For years, in Italian wealth planning, the life policy was described in simple and seductive terms: protection, speed, tax efficiency, frictionless succession. A “special” wrapper, capable of bringing together diverse needs: growing capital, protecting it, transferring it to heirs efficiently, shielding it from unforeseen events and disputes.

That promise, over time, had a concrete basis — above all in traditional policies (branch I): contracts with segregated management, capital at least partially guaranteed, low volatility, and a genuine insurance rationale. Over time, however, the market — and the distribution chain — progressively shifted the focus towards products that are more financial than insurance in nature: unit-linked and multi-branch contracts with significant exposure to funds, often with higher structural costs and a complexity that few savers are truly able to manage.

In the meantime, two decisive factors changed — ones that can no longer be ignored:

  1. Case law began scrutinising the substance of contracts more carefully, particularly when the financial element outweighs the insurance element.
  2. The market environment has become more “mature”: interest rates have risen from the era of near-zero money, volatility is more frequent, and risk premia are less linear.

The result is that the correct question is no longer “is a policy worthwhile?”, but rather: what genuinely remains today of the tax and protective promise, and under what conditions.

The original promise: why life policies were so successful

For a long time, the life policy was an elegant response to three concrete needs:

  • Rapid transfer of capital to heirs through beneficiary designation, often with a more straightforward process than traditional probate administration.
  • Favourable tax treatment in many circumstances: taxation limited to the return component and, historically, a commercial narrative centred on the idea of “efficiency” in generational transfer.
  • A perception of protection: the notion of an instrument “apart” from current accounts and investment portfolios, with an insurance framework.

These elements, in their most genuine insurance form, had their own coherence. The problem arises when the wrapper remains “insurance” in name, but the substance becomes a packaged financial investment, with costs and constraints that are not always apparent.

The turning point: when insurance becomes finance (and the boundary thins)

Unit-linked contracts are policies in which the capital is linked to units of internal or external funds or UCITS. In other words, performance depends on the markets, not on segregated management with traditional insurance logic.

This is where the first fracture appears:

  • If the financial risk remains substantially with the client,
  • if the insurance benefit is minimal or merely formal,
  • if the “life” function is merely a shell,

then it is entirely natural that those who adjudicate (and not only those who invest) begin to ask whether they are dealing with an insurance contract or a dressed-up investment.

This is precisely the crux: the promise of “special status” holds when there is genuine special status; when the wrapper serves primarily to distribute a financial product under a more reassuring label, that promise begins to lose its force.

Case law: the direction is clear, even if not always linear

In recent years, several rulings have emphasised a straightforward principle: substance matters, not the label. Where a policy is predominantly financial in nature, certain “shields” traditionally associated with life policies come under interpretative pressure, particularly when elements of the contract make it appear to be a pure investment.

Without entering into technicalities, the underlying idea is this:

if the insurance component is marginal and the structure is comparable to an investment, it becomes more difficult to argue that everything deriving from the “insurance world” applies automatically and unconditionally.

This does not mean that “unit-linked contracts are now worthless” or that “they are all the same”. It means something more useful for investors: one cannot purchase a financial policy whilst assuming that, by definition, it carries the same benefits and protections as a traditional insurance policy.

The second shift: new market conditions have overturned the narrative

There is also a change that does not depend on judges or regulations: it depends on the markets.

For over a decade, with rates at zero and abundant liquidity, many inefficiencies were “covered” by the rising tide of financial assets. In that environment:

  • volatility was often absorbed,
  • the search for yield drove people to buy “something” simply to have a positive number,
  • costs seemed less visible because markets were rising.

Today the picture is different. With higher rates and greater dispersion of returns, cost comes back to the fore and volatility is no longer a rare occurrence: it is a structural feature of the journey.

This affects unit-linked contracts directly because:

  • the underlying is financial,
  • costs accumulate (contract costs + fund costs + any management and performance fees),
  • and the “tax promise” risks becoming a short blanket if capital growth is eroded before reaching the point of generational transfer.

The issue few address: cost as a generational risk

In succession planning, the most underestimated risk is not always volatility. It is often erosion.

Imagine two paths, both aimed at “leaving something to heirs”:

  • Path A: an efficient financial instrument (ETFs, low-cost funds, a well-constructed portfolio) + coherent legal planning (a will, agreements, gifts where appropriate, management of liquidity and beneficiaries through banking instruments).
  • Path B: unit-linked contracts with structurally higher costs, often less efficient underlying assets, contractual constraints, and perceptual opacity.

The question is not ideological. It is mathematical:

if I pay more each year, I must obtain more each year (or, at minimum, a very clear and robust benefit) to justify it.

Otherwise, the tax efficiency risks becoming an optical illusion: savings on one front are offset by losses on another — with the difference that the loss occurs silently, year after year, before succession even takes place.

Liquidity: when “succession” and “financial” objectives come into conflict

Another common misconception: the assumption that a policy is always a liquid and “readily accessible” instrument.

In reality, many unit-linked and multi-branch contracts:

  • have surrender windows, penalties, or implicit costs,
  • have technical processing times that are not immediate,
  • and, above all, may force disinvestment at unfavourable market moments.

This creates the most painful friction:

an instrument sold as a “family solution” can turn into a forced sale when the family needs liquidity — perhaps at the worst possible moment.

Serious wealth planning does not only consider “what happens when everything goes well”. It considers “what happens when it is truly needed”.

So should unit-linked contracts be avoided? No. But they must be “defused” from the rhetoric

Unit-linked contracts are not an absolute evil. Well-structured contracts exist, and there are cases where they can make sense — particularly when:

  • there is a genuine need for beneficiary designation and integrated succession architecture;
  • the contract is transparent, with legible and competitive costs;
  • the underlying assets are efficient and consistent with the risk profile;
  • the time horizon is appropriate;
  • the client genuinely understands that they are taking on market risk, and not purchasing a “lifejacket”.

The point is to stop evaluating them as a “tax shortcut” and to begin evaluating them for what they often are: a financial portfolio inside an insurance wrapper. And a wrapper, on its own, does not create value: at most it can redesign certain aspects (beneficiaries, transfer arrangements, constraints).

A practical checklist: the questions that matter before signing

When a unit-linked proposal arrives on the table, the truly useful questions are few but decisive:

  1. What is the primary function? Family protection, succession planning, investment, or marketing?
  2. What is the total annual cost, in aggregate? (contract + funds + any ancillary costs).
  3. What are the underlying assets? Are they efficient, diversified, and consistent with the risk profile, or costly and redundant?
  4. How and when can I recover my capital? Timescales, penalties, windows, tax implications.
  5. Is the insurance component genuine or symbolic? If symbolic, expectations of a “shield” must be scaled back accordingly.
  6. What is the equivalent “pure” financial alternative and what would it cost? Comparison is the remedy against illusions.

What really remains of the tax promise?

It remains — but not as a slogan. It remains as architecture, provided that:

  • the policy forms part of an overall wealth plan,
  • costs are sustainable and justified,
  • the structure is not an expensive investment in disguise,
  • the investor is fully aware that markets can behave as markets do, even inside a policy.

The tax promise alone can no longer be the cornerstone. Today the cornerstone is something else: coherence between function, costs, risks, and family objectives.

Conclusion: less myth, more planning

Life policies are not all alike. And unit-linked contracts, in particular, can no longer be sold — nor purchased — as a shortcut.

Following greater scrutiny from the courts and in a less forgiving market, the truth has become simpler and, paradoxically, more useful:

if you are buying finance, you must evaluate it as finance. If you are buying insurance, you must demand genuine insurance.

The saver who today wishes to protect their family and transfer capital to heirs needs more than a promise: they need a plan. And a plan — in finance as in life — works when it is built on substance, not on labels.