Why buy life insurance for a child?
Life insurance for a minor child is a long-term savings operation that has various advantages. She permits :
- to fund the contract at their own pace and without any ceiling;
- to obtain a more attractive return than the livret A insofar as the duration of the investment makes it possible to take measured risks to obtain a much higher average annual return;
- to benefit from advantageous taxation after 8 years of ownership. Abatement of 4,600 euros or 9,200 euros (for a married or PACS couple) on the capital gains made.
This type of contract makes it possible to invest the money received by donation (a child can receive every 15 years up to 100,000 euros per parent, and 31,865 euros per grandparent, without any taxation) or inheritance, manual donation, but also as usual gifts offered by parents, grandparents, godfather, godmother or even friends.
>> Read also – Donation to grandchildren
Good to know : opening a contract to a minor child makes it possible to take a date for tax purposes by fixing the starting point of the holding period.
Minimum age and subscription procedure
As a minor child does not have the capacity to contract, the subscription of the contract cannot be made by him. It is therefore the parents’ responsibility to sign the contract in the name of their child and to manage it until they reach majority. The procedure varies according to the age of the child:
- For a child under 12, the agreement and signature of both parents are required.
- For a child over 12, the agreement, the signature of both parents and the child’s consent are required. In the case of parental authority exercised by a single parent or guardian, the consent of the guardianship judge is essential.
Emancipated minors (from 16 years old) can subscribe and manage their contract alone.
Good to know : to be able to keep an eye on the management of the contract having collected the funds of a donation, and thus avoid squandering them, the grandparents can match the contract with an assistant pact under private signature which allows them to organize the capital administration and in particular to block withdrawals up to a given age (which cannot exceed 25 years).
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What type of life insurance to choose?
Even if funds in euros now only have an average annual return of 1.3% in 2020, it is still well above the 0.5% of the Livret A. But we can get even better.
Prioritize multi-media contracts
This yield can be improved by introducing a higher or lower percentage of units of account which, over time, can yield significantly more and whose risk of loss is mitigated by the duration of the investment. The longer the investment, the more any decreases recorded on the units of account can be offset by an increase. Subscribing to a multi-support contract thus comprising both a fund in euros and units of account seems to be the best long-term solution.
However, it is advisable to take a minimum of precautions when subscribing and during the term of the contract and to ensure that the capital invested is in collective investment undertakings (Sicav, FCP) and other sufficiently diversified media on the equity markets, monetary and bond markets and on various economic and geographic sectors depending on the management objectives.
Favor contracts with the minimum costs
To do this, the level of entry fees must be controlled. Contracts sold on the Internet generally do not have one.
It is also necessary to choose the contracts with the lowest annual management fees and those also allowing free arbitration and free management options (Stop loss, automatic saving of capital gains, etc.).
Good to know : if contracts under private management mandate are generally not within the reach of all budgets, and if free management is not possible due to lack of time or skills, choose a contract in managed management, profiled management or on a horizon allows you to trust the insurer or the management company he has appointed to manage his contract.
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