Everything you need to know about life insurance taxation in 2026
The life insurance policy is the favourite investment of the French. It lets you save and pass on your wealth within a specific tax framework, with specific tax advantages.
However, understanding the taxation of life insurance can become a headache. Between the different scenarios, the tax allowances, the levies and the exemptions, it is easy to get lost.
Don't worry, we are going to go through all the aspects of life insurance taxation together.
Let's look in detail at the applicable tax rules.
Introduction to life insurance taxation
Life insurance is not just about guaranteeing a capital sum or an annuity in the event of death. It is a wealth management tool that lets you save, grow your money and pass it on under advantageous tax conditions. To make the most of it, you need to understand its taxation.
The taxation of life insurance depends on whether you withdraw money or pass it on to your beneficiaries in the event of death.
More capital invested
Non-contractual document for advertising purposes. Investing in unit-linked funds carries a risk of capital loss, as their value is subject to fluctuation, both upwards and downwards, depending in particular on the performance of the financial markets. The insurer guarantees the number of unit-linked funds and not their value, which it does not guarantee. The e-vie life insurance policy is an individual life insurance policy, denominated in euros and/or unit-linked funds, underwritten by Generali Vie, a company governed by the French Insurance Code. Finary SAS — 58 rue de Monceau 75380 Paris 8 — Investment Firm authorised by the ACPR under no. 19283, ORIAS no. 21001279, member of AMAFI
Taxation in the event of a withdrawal
Do you need cash for a project and are considering dipping into your life insurance policy? It is crucial to understand the tax implications before you go ahead. Not all withdrawals are equal in tax terms.
Partial or full withdrawal: definition and tax implications
Let's start with the basics. A withdrawal consists of taking out all or part of the savings in your life insurance policy:
- Full withdrawal: withdrawal of all of the savings.
- Partial withdrawal: withdrawal of part of the savings.
The taxation of your withdrawal depends on several factors:
- The subscription date of your policy
- The date of your payments
- The time elapsed since the opening of your policy
- The amount of your withdrawal
Let's take an example. You took out a life insurance policy 10 years ago and have made regular payments. Today, you want to withdraw €10,000. This withdrawal will be made up of a capital portion (your payments) and a gains portion (the interest generated). Only the gains portion will be subject to tax.
Taxation of life insurance policies more than 8 years old
The taxation of life insurance changes favourably after 8 years. Why? Because the legislator wants to encourage long-term saving.
Beyond 8 years, your withdrawals benefit from an annual tax allowance of €4,600 for a single person. If you are a couple, the allowance is €9,200. If the gains portion of your withdrawal is below these amounts, you will not pay any tax!
After the allowances, the gains are taxed at 7.5% (or 12.8% for more than €150,000) plus 17.2% in social security contributions. This regime may, depending on the situation, be more favourable than the 30% flat tax (PFU). Find out more about the life insurance ceilings.
How to choose between the flat tax and income tax?
The taxation of your withdrawals depends on the date of your payments and the duration of your policy. The introduction of the flat tax (PFU) changed the taxation of life insurance for all payments made from 27 September 2017.
For premiums paid before 27 September 2017, your gains are subject either to the progressive income-tax scale, or, by election, to the flat-rate withholding levy (PFL). The rate varies according to the age of the policy: 35% for a policy less than 4 years old, 15% between 4 and 8 years, 7.5% beyond 8 years. The 17.2% social security contributions are added in all cases.
For premiums paid from 27 September 2017, the regime is as follows:
- Policy less than 8 years old: 30% flat tax (PFU) (12.8% income tax + 17.2% social security contributions).
- Policy more than 8 years old, total payments below €150,000: 7.5% + 17.2% social security contributions (i.e. 24.7%).
- Policy more than 8 years old, total payments above €150,000: 30% flat tax (PFU).
The €150,000 threshold is global: it applies to all of your life insurance policies. By election, you can opt for taxation under the progressive income-tax scale. This option is global and applies to all of your investment income.
What are the withdrawal fees and how can I minimise them?
Withdrawing money from your life insurance policy may incur fees. These fees, set by the policy, may be:
- A percentage of the amount withdrawn
- A fixed amount
To minimise these fees:
- Spread your withdrawals over time to benefit from the annual allowances.
- Wait until your policy is more than 8 years old to benefit from the tax advantages.
The idea is to adopt a smart strategy that optimises your taxation while minimising fees. Knowing the applicable rules allows you to better anticipate the taxation of your withdrawals.
Knowing this, you can better understand your life insurance taxation and make informed decisions about your wealth.
within your reach
Non-contractual document for advertising purposes. Investing in unit-linked funds carries a risk of capital loss, as their value is subject to fluctuation, both upwards and downwards, depending in particular on the performance of the financial markets. The insurer guarantees the number of unit-linked funds and not their value, which it does not guarantee. The e-vie life insurance policy is an individual life insurance policy, denominated in euros and/or unit-linked funds, underwritten by Generali Vie, a company governed by the French Insurance Code. Finary SAS — 58 rue de Monceau 75380 Paris 8 — Investment Firm authorised by the ACPR under no. 19283, ORIAS no. 21001279, member of AMAFI
Taxation in the event of death
Life insurance is a savings tool, but also a wealth transfer instrument. In the event of death, the accumulated capital is paid to the designated beneficiary or beneficiaries. The applicable tax conditions are specific.
Payments before age 70: allowances and levies
If you take out a policy at age 50, your beneficiaries can receive up to €152,500 without paying inheritance tax. Beyond that, a flat-rate levy of 20% or 31.25% applies, depending on whether the taxable portion is below or above €700,000.
Let's take an example. You have paid €200,000 into your policy and pass it on to your two children, each receiving €100,000. This sum is completely exempt from inheritance tax. This illustrates the impact of the applicable allowances.
Payments after age 70: allowances and exemptions
Payments made after age 70 receive specific tax treatment. They are reintegrated into your estate and subject to inheritance tax according to the family relationship with the beneficiary.
Fortunately, your beneficiaries benefit from an allowance of €30,500 on these payments, across all policies and beneficiaries combined. In addition, the interest generated by these payments remains exempt from inheritance tax. This allowance is one element of the applicable regime.
Find out more about life insurance ceilings.
How to optimise transmission according to the age at which payments are made?
The age at which payments are made directly affects taxation in the event of transmission. Hence the importance of a well-considered payment strategy.
If you started funding your life insurance before age 70, you can continue your payments taking into account the applicable tax framework. Your beneficiaries will enjoy the tax advantages on your death. If you are 70 or older, other transmission tools, such as gifting, may be considered depending on your situation to limit the tax impact.
The role of the beneficiary clause
A well-drafted beneficiary clause is crucial. It determines who will receive the capital on your death and in what proportions. Good drafting optimises transmission, for example by splitting the capital between several beneficiaries to make the most of the allowances.
Keep your beneficiary clause up to date. A divorce, a birth or a death may require a review. By keeping a close eye on your clause, you ensure that your capital will be passed on according to your wishes, under the best tax conditions.
Optimising taxation in the event of withdrawals and inheritances
The taxation of life insurance may seem complex, but it is also a framework worth knowing for those who master its subtleties. With the right strategies, it is possible to optimise the applicable tax treatment, whether for withdrawals or inheritances.
Strategies to minimise taxes
For withdrawals, it may be worthwhile, depending on your situation, to defer the withdrawals from your life insurance policy. Each additional year brings your policy closer to the 8-year mark, with its lighter taxation. If a withdrawal is necessary before 8 years, a partial withdrawal may be considered to minimise the taxable gains portion.
Splitting your withdrawals over time is an approach that some savers adopt. By spreading withdrawals over several years, it is possible to benefit from the annual allowances of €4,600. For a couple, the annual allowance is €9,200.
On the inheritance side, the tax strategy begins as soon as the policy is taken out. Opening a life insurance policy before age 70 allows you, within the current legal framework, to benefit from tax advantages specific to transmission. Splitting the capital between several beneficiaries also multiplies the allowances.
Benefiting from specific exemptions
In certain specific situations, you can benefit from tax exemptions on your withdrawals:
- Redundancy
- Early retirement
- Disability
- Court-ordered liquidation
In these cases, the gains from your withdrawal are exempt from income tax. You remain liable for social security contributions, but it's still a saving! Provide the supporting documents for your situation to your insurer to benefit from this exemption.
Older policies
Policies taken out before 1983 or payments made before 25 September 1997 are not taxed on a withdrawal. Premiums paid before 27 September 2017 benefit from the old tax regimes. These regimes may be more favourable, depending on the case, than the 30% flat tax (PFU) applicable to premiums paid after that date.
Concrete examples of tax calculation in the event of withdrawals
To understand better, let's take a worked example. You took out a policy 10 years ago, with an initial payment of €50,000. Today, your policy is worth €70,000, i.e. a gain of €20,000. You want to make a withdrawal of €10,000.
Worked example for purely illustrative purposes. The taxable gains portion will be calculated as follows: (Withdrawal amount / Policy value) * Total gains. That is (10,000 / 70,000) * 20,000 = €2,857
On these €2,857, you can apply the annual allowance of €4,600 (if you are single). Your withdrawal will be completely exempt from tax! You will only have to pay the social security contributions of 17.2%, i.e. €491.
With a little planning and a good understanding of the tax rules, you can better understand the taxation of your life insurance. To simulate the impact of your withdrawals over the long term, our life insurance simulator can be useful.
Goals
Is it possible to take out several life insurance policies?
Good news: it is possible, and often even recommended, to take out several life insurance policies. You can hold as many as you wish, and this multiplicity of policies can prove very advantageous in tax terms.
Advantages of having several policies
By having several policies of different ages, you can optimise your taxation over time:
- Make withdrawals from your "old" policy to benefit from the allowances and reduced rates.
- Let your "young" policy mature quietly.
Another advantage: diversification. By spreading your savings across several policies, you can diversify:
- The investment options
- The insurance companies
- The management options
This allows you not to put all your eggs in one basket and to adapt to the best opportunities in the market.
The multiplicity of policies is also useful in terms of transmission:
- Designate different beneficiaries on each policy, according to your family situation and your transmission objectives.
- Customise the distribution of your death benefit capital.
Be careful not to fall into the opposite excess. Too many policies can become difficult to manage and generate additional fees. Find the right balance according to your situation and your needs.
Taking out several life insurance policies can, depending on your situation, be a wealth optimisation tool. But as always in wealth management, weigh up the pros and cons carefully, and adapt to your personal situation. Seek the advice of a professional, who will be able to guide you towards the strategy best suited to your objectives.
Want to know more? Discover our detailed article on opening several life insurance policies.
Comparison with other financial products
Life insurance is not the only savings and wealth transfer tool. Let's compare it with other financial products:
- PER (France's retirement savings plan): lets you deduct payments from your taxable income, but the benefits are taxed on the way out. Discover the differences between the PER and life insurance.
- PEA (a French tax-advantaged equity savings account): exempts capital gains and dividends from tax after 5 years, but is limited to securities of companies in the European Economic Area, although some eligible ETFs allow exposure to global markets.
- Buy-to-let property: Offers various preferential regimes (Malraux, property deficit, etc.), but involves active management and specific constraints.
Tax advantages specific to life insurance compared with other investments
Life insurance has unique tax strengths:
- Transfer of capital outside the estate: Escapes transfer duties and preserves the confidentiality of the transmission.
- Non-taxation of gains without withdrawal: Allows you to grow your savings free of tax.
- No payment ceiling: Unlike tax wrappers such as the PEA or regulated savings accounts.
- Great freedom of investment: Choice between options with capital guaranteed by the insurer (euro funds, with the guarantee subject to the insurer's solvency and to the Sapin 2 framework) and more dynamic ones (unit-linked funds).
These characteristics make life insurance a wealth tool to study according to your profile. It can fit into an overall wealth strategy to make the most of it, depending on your personal situation.
The taxation of life insurance has its rules, exceptions and subtleties. It is also a tool used for the management and transmission of wealth. Its implementation must be adapted to each individual situation.
Regulatory disclaimers: Marketing communication. Investing carries a risk of partial or total capital loss. Past performance is not a reliable indicator of future performance. This article is provided for information and educational purposes only; it does not constitute personalised investment advice, a buy or sell recommendation, or tax advice. The capital guarantee on euro funds is provided by the insurer and depends on its financial strength. In a severe systemic crisis, the French "Sapin 2" law allows withdrawals to be temporarily restricted (liquidity), without affecting the guaranteed capital. Unit-linked funds are not guaranteed and carry a risk of capital loss. Before investing, read the Key Information Document (KID) and, where relevant, consult an authorised adviser. Finary SAS, an investment firm authorised by the ACPR (no. 19283), member of AMAFI. Insurance broker registered with ORIAS (no. 21001279), member of the CNCGP (association approved by the AMF). PSAN registered with the AMF (no. E2022-057).
