Do you know what they are?
It is likely that, in a store window of a bank or Insurance company, you have seen or read advertising posters inviting you to invest in Unit Linked Insurance. Perhaps you have not understood very well the investment that was offered to you or you may have doubts. Since Euroteide Seguros (Insurance Brokers and Consultants) In this article I will try to explain briefly what these financial instruments are that have a variable part of risk.
The 'Unit Linked '(Spanish translation would be a diversified insurance fund or basket of funds), is an English word that means "linked to units of account", although they are also called or defined as “those Insurances in which the policyholder assumes the risk of the investment”. In any case, whatever the chosen translation, they are no more or less financial products that allow you to channel and diversify future savings.
They are a way of investing, having both a Life Insurance and a savings fund. Specifically it is an investment in a basket of funds, stocks or bonds and that is structured around a Life Insurance that is not usually generally very capitalized. This means that a small part of the investment must be used to pay the Insurance premium, but most of the capital is invested in a product portfolio and the risk is borne by the buyer.
A form of investment while having life insurance
They are life-saving insurance that in which the insured assumes the risk that the investment entails and that obviously always guarantees coverage in the event of death. It is a way of investing while having Life Insurance.
En a 'Unit Linked' How could it be otherwise, a part of the capital is used to pay the insurance premium and the rest to invest in a basket of funds or financial assets. This type of product does not guarantee that a return will be obtained, no matter how minimal, it depends on where you decide to invest in the different funds and markets in different world areas.
How the Linked Units work
Its operation is very simple, although it is always recommended to have a minimum culture financial or have a good advisor to guide us, -Euroteide Seguros (Asesores de Seguros) - since the insured client decides practically everything: he is the one who distributes the capital that he contributes among all the investment alternatives offered.
The insured can change to mobilize the capital between the baskets or funds that belong to the 'Unit Linked' from the moment he hires the product or waiting for some minimum time depending on the structure. In general, insurers tend to limit the number of changes between baskets, modalities or funds per year, in such a way that they begin to charge commissions from a certain number of mobilizations carried out.
What is their taxation and when are they extinguished?
The 'Unit Linked' They can be extinguished for two reasons. One of them would be because the insured, in life, rescue his capital. The other is undoubtedly due to the death of the insured.
Depending on each case, the taxation of the product would have one treatment or another. In the event that the client orders their redemption, the increase in the value of the 'Unit Linked' (the difference between the redemption value and the value contributed when contracting) will be taxed by Personal Income Tax as a return on movable capital, currently 19%. They can also be redeemed in the form of an annuity. What allows to have a more favorable taxation. If the insured dies, the beneficiaries will be taxed by the Inheritance Tax.
The new law that regulates these products establishes that, for the purposes of Wealth Tax, Life Insurance shall be calculated at its redemption value at the time the tax is accrued. Until the entry of this new regulation, many policyholders of this type of policy named one or more irrevocable beneficiaries (thus losing the redemption option) and thus avoided this tax. From now on, this formula will no longer have value and the insured will have to pay Wealth Tax while keeping the 'Unit Linked' in force. In addition, in the event of redemption or death, it will be taxed, as mentioned, either by personal income tax or by successions.
What profile does an 'Unit Linked' investor have?
The 'Unit Linked' they are for savers who invest with expectations and a long-term view, the investment should have a horizon of at least 12 years and to be able to assume different degrees of risk, with the aim of making a rotation in their investments and being able to obtain the maximum profitability.
What are the advantages of a Unit Linked?
The advantage of Unit Linked versus other savings products through Insurance it is its greatest versatility and flexibility. This leads and results in the possibility of achieve higher returns on savingsYes, and it must be said clearly, always at the cost of risking more.
Like other investment insurance, can be rescued in an annuity, allowing you to enjoy additional tax advantages. This rescue can be carried out at any time, since Unit Linked are liquid products.
Another important factor is that in addition offers us the additional coverage of being linked to life insurance and the crucial possibility for the policyholder to choose the term of the investment, the value of the premium, the coverage and the investment of the premium itself. Due to its composition, It is ideal for making small periodic investments of capital. Yes, those 100 or 200 euros that you save month by month can go directly to Unit Linked.
But without a doubt what makes the difference is their treatment in the event of death, as I explained previously Unit Linked are very interesting when planning a succession. The reason is that they are not part of the inheritance and are not made public. In Spain, the Register of Insurance Contracts can only be consulted when the insured dies and that information does not contain amounts or beneficiaries, only the data of the company with which the Insurance was contracted.
In the case of companies, it is not part of their balance, so it would be out of the capital to claim in case of bankruptcy.
Disadvantages or disadvantages of Unit Linked
Like almost everything in life, not everything is good or good for this product. The first disadvantage of Unit Linked is that profitability is not assured nor is capital. As it happens and is natural with any investment fund basket, it is impossible to assure that the money will be recovered or you will obtain a certain profit (We leave aside guaranteed products).
To this we must add that fund portfolio management that the management team does It has a cost, although the commissions charged by the managers of the Insurance companies are almost half that of the banks that you will have to pay. In addition, like any pre-designed portfolio, it will never be 100% adjusted to your needs or your investor profile. It is very important that you know your profile as an investor, but do not worry Euroteide Seguros, (Insurance Advisors) It will advise you and help you know what your profile is.
Finally, the premium paid for life insurance is both an advantage and a disadvantage. The reason? That part of your savings, which you allocate to the premium, will not be invested and, therefore, will not generate profitability. In addition, the premium will increase over time because the older, riskier and, therefore, more expensive life insurance is.
Conclusions on the “Unit Linked”
From Euroteide Seguros, (Insurance Advisors) We understand that the “Unit Linked” are an excellent investment instrument for all those who are willing to assume a certain risk index in order to maximize their profitability and at the same time be protected with Life insurance and the taxation of this type of Insurance. . Especially suitable in economic cycles where interest rates are low and traditional savings are little paid. Their attractive taxation, either by ransom, taxed as an annuity, or personal income tax, or under inheritance tax, makes them very appropriate. They are not suitable for "Financial heart" or what is the same for people with risk aversion.
En Euroteide Seguros (Insurance Brokers and Consultants) we can advise you and help you in your investment in Unit Linked we will be happy to inform you and help you choose the best Unit Linked Insurance for you with the best insurance company. Do not hesitate to contact us, it will be a pleasure to help you obtain, in the long term, your highest profitability with the best “Unid Linked”