Situations in Which It Is Better to Forgo the Benefits of a Life Insurance Policy

Life insurance is a savings product that is very popular among the French, particularly because of its flexibility and tax advantages. However, a beneficiary may choose to waive the benefits of a life insurance policy. This decision may be motivated by tax or estate planning considerations.
 

What is the point of giving up the benefits of life insurance?
 

In the context of an estate, an heir may decide to renounce their share of the estate. Similarly, in the context of a life insurance policy, a beneficiary may also decline to receive the death benefit to which they would otherwise be entitled. The reasons for doing so may vary, but the primary motivation is often tax-related. For example, if a parent—a primary beneficiary—waives their rights to the policy in favor of their children, who are designated as secondary beneficiaries, the children will benefit from a more favorable transfer of capital. In fact, with life insurance, it is possible to transfer up to 152,500 euros without paying any inheritance tax, whereas in a traditional estate, the tax exemption between parents and children is only 100,000 euros. Furthermore, by renouncing the policy, the transfer of capital occurs while the parent is still alive—which is never the case in an estate. It is therefore possible to optimize the transfer of capital within a family in this way.
 

How do I waive my rights to a life insurance policy?
 

There is no specific procedure for waiving the benefits of a life insurance policy other than notifying the insurance company by certified mail that you are waiving the benefits of the policy. However, it is important to keep in mind that the beneficiary clause must be properly drafted for the waiver to have the intended tax consequences. It is therefore recommended that you seek the assistance of a legal professional (attorney or notary) when drafting the beneficiary clause.
 

Do I have to forfeit the benefits of a life insurance policy if I renounce an inheritance?
 

Renouncing a life insurance policy is not necessarily linked to renouncing an inheritance. It is entirely possible to renounce one without renouncing the other, since a life insurance policy is considered to be “outside the estate” under Article L 132-12 of the Insurance Code. However, it is important to verify that the beneficiary clause has been properly drafted, so that renouncing the inheritance does not result in the loss of beneficiary status.
 

What is the difference between surrendering and canceling a life insurance policy?
 

It is important not to confuse waiving the benefits of a life insurance policy with rescinding or canceling a life insurance contract. In the latter case, the policyholder terminates the life insurance contract and cancels the application after it has already been signed. The procedure requires compliance with certain formalities and must be completed within a maximum of 30 calendar days from the date the policyholder receives the insurance application and the disclosure statement. 

In the event of cancellation, the insurer has 30 days to reimburse the policyholder for all premiums paid, plus any late payment interest. It is important to note that, with life insurance, funds are never frozen or lost, and it is always possible to surrender the policy in full, subject to the tax rules applicable to a surrender.