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What is savings insurance?
Savings insurance is a very common financial product in Spain, offered by both insurance companies and banks. This type of insurance provides a return that, together with the client’s contributions, generates long-term capital.
There are different types of savings insurance, each adapted to different risk profiles. Some are more conservative, while others seek higher returns through riskier investments.
Savings insurance is often very flexible, allowing each client to save according to his or her means. Although monthly contributions are common, each plan can be customised according to individual needs.
These insurances invest in fixed income, equities or a combination of both. This means that the level of risk and potential return can vary. Some prefer not to take risks and opt for lower returns, while others seek higher returns despite the additional risk.l.
In addition, a small part of the investment in savings insurance is used to take out life insurance. This adds an additional benefit: in the event of the death of the policyholder, an indemnity is granted in addition to the accumulated return.
Why take out savings insurance?
In a changing world like ours, saving is more than an option, it is a necessity. The future is unpredictable and it may be that, although today we have our personal needs covered in the future, this will not be the case.
Taking out savings insurance offers several advantages::
Financial security:Your savings are protected within an insurance company, away from riskier financial products such as preference shares or investment funds..
Encourages the habit of saving: A savings insurance policy allows you to automatically dedicate a part of your income to savings each month, thus encouraging the habit of saving without you even realising it.
Profitability from day one: Your money is invested from day one according to your investment preferences, allowing you to obtain a return from the start.
Flexibility: Savings insurance offers you the possibility of cancelling if you no longer wish to continue, and you decide the form of contribution, whether monthly, annual or extraordinary.
Taking out savings insurance can be a smart strategy to prepare for the future and ensure your financial well-being.
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Which savings insurances are the most profitable ones?
What is the taxation of savings insurance?
The taxation of savings insurance can vary significantly depending on whether the beneficiary is alive at the time of surrender.
If the beneficiary is alive at the time of the surrender, the benefits of the savings insurance are taxed through Personal Income Tax (IRPF), with rates ranging from 19% to 23% of the gain.
On the other hand, if savings insurance is inherited, taxation is through Inheritance and Gift Tax (ISD). The amount paid to the Inland Revenue for a savings insurance can vary considerably depending on the situation.
It is important to note that the return on the savings insurance accumulates within the product. This means that nothing is payable to the tax authorities until the time of surrender, which can have significant tax implications.
Where do Savings Insurances invest?
Savings insurances diversify their investments between two main categories: fixed income and equities. Fixed income includes low-risk investments such as treasury bills and corporate debt, which offer a stable and predictable return.
On the other hand, equities comprise investments in equities and similar products which, while they may have higher risk, also offer the potential for higher returns.
The combination of these two investment categories determines the risk profile of the product. This means that a savings insurance product can be more conservative (savings-oriented) or more risky (investment-oriented) depending on how these investments are balanced.
In short, savings insurance offers investment diversification that allows investors to balance risk and return according to their financial needs and objectives.