Pros and cons of life insurance policies
The life insurance policies are a solution for those looking for a source of yeild combined with insurance and social security protection. Let us see at a glance what are the pros and cons of this tool.
The advantages of life insurance policies are primarily of a fiscal nature and protection against volatility:
* Those of revaluable type (also known as separate management) are not subject to stamp duty that affects all financial investments.
* They guarantee a minimum return for each year in which they are preserved, which is consolidated.
* They are not part of the estate.
* The amounts paid are not attachable or subject to be seized, as well as are not subject to inheritance tax.
* The premiums paid are deductible up for specific amounts per year.
* For returns refering to the portion invested in government securities (which usually makes up the bulk of the assets), they are subject to a withholding tax of 12.5% instead of 20%.
* The life insurance policies offer a return on average higher than that of BOT (including inflation), although lower than that of a medium-term BTP. In 2012 the traditional life insurance of revaluable type has made a Net of 3.2%, more or less the same percentage as the previous year.
* By their nature, they discreetly protect your investment from market fluctuations.
The disadvantages of life insurance policies mainly concern the direct or indirect costs that are higher than other financial products:
* The loadings applied by the company are considerable (on average, between 2 and 7%, which decreases as the years go by). To put it in other words, only a portion of the premium paid is invested.
* One part of the annual yield is recognized to the customer (usually 80%).
* The policies taken recently do not guarantee minimum returns (because of current low interest rates), but only the return of premiums paid.
* The redemption of the policy (ie, the decision to terminate the contract early) is detrimental, especially in the first years after the signing.
In the final analysis, a life insurance is a a type of investment that could possibly save your life or make the lives of your loved ones much better in case of any unfortunate and unpleasant situation or incident. It is up to you to consider the pros and cons of each policy and act accordingly.