion of the premiums is withdrawn, in proportion to the amounts redeemed relative to the total redemption value. The taxable proceeds are the amount redeemed less this portion of premiums (BOFiP, BOI-RPPM-RCM-20-10-20-50, § 80).

Numerical example (fictitious profile)

Situation. Hélène, who is single, opened a policy 9 years ago. All her premiums were paid after September 27, 2017, totaling €90,000. The policy is now worth €120,000 (surrender value). She has no other assurance-vie policies and has not made any withdrawals this year. She needs €40,000.

Issue. A partial redemption of €40,000 does not incur tax on €40,000. What portion is taxed?

Strategy. Apply the pro rata rule from the BOFiP (French Official Tax Bulletin), then the 7.5% tax rate (%) after the €4,600 allowance. Assumptions: the allowance is fully available and applied to the gains taxed at 7.5% (%), the conditions for the 7.5% tax rate are met (premiums of €90,000, below the €150,000 threshold), Hélène did not request an exemption from withholding tax and did not opt for the progressive tax scale. The calculation excludes social security contributions.

Result.

This amount of €405 is the tax after deduction of the allowance, as described in the gains tax return. The withholding tax levied by the insurer at the time of payment is not included here. For comparison: if the same redemption had been made on a contract less than 8 years old, without the allowance, the tax would have been €10,000 × 12.8 %, or €1,280. This profile is hypothetical. The figures illustrate the mechanism and do not reflect your specific situation: your policy's seniority, other contracts, and other income will affect the calculation.

What changes depending on your situation

• The seniority of the contract and the date of payment of your bonuses.
• The total amount of your unreimbursed premiums, in relation to the threshold of €150,000.
• Your situation: single person or couple subject to joint taxation.
• The investment vehicles chosen: euro funds, unit-linked funds, or both.
• The presence of an accepting beneficiary.
• A possible exemption from withholding tax, which depends on your reference tax income.
• The fees, redemption charges and advance options provided for in your contract.

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