Life insurance is an essential investment if you want to save, get ready to retire or pass on capital. Beyond these more traditional uses, its significant investment flexibility makes it attractive, allowing you to spread your savings across several asset classes, while adapting to your chosen risk profile. Another key advantage lies in the transfer: It is up to you to decide who will receive the money in your insurance. You can change the beneficiaries in your policy for free, as many times as you wish. And when taken out in Luxembourg, your policy will benefit from a unique protection framework that strengthens the security of your assets should the insurer default. However, in light of a wide range of options including guaranteed capital, units, investment funds, equities, bonds and asset allocation, it can sometimes be difficult to choose the right one. What are the differences and how do you go about choosing? Here is a guide to help you see things more clearly.
1. Life insurance: A versatile investment package
Life insurance is not just a savings policy; it's a genuine investment package that enables you to spread your money across diverse kinds of assets, with varying levels of risk and return. Such flexibility allows you to adapt your investment strategy based on your financial objectives, whether it is securing your savings or aiming for a better return over the long term.
There are two major categories of investment in life insurance in Luxembourg:
Guaranteed capital with a fixed interest rate offering stability and security
Units potentially performing better, but more risk-exposed
The choice between these two options primarily depends on your risk tolerance, your objectives and your investment horizon.
2. Guaranteed capital: Security and stability
Guaranteed capital receives an interest rate set by the Commissariat aux Assurances, the supervisory authority for the insurance sector. In addition, the company may set a profit-sharing scheme each year based on its results and changes in interest rates on the financial markets. This means that your capital is protected, and you will receive interest every year. This interest is definitively earned, which ensures that your savings grow steadily without any risk of losing capital. However, the returns have fallen in recent years and are not extremely high. Guaranteed capital is thus well suited to cautious investors looking to secure their savings without exposure to market fluctuations.
3. Units: Boost your savings
Units are non-guaranteed investment vehicles whose value fluctuates depending on the financial markets. These vehicles provide access to a wide range of assets, including investment funds, equity funds, bond funds, mixed funds, commodities etc. The objective is to achieve a return in excess of the guaranteed capital over the long term, while accepting a certain degree of volatility.
Units are suitable for investors who accept a moderate to elevated risk in exchange for a potentially more attractive return. They are particularly suitable for investors with a long-term investment horizon who wish to boost their savings.
By choosing units in your policy, you are investing in investment funds. Specifically, this means that you are not buying equities or bonds directly, but a share of a collective fund, which brings together the savings of several investors. This fund is then managed by professionals who use a strategy devised in advance (safe, balanced, dynamic, sector-based, etc.).
One of the major advantages of these funds is their diversification: They allow investments to be spread across different types of assets, geographical areas, currencies or themes (such as ESG), thereby reducing the overall risk of the portfolio. The value of the fund fluctuates depending on the performance of the assets it holds, and the gains (or losses) are shared among the investors, on a pro-rata basis. It is a simple and efficient way to access financial markets while benefiting from the expertise of specialist managers.
4. The main funds available at LALUX
LALUX offers a selection of diversified external funds, managed by finance experts and accessible according to your risk profile. By asking a few questions, your advisor sets up your investor profile and propose funds with a level of risk to suit your objectives and situation.
The funds can be made up of different asset classes such as:
Government or corporate bonds: for a stable investment with a moderate yield
Equities: Shares: for a potentially higher return, with an adjustable level of risk
Commodities (e.g., gold): acting as a safe haven against inflation
ESG funds: aligned with environmental, social and governance criteria and LuxFLAG labelled, guaranteeing selection in compliance with ESG standards by an independent body
Your trusted advisor is available to help you with your choice of investment.
Don't forget that you can change the allocation of your investments at any time by making a simple switch to secure capital gains, minimise losses or seize opportunities.
5. How to choose your life insurance to invest?
If your priority is security, guaranteed capital is preferable. If you are looking for a good compromise, a mix between guaranteed capital and investment funds could be a good strategy. For a higher return over the long term, investment funds could be a sensible choice.
Last but not least, investors in Luxembourgish life insurance products are particularly well protected by the country's regulations. The assets linked to your policies are deposited with a depositary or custodian bank approved by the supervisory authority for the sector, the Commissariat Aux Assurances, and are kept strictly separate from the company's own assets. Therefore, should an issue arise, along with the other investors you have priority in recovering your assets. In addition, you have a special privilege known as the superprivilège: Indeed, as a policyholder, you are recognised as a first-ranking creditor in respect of all the company's assets. Should the company go bankrupt, the policyholder has priority over the State, social security bodies, employees or any other creditor. An extra guarantee when it comes to peace of mind.
Life insurance is much more than a savings product; it’s a flexible, secure asset management tool. Whether you like it safe, balanced or dynamic, there’s a combination to suit your profile. Thanks to the flexibility of your life insurance, you can combine the benefits of guaranteed capital and more dynamic funds, based on your needs. Ready to optimise your savings? Get customised advice from your advisor to make the right choice and see your investment grow in complete confidence.