How to increase the return on your life insurance while taking as little risk as possible

(Photo credits: Adobe Stock -)

(Photo credits: Adobe Stock -)

1.1%: this is the average return of the euro fund in 2021, a return much lower than inflation. In other words: keeping your capital in the euro fund of your life insurance harms your purchasing power. It is therefore understandable that many people are wondering how to increase the performance of their life insurance without taking too much risk, as the French are particularly risk averse. Find out in this article 4 ways to increase the performance of your life insurance without taking excessive risks.

Select the best euro funds

First of all, of course, we will pay particular attention to the performance shown by the euro fund. As we have seen previously, the average in 2021 was 1.1%, a return well below inflation and therefore very disappointing, even for a guaranteed capital investment that fully recovers its capital.

But this is only an average and it means that there are a good number of euro funds that serve a lower interest rate but also that some of them show a much higher yield.

It will therefore be necessary to look for the best euro funds. To do this, it might be wise to move away from the classic euro fund and look towards new generation euro funds that include real estate or equities in their composition. These dynamic euro funds or euro real estate funds are also guaranteed in capital and redemptions can be made at any time. But with a long-term investment horizon, it may also be interesting to turn to growth funds in euros, always guaranteed in capital but which include a period of fund blocking.

Invest in UC to benefit from a possible euro fund bonus

You should also know that some insurers offer a bonus at the rate paid on the euro fund when the sums invested in the contract are large and, above all, if a significant part of the outstanding payments is paid on the media in units of account (UA). Often, the higher the unit-linked component, the higher the fund’s return in euros.

This type of offering is generally offered through contracts distributed online which, in addition, have the advantage of charging very reasonable commissions.

It is therefore recommended to enhance the execution of the contract to invest part of its credits in unit-linked vehicles. It is true that this pocket will therefore not be guaranteed in capital, but it is still possible to opt for relatively low risk units.

Read also: What Tax Benefits for Life Insurance?

Bet on CUs with the best risk / reward ratio

Unit-linked vehicles are very varied investment vehicles that allow you to invest in stocks, bonds, ETFs, funds, SCPIs, OPCI, SCI, etc.

Of course, not all of them carry the same level of risk. SCPIs, structured funds and ETFs of major European or US stock market indices are, for example, less risky than shares of companies in emerging markets or investments in unlisted shares.

To assess the risk of an investment, you can consult its risk scale in the KIID (Key Investor Information Document).

In general, you should always opt for units of account that offer the best risk-reward ratio. Beware of low-risk shares that show an anemic yield, lower than that of the euro fund. Information to keep in mind when choosing between a bond fund or an ETF on one of the major US stock market indices, for example!

SCPIs are often an attractive alternative for risk-averse investors. Recall that they offered a yield of 4.40% in 2021 and present a risk of capital loss that is certainly real but not disproportionate. But pay attention to the entrance tickets.

give yourself time

Finally, to increase the benefits of your life insurance by taking on a little more risk but without breaking a cold sweat, it is essential to dedicate time to time. It is with an investment horizon of one or more decades that you can significantly increase your capital over time without taking too many risks.

Two parameters are taken into consideration: on the one hand, you will benefit from the attractive long-term performance of the equity and real estate markets; on the other hand, you can count on the magic of compounded interest to grow your capital.

Finally, we recommend that you invest regularly for the long term by setting up scheduled payments. This is the best way to reduce the risk.

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