Insurance policies are a versatile and strategic instrument for ensuring financial protection, confidentiality and targeted succession planning. They can be used to direct capital to beneficiaries outside the estate, to protect legally unrecognised partners and to provide financial security in unforeseen circumstances.
How do insurance policies work in succession planning?
Insurance policies allow capital to be directed to chosen beneficiaries outside the estate. This guarantees confidentiality and asset protection, avoiding the exclusion of individuals such as legally unrecognised partners or other significant parties.
What tax advantages do insurance policies offer?
Insurance policies offer several tax advantages:
- Insured capital is exempt from inheritance tax
- It cannot be seized or attached, although for financial policies such as unit-linked contracts these characteristics have been subject to legal challenge.
What costs are associated with insurance policies?
Insurance policies may entail significant annual charges, which in certain cases exceed 3–4% of the capital. These costs must be weighed against inheritance taxation, which stands at a maximum of 8%. It is therefore essential to evaluate the economic merits carefully.
Are there alternatives to policies for avoiding inheritance tax?
Yes, alternatives exist such as government bonds and other financial instruments that are exempt from inheritance taxation. These instruments may prove more cost-effective than insurance policies.
What are term life insurance policies (TLI)?
Term life insurance policies offer protection against premature death, paying out a capital sum proportional to the premium paid. They are ideal for:
- Single-income households.
- Families with school-age children.
- Individuals with outstanding mortgages.
These policies can be combined with cover for disability or illness, which is particularly useful for self-employed workers.
Why is it important to inform the beneficiary of the existence of a policy?
If the beneficiary is not informed, there is a risk that the policy will remain unclaimed. To avoid this problem:
- ANIA provides a service for identifying dormant contracts.
- IVASS has already contributed to recovering numerous unclaimed policies, reducing the scale of the problem.
Conclusion
Insurance policies represent an effective solution for succession planning and ensuring financial protection, but they require careful assessment of costs and economic suitability. Consulting an independent financial adviser is essential to optimise the management of these instruments and make full use of their benefits.