How Does Assurance Vie Work? A Simple Definition
The assurance vie — also spelled assurance-vie — is, in France, above all a savings contract. You pay money, called “premiums”, to an insurer. The insurer invests it in the investment vehicles you have chosen and undertakes to return your savings, gains included, either as capital or as an annuity. If you die, it pays the sums to the people named in the beneficiary clause.
Despite its name, this is not simply insurance against a risk. At its heart, the product is a medium- to long-term investment: flexible, free of any contribution ceiling and governed by its own tax framework. That is why it remains one of French households’ favourite investments, alongside the Livret A regulated savings account and the PEA share savings plan.
Four parties are involved in a contract. The policyholder signs the contract and makes the payments. The insured person is the person whose life the contract is written on; in most cases, it is the policyholder. The insurer manages the funds. Finally, the beneficiary or beneficiaries will receive the capital when the insured person dies.
Assurance Vie for Expats: Don’t Confuse It With Anglo-Saxon Life Insurance
A great deal of content translated from English confuses the French assurance vie with Anglo-Saxon “life insurance”, with its term policies, medical examinations and risk-based premiums. Yet the life insurance France offers under this name is a different product entirely. Death insurance (assurance décès) is the protection product: you pay a premium so that a capital sum is paid to your loved ones if you die during the coverage period. If you are still alive at the end of the term, the contributions are lost, like a home insurance policy with no claim.
French life insurance, by contrast, is savings that belong to you: you can recover them at any time during your lifetime. The Autorité des marchés financiers (AMF) and Service-Public each devote a page to this distinction. Medical questionnaires concern death cover and borrower insurance, not the opening of a standard assurance vie savings contract.
How to Fund an Assurance Vie Contract
The contract is funded by your payments. According to the official Service-Public factsheet, there are three ways to pay your premiums in:
- Free payments: you pay in whenever you like, whatever amount you like, subject to any minimum the insurer may set. This is the most widespread formula.
- Scheduled premiums: a fixed amount programmed each month, quarter or year. Ideal for saving without thinking about it and for smoothing your entry points into the markets.
- A single premium: one payment at subscription, for example after the sale of a property or the receipt of an inheritance.
There is no legal ceiling on payments, unlike regulated savings accounts. The law asks only that premiums not be manifestly excessive in view of your financial and family situation. There is no legal minimum for the first payment either: each insurer sets its own. Depending on the contract, it ranges from around a hundred euros to several thousand.
Why You Should “Set the Clock Running” as Early as Possible
The first payment fixes the contract’s effective date, which marks the starting point of its seniority. Yet it is that seniority — not the date of each payment — that largely determines the tax treatment of withdrawals: the key threshold is set at eight years. Opening a contract with a small sum, even with no immediate plan, therefore starts the clock. You can fund it later, on the day you have savings to invest.
Where Your Money Goes: Assurance Vie Funds Explained
A contract can be single-vehicle, with just one support — often a euro fund — or multi-vehicle, which today is the case for the vast majority of contracts. In the latter case, you spread your savings across several families of vehicles with very different return/risk profiles.
The Euro Fund: Safety and the Ratchet Effect
The euro fund is the historic vehicle. The insurer invests mainly in bonds and low-risk assets and guarantees the capital you place there, fees aside depending on the contract. Interest is credited each year and, unless the contract states otherwise, becomes definitively yours: this is the ratchet effect. A difficult year on the markets does not wipe out the gains of previous years.
The trade-off is a moderate return, announced each year by the insurer and highly variable from one contract to the next. It depends on prevailing interest rates, the age of the insurer’s portfolio and its policy of setting reserves aside. Returns paid out last year guarantee nothing for the future. Some insurers also require a minimum share of unit-linked funds before you can access their euro fund or a bonus rate.
Unit-Linked Funds: Performance Potential, With a Risk Attached
Unit-linked funds (unités de compte, or UC) are non-guaranteed vehicles: equity or bond funds (OPCVM), shares in SCPI property funds, trackers, alternative funds, structured products. Your savings are no longer expressed in euros but in units. The insurer guarantees the number of units, not their value, which follows the stock and property markets up as well as down.
Over long periods, equity vehicles have historically offered greater potential than the euro fund, at the price of real volatility. Many online contracts give access to ETFs, the low-cost trackers that replicate an index such as the CAC 40 or the MSCI World. This is often the cheapest way to gain exposure to the markets inside an assurance vie.
The law also obliges insurers to offer at least one ISR-labelled unit-linked fund, one Greenfin-labelled fund and one solidarity fund: you remain free to choose them or not.
Euro-Croissance: A Compromise on a Fixed Horizon
Euro-croissance funds offer a capital guarantee, total or partial, but only at a given maturity date, at least eight years out. In exchange for this deferred guarantee, the insurer can invest more heavily in dynamic assets. The formula suits savings you are certain you will not need before maturity.
| Criterion | Euro fund | Unit-linked funds | Euro-croissance |
|---|---|---|---|
| Capital guarantee | Yes, at all times | No | Yes, at maturity (total or partial) |
| Return potential | Moderate | High, variable | Intermediate |
| Risk of loss | Very low | Real | Possible before maturity |
| Recommended horizon | Short to long term | Long term (8 years and more) | At least 8 years |
Self-Managed or Managed: Which Management Style Should You Choose?
Once you know which vehicles are available, you have to decide who steers their allocation.
- Self-managed: you choose your own vehicles and carry out your own reallocations — your transfers from one vehicle to another. This is the cheapest formula, suited to savers who follow the markets.
- Managed portfolios (under mandate): you delegate the decisions to the insurer or to a management company, according to a profile defined with you. Convenient, but often accompanied by extra fees.
- Profiled or target-date management: intermediate formulas offered by some contracts. The risky share shrinks automatically as a goal approaches — typically retirement.
Since the loi Industrie verte, managed portfolios follow supervised allocations set by profile. The cautious profile must contain at least 50% low-risk vehicles, or 30% if the horizon exceeds ten years. The balanced profile contains at least 30%, or 20% beyond ten years. The dynamic profile contains at least 20%, or 10% beyond ten years.
The balanced and dynamic profiles also include a small pocket of unlisted private equity. You can switch from self-managed to managed portfolios at any time.
One simple rule guides the allocation: the longer your horizon, the larger the share of unit-linked funds can be. As the moment you will need the funds approaches, it is prudent to secure gains progressively by reallocating into the euro fund.
Assurance Vie Fees: The Factor That Weighs Most
Over fifteen or twenty years, fees nibble away a considerable slice of performance. Service-Public distinguishes four families:
- Setup fees, fixed, paid at opening — rare today.
- Payment fees (or entry fees), deducted from every sum you pay in. They can reach several percent in traditional banking networks, whereas most online contracts have scrapped them.
- Management fees, charged each year on the assets held, often higher on unit-linked funds than on the euro fund.
- Reallocation fees, applied when you move savings from one vehicle to another.
On top of these contract fees come those of the vehicles themselves: the ongoing charges of a unit-linked fund are stacked on top of the contract’s management fees. An active fund can therefore cost several times more than an ETF on the same market. Consumer associations such as UFC-Que Choisir regularly issue the reminder: a contract with high entry fees and expensive in-house funds starts out with a handicap that no sales promise can make up. Before signing, read the key information document and the fee table of every underlying fund.
Getting Your Money Out: Partial Withdrawal, Full Surrender or Advance
Contrary to a stubborn myth, money placed in an assurance vie is not locked up, outside specific contracts. The policyholder has three tools.
The Partial Withdrawal
You withdraw part of the savings and the contract keeps running. Mechanically, every withdrawal contains a share of paid-in capital, which is not taxable, and a share of gains, which alone is taxed, pro rata. Some contracts allow scheduled partial withdrawals, so you can pay yourself a regular top-up income.
The Full Surrender
You recover the whole surrender value and the contract is closed, with the loss of its tax seniority. Any surrender penalties cannot exceed 5% of the savings and are banned after ten years of the contract. Once the written request has been received, the insurer has two months to pay out the funds, failing which increased late-payment interest applies.
The Advance
If the contract provides for it, the insurer lends you a sum, capped at a percentage of the surrender value, without touching your savings. The advance carries interest and must be repaid. It is not taxable in itself, but an advance left unpaid can be reclassified as a withdrawal. It saves you from “breaking” an old contract for a one-off need.
Beware of one special case: if a beneficiary has formally accepted their designation, their consent becomes necessary for any withdrawal or advance. This applies to acceptances made since December 19, 2007 in the forms prescribed by law.
Assurance Vie Tax Benefits: The Rules to Know
Taxation is one of the contract’s great strengths, but it obeys precise rules. The points below describe the regime in force in October 2026. Tax rules can change with every finance bill: before any major decision, check the official page How the income from an assurance vie contract is taxed (in French).
While the Contract Is Running
As long as you withdraw nothing, the gains that compound are not subject to income tax. Social contributions are deducted each year from euro fund interest. On unit-linked funds, they become due only when a withdrawal is made. It is this tax-sheltered compounding that gives the contract its power over long periods.
At Withdrawal: The Eight-Year Milestone
Only the gains contained in the withdrawal are taxed — never the capital you paid in. Their taxation depends on two parameters: the age of the contract and the date of the payments. For premiums paid since September 27, 2017, the regime is as follows, excluding social contributions, which apply in every case:
| Contract age | Income tax applied to gains |
|---|---|
| Under 8 years | Single flat-rate levy of 12.8%, or the progressive scale under a global option |
| 8 years and over | Annual allowance of €4,600 (€9,200 for a couple taxed jointly), then 7.5% on gains linked to €150,000 of net premiums, and 12.8% above that |
Payments made before September 27, 2017 remain subject to the old regime — the progressive scale or the regressive liberatory flat-rate levy, depending on seniority — with the same allowance after eight years. Concretely, after eight years, a single saver can withdraw gains of up to €4,600 each year free of income tax. Only social contributions remain due. That is why the contract is often said to “become worthwhile” from its eighth birthday.
Passing On Wealth With the Beneficiary Clause
French life insurance is also a first-rank tool for passing on wealth. When the insured person dies, the capital is paid to the designated beneficiaries and, for the most part, outside the estate: it does not enter the division between heirs, provided the premiums are not manifestly excessive. You can designate whoever you wish, family member or not.
Taxation at death depends on the insured person’s age at the time of each payment:
- Premiums paid before age 70 (Article 990 I of the French General Tax Code): each beneficiary enjoys a €152,500 allowance across all contracts combined. Beyond that, a 20% levy applies up to €700,000 of taxable amounts, then 31.25%.
- Premiums paid after age 70 (Article 757 B of the French General Tax Code): premiums are subject to standard inheritance tax after an overall €30,500 allowance, shared between all beneficiaries. The gains generated by these premiums, however, are exempt.
The surviving spouse and the Pacs civil partner are fully exempt. The beneficiary clause therefore deserves to be drafted with care and reviewed at every life event — a marriage, a birth, a divorce or a death. The standard formula “my spouse, failing that my children, failing that my heirs” does not suit every family situation. If in doubt, a notary can help you draft it.
Why Take Out an Assurance Vie? The Goals It Fits
The French Ministry of Economics sums up the contract’s appeal in three uses: building capital, preparing for retirement with a top-up income, and passing on wealth in a favourable framework. Concretely, an assurance vie is a good fit for:
- investing the savings that exceed the caps on regulated accounts, once your emergency fund has been built;
- funding a medium- or long-term project: the children’s education, a house deposit, a career transition;
- building extra income for retirement, through partial withdrawals or a life annuity;
- organising the transfer of wealth, notably for the benefit of people who are not legal heirs;
- diversifying your investments within a single wrapper, across guaranteed funds, equities, bonds and real estate.
It slots into a broader wealth strategy: for an overview of the steps, from emergency savings to investing, see our method for building wealth step by step.
How to Choose the Best Assurance Vie Contract
Annual round-ups come one after another, but their rankings change with returns and current promotions. Rather than one fixed name, here are the durable criteria that set a good contract apart:
- Zero fees on payments, or fees negotiated down to the minimum.
- Contained annual management fees, on unit-linked funds and on the euro fund alike.
- The quality of the euro fund: consistency of returns over several years, access conditions (is a share of unit-linked funds imposed?), the solidity of the insurer.
- The choice of vehicles: low-cost ETFs, SCPI property funds and a varied fund range, rather than a lineup limited to in-house funds.
- Management options: managed portfolios at a reasonable cost, free reallocations, scheduled partial withdrawals, automatic profit-taking.
- Service: online management, fast payments and reallocations, quality of support.
Nothing stops you from holding several contracts with different insurers. That lets you spread insurer risk, benefit from distinct euro funds and tailor each contract to a specific goal or set of beneficiaries. An old but expensive contract does not necessarily have to be closed: it keeps its tax seniority. You can stop funding it and open a cheaper contract alongside it for new payments. Once the contract is signed, you have 30 days to change your mind and receive a full refund.
Assurance Vie, PEA, Savings Accounts or PER: Which Should You Choose?
An assurance vie is not the only long-term investment. Each wrapper answers a different goal, and they often work well together:
| Wrapper | Strength | Limit | Best for which goal? |
|---|---|---|---|
| Livret A / LDDS | Available and risk-free | Capped, regulated return | Emergency savings |
| Assurance vie | Flexibility, no cap, wealth transfer | Contract fees, optimal taxation after 8 years | Projects, retirement, inheritance |
| PEA | Tax advantages after 5 years, low brokerage fees | Capped, mainly European shares | Long-term equity investing |
| PER (retirement savings plan) | Payments deductible from taxable income | Savings locked until retirement, except in the cases provided for | Preparing retirement, cutting your tax bill |
| Securities account | No restrictions on vehicles | Standard taxation of capital income | Investing without limits |
For the investor who wants to hold shares directly, the PEA share savings plan is often complementary to an assurance vie. We detail how it works through a selection of PEA-eligible shares. And if you are starting out on the markets, our beginner’s guide to the stock market explains the basic mechanics before you choose your unit-linked vehicles.
The Risks and Mistakes to Avoid
- Believing everything is guaranteed: only euro funds — and euro-croissance at maturity — protect your capital. Unit-linked funds can lose value, sometimes durably.
- Neglecting fees: a few tenths of a point a year amount to thousands of euros over twenty years.
- Putting everything into unit-linked funds over a short horizon: needing money during a market downturn forces you to sell at the worst possible moment.
- Forgetting the beneficiary clause: an outdated clause can hand the capital to people you would no longer have chosen.
- Closing an old contract without thinking it through: you lose its tax seniority, when a partial withdrawal is often enough.
- Ignoring insurer risk: should an insurer fail, the Fonds de garantie des assurances de personnes (FGAP) covers up to €70,000 per insured person and per insurer, all contracts combined. Beyond that, spreading your money across several companies reduces exposure. The Sapin 2 law also allows the authorities to limit withdrawals temporarily in the event of a severe crisis in the sector.
FAQ: Your Questions About Assurance Vie
How does assurance vie work, in one sentence?
You pay money into a contract opened with an insurer, which invests it in guaranteed or non-guaranteed vehicles according to your choices. You can recover it at any time and, when you die, it passes to the designated beneficiaries with favourable taxation.
Can you lose money with an assurance vie?
Yes, on the portion invested in unit-linked funds, whose value follows the markets. The euro fund, on the other hand, guarantees the capital invested, under the conditions of the contract.
Is my money locked up for eight years?
No. The eight-year mark concerns only the taxation of withdrawn gains, which becomes more favourable after that point. Withdrawals are possible at any time, except on certain specific contracts or if a beneficiary has accepted their designation.
How much do you need to open an assurance vie?
There is no legal minimum. Depending on the insurer, the first payment ranges from a few tens or hundreds of euros to several thousand for certain premium contracts.
Can you hold several assurance vie contracts?
Yes, with no limit on the number. The tax allowances — €4,600 of gains per year after eight years and €152,500 per beneficiary at death — nevertheless apply across all contracts combined.
Are assurance vie and death insurance the same thing?
No. An assurance vie is a savings investment that you can recover. Death insurance is a protection contract that pays out capital only if you die during the covered period, with no refund of contributions otherwise.
What happens when the policyholder dies?
The insurer pays the capital to the beneficiaries named in the clause, for the most part outside the estate. Taxation depends on the policyholder’s age when the payments were made — before or after age 70 — and the spouse or Pacs partner is exempt.
Official sources: Service-Public, factsheets F15274 “Contrat d’assurance-vie : fonctionnement” (checked September 25, 2026) and F22414 on the taxation of contracts; AMF, savers’ area. This article is educational in purpose and does not constitute personalised investment advice.