Life insurance: these little -known options allow you to limit your risk taking

Investing in life insurance exposes you to a risk of loss when you bet on account units (UC). Fortunately, certain automatic options make it possible to master this hazard without thinking about it.

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Take risks, while limiting breakage in the event of a glitch. This is how we could summarize the objective of certain options available in life insurance. Because if the holders of this product primarily place their savings on guaranteed capital supports – funds in euros – on which they cannot lose money, it is also possible to invest in more risky, but potentially more remunerative supports, called account units (UC). Invested in equity, bonds, real estate, or even in not listed assets on the stock market, these UCs submit the saver at a risk of loss in partial or total capital.

However, to avoid losses, or shelter your earnings, contracts offer automatic mechanisms called “options”, often unknown to the general public. Logic for Thibaud Lecomte, co-founder and president of the Epargnoo platform, “Because these solutions are mainly intended for an audience of already informed investors, who will take risks with his capital, which is not the case for all life insurance holders”. However, “These options have even more interest with online contracts, because they consist of automatic arbitrations (transfer of part of the savings from an investment medium to another, editor’s note), which are free for most digital players”Note Yves Conan, Vice-President of Linxea. Here are three options that could be useful to you, and which can be offered within your life insurance contract.

Limit its losses

First option to consider, in particular to limit the damage in the event of a fall in stock market prices, the “stop loss”, literally “stop losses”. Difficult to better summarize it: in case exceeding a certain threshold of loss defined in advance by the saver, all of his investment is repatriated to the Euros fund (or other more secure media such as monetary or bond funds if not invested in Euros funds). “The principle is simple: when you pass under a defined loss threshold, the investment on this support is blocking on its own, and this limits the loss”, explains Thibaud Lecomte.

Imagine that you have invested 10,000 euros in UC shares. It is for example possible to set a “stop loss” at 5,000 euros (a drop of 50%): if the value of your investment drops to this level, the remaining 5,000 euros will be automatically sheltered so as not to risk losing more.

Shelter or secure its capital gains

Second option: securing capital gains. The principle: the gains generated by your UCs are automatically transferred to your guaranteed capital support (the fund in euros) on which you will therefore no longer be able to lose them. “This is the strategy of the squirrel, as soon as one exceeds certain level of gain, which we determine in advance, these gains are sheltered”summarizes Yves Conan.

For example, you invest 10,000 euros in UC shares, by fixing a securing of capital gains from 2,000 euros. As soon as the value of your investment reaches 12,000 euros, the 2,000 euros in gains generated are automatically transferred to the euro fund part, on which they benefit from the capital guarantee.

Automatically rebalance your wallet

Last option: Automatic rebalancing, which allows you to keep the desired distribution within your life insurance. Over time, the latter can indeed evolve, and the share of risky supports, potentially more remunerative, take up more space.

For example, being 20 years from retirement, you agree to take risks, but for half of your capital only, a distribution of 50/50: 50% euros and 50% invested in UC shares. After 15 years, the gains generated on the UC part may pass your actions pocket to 60% of your wallet. In this case, automatic rebalancing sells part of the shares to bring it to 50%. “This is similar to the default management of retirement savings plans (PER): Management controlled by horizonwhich will automatically sell risky supports as the retirement age is approaching, so that the secure part takes up more and more space, and thus avoid losing everything before the end of the contract ”, Note Thibaud Lecomte.