Taking out a life insurance policy for your child or grandchild will enable you to build up long-term savings from the time of their earliest years.
These savings can be used to finance part of their studies abroad, a trip, the purchase of their first car, or to invest in a real estate project.
Furthermore, the premiums paid on this type of policy are tax deductible.
"According to the Erasmus Observatory, the cost of one year’s study in Europe is an average of €10,000 ... and this does not include tuition fees. If you choose a country outside Europe - such as Canada, the United Kingdom, Australia or the United States - this cost can rise to as much as €30,000."
The life insurance policy taken out for your children or grandchildren works in the same way as a traditional life insurance policy.
As parent(s) or grandparent(s), you will be the policyholder of the life insurance policy, i.e. the person who takes out the policy and pays the premium, and you will also be insured as the beneficiary if you survive into old age. In the event of your death, your children or grandchildren will be your policy’s beneficiaries.
The policy is blocked for a minimum of 10 years and at least until the child is 18 years old.
- You decide to save at your own pace, with monthly or annual premiums, but also with free payments on special occasions (birthdays, Christmas, etc.).
- You deduct the premiums paid from your tax return.
- You choose the underlying investment vehicles, based on the term of the investment and the risk profile.
- You benefit from death and disability coverage. This is what is commonly called the performance guarantee: whatever happens to you, Baloise insures the capital provided for at the time of subscription.
- When the policy ends, you remain in control of your savings and thus you help your child manage his money.
- Life insurance policies benefit from tax advantages: no tax on the premiums, and no tax on capital gains provided the policy is maintained for at least 10 years.
Did you know that the premiums you pay on your children's life insurance policy can be deducted when you file your tax return (Article 111 LIR).
You may therefore deduct as much as you can afford. Here is a non-exhaustive list (with amounts given by way of example):
- €672 in annual premiums for a single person
- €1,344 for a couple
- €1,344 for a single person with one child
- €2,688 for a couple with two children
These amounts include all of the deductible premiums paid as defined by Article 111 LIR, such as third-party liability for car insurance, or Outstanding Balance Insurance.
If you want to know more about all the insurance premiums which you can deduct on your tax return, do not hesitate to consult our blog articles (here and here).
"Since 2023 the deadline for submitting your tax return has been extended from 31 March to 31 December "
A life insurance policy is an excellent means of saving long-term to finance the projects of your children or grandchildren. Would you like to know more about tax-deductible savings solutions? Do not hesitate to contact your broker.