No cap really applies for life insurance. However, there are many thresholds to be aware of. 150,000, 152,500, 30,500, 4,600 euros: these figures should be kept in mind to optimize the taxation of your life contract. Overview.
This is a question that many Internet users are asking. What is the limit for life insurance?
In fact, by asking search engines about this, savers are probably looking for other information. Indeed, life insurance contracts are not subject to any payment ceiling, as is the case for a PEL, a Livret A or a PEA.
No legal or regulatory limit applies. In theory you can deposit as much money as you want on a life contract (and take out as many contracts as you want). Insurance companies may individually impose limits – in particular concerning the premiums paid into the fund in euros – but these are in no way generalizable ceilings to all life insurance.
On the other hand, there are many thresholds which, if exceeded, limit the tax interest of life insurance contracts.
The “ceiling” of 152,500 euros…
The best known, which may correspond to the “ceiling” sought by Internet users when they query Google, is the threshold of 152,500 euros.
It is in fact the amount that a subscriber of a life contract can transmit to each of his beneficiaries in total exemption from inheritance tax. Concretely, if you hold 610,000 euros (four times 152,500), you can transmit, upon your death, 152,500 euros to four people without any tax being due (excluding taxation of any capital gains, see below).
The beneficiary(ies) can be the heirs or any other person. In the latter case, however, be careful not to transmit sums that would affect the hereditary reserve (children in particular). The transmission could then be called into question by the courts if it considers that the premiums – the money bequeathed via life insurance – are “grossly exaggerated”. However, there is no official “cap” on this. Each case will be studied individually by a judge in the event of a complaint filed by a reserved heir.
… and that of 30,500 euros after 70 years
This threshold of 152,500 euros is reduced to 30,500 euros if the payments were made after the insured’s 70th birthday on a contract opened after 20 November 1991. This reduction is also common to all beneficiaries (you can send 30,500 euros to one beneficiary or 15,250 euros to two beneficiaries etc.).
Beyond the allowance of 152,500 euros, the bequeathed capital will be taxed at 20% up to €852,500 per beneficiary then 31.25% (beyond the allowance of 30,500 euros, the capital is taxed with inheritance tax and interest is exempt).
Alongside these “ceilings”, which are essential for optimizing your estate, other thresholds apply to the taxation of life insurance. Specifically, they concern the taxation of gains generated by your investments.
The allowances of 4,600 and 9,200 euros
Eight years after its opening, a life contract allows you to benefit from a total exemption from taxation (social security contributions remain due) on capital gains and dividends up to a limit of 4,600 euros per year (9,200 euros for a couple). If the winnings do not exceed this amount on a withdrawal (or redemption, in the jargon), no income tax will be payable.
Let’s take an example. You hold 100,000 euros in savings invested in a life contract, including 30,000 euros in capital gains and dividends (“gains”), ie 30%. In this case, you can withdraw 15,333 euros tax-free. The share of the gain will indeed amount to 4,599.90 euros (15,333X0.3). To find out this figure, simply divide the amount of the allowance (4,600 euros or 9,200 euros for a couple) by the share represented by the gains in your contract (here the rate is 30%, or 0.3. 4,600 /0.3 = 15.333).
The operation can be repeated every year. It is even interesting to force yourself to implement it every year if you benefit from significant latent capital gains.
The new “ceiling” of 150,000 euros
Beyond the allowance, earnings are taxed at 7.5% (+17.2% social security contributions). For payments made before September 27, 2017, this flat rate withholding tax applies regardless of the amount. For payments made since that date, it is only valid up to 150,000 euros in payments. Then, it is the flat tax of 12.8% (30% with social contributions) which will be levied.
This new “ceiling” of 150,000 euros is therefore to be known if you have recently deposited significant premiums or plan to do so. It should not be confused with the reduction of 152,500 euros mentioned above.
To sum up, five “ceilings” can be considered to apply to life insurance.
– Three concern transmission: 152,500 euros, 30,500 euros (after the age of 70) and an amount potentially assessed by the judge if the beneficiaries are not forced heirs.
– Two concern the taxation of earnings: 4,600 (9,200 euros for a couple) and 150,000 euros for payments made since September 27, 2017.