Surrender of a life policy
The policyholder's right to take back all or part of the savings before maturity, a source of liquidity for them and of liability risk for the insurer.
Since France's 2018 finance law, gains surrendered after eight years have been taxed at 7.5% up to 150,000 euros of premiums and 12.8% above that, after an annual allowance of 4,600 euros. Surrender is the policyholder's right to end a savings contract, in whole or in part, and take back its accumulated value. Not every contract can be surrendered: term life cover, an annuity in payment or a compulsory group scheme cannot, because there is no individualized savings pot to return. For the insurer, the surrender option is the main liability risk on a life balance sheet. It turns a thirty-year commitment into a debt payable on demand. And it fires en masse at the worst moment: when rates rise, newer contracts credit more just as the bonds held are worth less. Since 2016 the French regulator has been able to suspend surrenders temporarily, so that a run cannot force asset sales. Taxation, which rewards holding period, also works as a deliberate brake. Surrender gives the saver liquidity. Without it, life insurance would be an investment in name only and an irrevocable commitment in fact.
Beyond eight years of holding, withdrawn gains get an annual allowance of 4,600 euros for a single person and 9,200 euros for a couple. Since the 2018 budget act, they then bear a levy of 7.5% up to 150,000 euros of premiums paid and 12.8% above that. That eight-year threshold explains the stability of a French market holding more than 1,900 billion euros.
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