Within the investment products segment, there is one that has begun to stand out especially in recent years. Its about unit linked, Savings insurance that offers high profitability and that it is tough competition for traditional style investment funds.
If you want to invest in this or other solutions, we invite you to contact us for advice and discover which is the best product for you. But first, we explain what is a unit linked.
What is Unit Linked Insurance?
In this Diversified insurance oriented towards long-term savings. A product that combines life insurance and a savings fund that invests in funds, stocks or bonds. In this case, the insured assumes the risk that the investment entails, while the coverage of the designated beneficiaries is guaranteed in the event of their death. What is not assured in any case is that profitability will be obtained, no matter how minimal it may be. Therefore, it is a recommended product for long-term savers who can take on a certain level of risk.
As a particularity, a part of the capital paid by the user is used to pay the Insurance premium, while the rest is used to invest in funds or financial assets.
How this type of Insurance works
To understand how the unit linked, it is important to be clear that whoever hires it does not assume the role of a participant in the funds that make up their investment basket, but rather that of a life insurance policyholder.
What the client does have is total decision-making power over how the contributed capital is distributed among the different investment alternatives offered. There is freedom when it comes to moving capital from one basket or fund to another, but insurers typically limit changes to a certain number throughout the year.
Neither the benefit nor the rescue are guaranteed. What will be perceived for one concept or another depends on the evolution that the markets experience. Therefore, there is a risk of losing savings, and this is something that anyone who decides to take out insurance of this type must understand from the beginning.
The product expires after death of the insured, or if he decides to rescue his capital. In both cases there are tax consequences that are important to take into account.
Unit linked and taxation
As is usual in investment funds, you do not pay for moving money from one fund or basket to another. While maintaining the unit linked in force, is taxed on the estate tax. When the money is recovered, you must pay personal income tax (IRPF) or inheritance tax, as appropriate.
If the client decides recover the invested capital, the difference that exists between the surrender value and the value contributed when contracting is taxed through the Personal income tax as return on capital assets.
In case of death of the insured, the beneficiaries pay tax on the amount received in the inheritance tax.
Advantages and disadvantages of Insurance unit linked
As experts in the field, we are clear that all savings and investment products have interesting benefits and also some drawbacks. Since not everything is positive, it is essential to weigh the pros and cons and decide what also weighs.
Another aspect to keep in mind is that investment decisions are very personal. The product that is suitable for one person may not be suitable for another, because it depends on their investor profile, the available capital and the level of risk you can accept.
So that you can assess whether this Life and Savings Insurance is suitable for you, carefully weigh its benefits and drawbacks.
Advantages
The unit linked offer an interesting flexibility in investment, since they allow the holder to choose between different funds that adapt to their objectives and risk profile. As the Insurance is linked to an investment fund, the possibility of obtaining returns is greater than with more traditional Insurance.
On the other hand, it is a product that offers additional protection, because the invested is delivered to the beneficiaries of the Life Insurance in the event that the owner dies.
Another advantage is that does not have a minimum permanence. The rescue can be carried out at any time, it is a product with great liquidity.
Drawbacks
As is usual in investment products, the unit linked a commission structure of some complexity, which includes management and administration costs, among others. This must be taken into account, because it can reduce final profitability.
Furthermore, since they are linked to investment funds, they imply a market risk. If investments do not go well, part of what was invested, or even the entire investment, may be lost. Not even a minimum capital is guaranteed.
Although this investment product is beginning to become popular, it is still quite unknown to investors and can be difficult to understand. Therefore, investment is not recommended without specialized advice. Because it is essential to understand well how it works and the risks involved in depositing savings in life and savings insurance like this.
El unit linked It is an attractive option for those who want to combine an investment that provides long-term benefits with life insurance that ensures the financial stability of the family in the event of the death of the contracting party, but it also involves taking risks and taking care of the associated costs.
Therefore, what we recommend is to resort to professional financial advice before making any investment decision in this or another product, because it is important for the consumer to know where they are putting their money and what consequences at a tax, performance and risk level. It will be up to him to choose one option or another. If you need help, at Euroteide Insurance we are at your disposal.
