In the event of a rapid need for liquidity and an insufficiently funded current account, the reflex is often to turn to savings (withdraw money from savings accounts or life insurance, sell shares) or apply for a consumer loan. However, there is a third, less well-known option available to life insurance policyholders: the advance.
“This solution is similar to a loan granted by the insurance company to the contract holder. The savings invested in the envelope are not affected.”explains Loïc Le Foll, director of wealth savings at the AG2R La Mondiale group. Thus, as part of an advance, the sums are not disinvested and continue to grow. In addition, “The transaction does not generate taxes (this is the case during a partial buyback), nor administrative fees (some are sometimes charged for a bank loan)”underlines Patrick Thiberge, CEO of MeilleurTaux Placement.
However, this option “It does not appear in all contracts, especially in older ones”underlines Jérôme Rusak, wealth management advisor at L&A Finance. “And if the clause has been accepted by the beneficiary designated by the holder, the latter must obtain authorization to request the advance.”underlines Simon Mallette, partner at Gefinéo, a wealth management firm.
Using an advance is practical for a saver who needs cash quickly and who knows that he will have a cash flow deficit. This is the case for a taxpayer who is obliged to pay a tax balance within a certain period of time, knowing that within a few months he expects an influx of money (an inheritance, a bonus). Or for an owner who has to finance renovation work on a property that is intended for resale.
A “final” loan
The parameters of the advance vary between insurers, with some common elements. Firstly, the conditions of granting do not take into account the age of the applicant, nor his level of indebtedness, as is the case in the case of a loan application. There is also no justification for the use of the sum to be donated. In addition, the time to obtain funds is fast, with release often within a few weeks, while the payment of funds takes much longer for a partial withdrawal of a life insurance policy.
The repayment period is shorter than that of a loan. “The insurer agrees to lend for a “temporary liquidity need,” with a repayment ranging from one to three years, or even four, depending on the company.”Mr. Mallette said. The term is sometimes renewable. And it is almost always a “bullet” loan, that is, repayable, in principal and interest, at maturity.
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