Is Luxembourg life insurance
right for you?

What is Luxembourg life insurance?

It is life insurance in the classic sense (policyholder, life assured, beneficiaries, withdrawals), but governed by Luxembourg's prudential rules. In English it is often called a Luxembourg life insurance wrapper. Three things set it apart from a French policy:

• the investment rules set by the CAA, which depend on your investor profile (categories N, A, B, C, D);
• the custody of assets at a depositary bank, held separately from the insurer's balance sheet;
• portability: the insurer adapts the policy to the country where you live.

Most Luxembourg policies are invested in unit-linked funds. The capital is not guaranteed: it follows the value of the underlying investments, up and down.

There is also a Luxembourg capitalisation contract, with no life assured and no beneficiary, which is useful for companies and for lifetime gifts: see my page for business owners.

How is Luxembourg life insurance taxed for a French tax resident?

If you are a French tax resident, your Luxembourg policy is taxed like a French policy, no more and no less. French tax rules apply to withdrawals and to transfers on death, exactly as they would for a policy taken out in France. Any argument along the lines of "Luxembourg is how you pay less tax" is wrong for a French resident.

Tax rates applicable to premiums paid since 27 September 2017. In 2026, social charges on life insurance income remain at 17.2%: the CSG increase voted in the 2026 Social Security Financing Act (LFSS 2026: Law no. 2025-1403 of 30 December 2025, art. 12), which raises the general rate to 18.6%, does not apply to these contracts (article L. 136-8, IV of the French Social Security Code (code de la sécurité sociale); impots.gouv.fr, page updated on 8 April 2026).

Two obligations apply specifically to a foreign policy:

1. Report the policy every year with your income tax return (article 1649 AA of the French Tax Code (CGI), form 3916-3916 bis). Forgetting costs €1,500 per unreported policy, or €10,000 if the country has not signed an administrative assistance agreement with France (article 1766 of the CGI).
2. The levy on withdrawals: on a foreign policy, the income tax prepayment and the social charges due on the gains you withdraw are declared and paid on form 2778-SD, for the month in which you receive the money. Some Luxembourg insurers offer to handle this for you: I check this point with the chosen insurer before you sign.

Is Luxembourg life insurance safe? The triangle of security and the super-privilege

The Luxembourg system protects you if the insurer goes bust, not if markets fall. It rests on three parties, hence the name "triangle of security":

• The insurer manages the policy but does not hold the assets.
• The depositary bank holds the assets backing your policy, separate from its own assets and from the insurer's, under a custody agreement approved by the CAA. That agreement acts as an irrevocable instruction to freeze the accounts on notice from the CAA in the cases provided for by law, and the securities held do not form part of the bank's estate if the bank itself fails (circular letter 16/9).
• The CAA supervises the insurer and can have the assets frozen.

On top of this comes the super-privilege: the assets backing the policies form a separate pool, earmarked by priority for paying insurance claims, and this priority "ranks above all others" once the assets are entered in the permanent inventory (article 118 of the Luxembourg law of 7 December 2015 on the insurance sector, restated in circular letter 16/9). In practice, on these assets you rank ahead of the insurer's other preferential creditors, including the State, social security bodies and employees.

What the system does not do:

• it does not guarantee the value of your unit-linked funds;
• it does not rely on a guarantee fund. In France, the FGAP pays out up to €70,000 per person and per insurer (article R. 423-7 of the French Insurance Code (code des assurances)), but it does not step in for an insurer from another European Economic Area country operating in France under the freedom to provide services or through a branch (ACPR, France's banking and insurance supervisor): your Luxembourg policy is therefore not covered by it. Luxembourg's protection is the segregated custody and the super-privilege described above. On 5 May 2026, EIOPA (the EU insurance supervisor) opened a consultation on minimum European standards for these funds, noting that some countries have none.

New in 2026: circular letter 26/2 regulates the choice of a depositary bank outside the European Economic Area. It is reserved for categories A to D, and only if you sign a declaration accepting sole responsibility for the risk of that choice. I advise against it unless there is a specific reason.

What can you invest in? External funds, FID, FAS and CAA investor categories

What you can hold in the policy depends on your investor category, which is set by the amount you invest and the financial assets you declare. Since 1 February 2026, these rules have been laid down in CAA circular letter 26/1 (lettre circulaire 26/1), which replaces circular 15/3 for policies issued from that date. Older policies remain governed by the 15/3 annex attached to the contract, which can be amended by endorsement.

Financial assets (fortune mobilière): financial instruments, bank deposits and life insurance policies, minus debts of any kind. The insurer may reject a declared value and remains free to apply a stricter policy.

The investment options:

• External funds: UCITS, ETFs, alternative or real estate funds, within the limits of your category.
• Internal collective fund (FIC): an insurer's fund open to several clients.
• Specialised insurance fund (FAS): an internal fund specific to your policy, with no premium or wealth condition.
• Internal dedicated fund (FID): a fund specific to your policy, entrusted to a single manager, reserved for categories A to D, with a minimum premium of €125,000 at subscription.

The higher your category, the wider the range: category D can invest without restriction in every category of financial instrument and in bank accounts of any kind, including precious metal accounts (circular letter 26/1, points 7.1.1 and 7.3.2). Since 2026, direct investment in structured products is also covered by the circular.

Luxembourg policies also generally accept several currencies (euro, US dollar, Swiss franc, pound sterling), which helps if your income or your plans are not in euros.

What about returns? The policy has no return of its own: it depends on the investments you choose, minus fees. Capital-guaranteed euro funds (fonds en euros) are rare in these policies. Past performance is not a reliable indicator of future performance.

What are the fees on Luxembourg life insurance? Four layers to add up

The real cost of a Luxembourg policy is the sum of four layers of fees, plus the fees of the underlying investments. Comparing a single figure (usually the insurer's fee) tells you nothing.

These ranges are orders of magnitude, not prices: only the key information document (KID) and the policy terms are binding.

Illustrative example: €500,000 over 10 years

Assumptions: a couple who are French tax residents, €500,000 to invest, declared financial assets of €1.4m, hence category C. Allocation: €300,000 in external funds (equity and bond ETFs) and €200,000 in an FID entrusted to a manager. Entry fee of 1%, investment performance of 5% a year before policy fees (calculation assumption, capital not guaranteed), no withdrawals.

Here, each half-point of annual fees costs about €35,000 over 10 years. That is why I always present the total cost, layer by layer, before you sign.

Why do expats and non-residents choose Luxembourg life insurance? Portability

For an expat, the main benefit is that a single policy can follow you from one country to the next, applying at each stage the tax rules of your country of residence. You avoid cashing in and rebuilding a policy every time you move.

Three points to lock down:

• The date you change residence. A withdrawal made just before or just after you leave is not taxed the same way.
• Compatibility with your new country. Some countries tax the gains every year on a policy where you freely choose the investments; others require a local tax representative. The insurer must be able to produce that country's tax documents.
• Moving back to France. This calls for a full review of the policy, the beneficiaries and the investments.

On death, the article 990 I levy applies if the life assured is tax-domiciled in France, or if the beneficiary is and has been for at least 6 of the previous 10 years (article 990 I of the French Tax Code (CGI)). Tax treaties may change these rules.

To prepare a move: preparing to move abroad, French exit tax, and my page for expats and non-residents.

Living in Spain: three points to check

A Luxembourg policy can suit a Spanish resident, but it has to comply with Spanish rules, which are stricter than French ones on one key point. In short:

1. Gains are taxed in Spain on withdrawal, in the savings income tax base (base del ahorro).
2. If you can freely choose the policy's assets, the Spanish tax authority may tax the change in value every year, unless the conditions of article 14.2.h of the Spanish personal income tax law (Ley del IRPF) are met (Agencia Tributaria). A badly set-up FID can therefore lose its tax deferral.
3. The policy falls within Spain's reporting obligations for assets held abroad (modelo 720).

I cover these points in detail on my page on wealth planning for expats in Spain.

How do you use a Luxembourg life insurance wrapper for estate planning?

For a policyholder who is a French tax resident, a Luxembourg policy is passed on under exactly the same rules as a French one. Premiums paid before age 70: €152,500 tax-free per beneficiary, then 20% up to €700,000 of taxable share and 31.25% above. Premiums paid after age 70: inheritance tax on the portion of premiums above €30,500, all policies combined. A surviving spouse or PACS civil partner is exempt.

What Luxembourg adds here are practical tools:

• a tailor-made beneficiary clause, drafted to work in several countries;
• a policy that remains valid if you, or your children, live elsewhere;
• the ability to pass on assets held in several currencies without selling them first.

A word of caution: for an international family, the law governing the succession generally depends on your habitual residence at the time of death (EU Succession Regulation 650/2012), and the tax depends on the countries involved. Review the beneficiary clause every time you change country.

Can you take out a Lombard loan against a Luxembourg policy?

Yes. A Luxembourg policy can serve as collateral for a Lombard loan: the bank lends against a pledge over the policy, and you do not have to make a withdrawal. No withdrawal means no tax on the gains at that point. But opening a policy does not guarantee any financing: the bank decides, applies its own haircut to each investment and sets its own terms. Everything is covered on my Lombard loan page.

Pros and cons: is Luxembourg life insurance worth it?

My view: it is an excellent tool when you have at least one need that a French policy does not cover well, and a poor choice if you treat it as a tax shelter.

"The best Luxembourg life insurance" does not exist in the abstract. To compare offers, I look at: the insurer's financial strength (its public solvency and financial condition report), the list of available depositary banks, access to FIDs and FASs, total fees, the minimum entry amount, compatibility with your current and future country of residence, and whether banks accept the policy as collateral. Vitis Life is one of the partner insurers I work with through Uptimi; it is not the only option, and the choice depends on your situation.

What is the minimum investment, and can you open a policy online?

There is no general legal minimum: each insurer sets its own threshold, usually between €100,000 and €250,000 for a wealth-planning policy. The only regulatory floor is the FID's: €125,000 at subscription. Some platforms offer Luxembourg policies online with lower tickets, but with a standardised structure.

Subscription is done remotely, electronic signature included; I work by video call, with clients in France and abroad.

The mistakes I see most often

• Opening a Luxembourg policy to "pay less tax" while remaining a French tax resident: the tax treatment is identical.
• Comparing only the insurer's fees, leaving out the depositary bank, the distributor and the investments.
• Forgetting form 3916-3916 bis, every year.
• Keeping the same allocation after moving to Spain, when the freedom to choose investments can cost you your tax deferral there.
• Believing the triangle of security protects you against the markets.
• Signing without a beneficiary clause suited to a family spread across several countries.

Key takeaways

• French tax resident: same tax treatment as a French policy, plus annual reporting.
• The real value: protection if the insurer fails, bespoke structure, currencies, portability, Lombard loan.
• The CAA categories (circular letter 26/1 since 1 February 2026) determine what you can hold.
• Not covered by the French FGAP; capital not guaranteed in unit-linked funds.
• The real cost = four layers of fees + the investments.

Official sources

• CAA – Circular letter 26/1 on investment rules for life insurance products linked to investment funds (1 February 2026) (in French)
• CAA – Circular letter 15/3 (rules for policies taken out before 1 February 2026) (in French)
• CAA – Circular letter 16/9 on the custody of assets covering technical provisions (in French)
• CAA – Circular letter 26/2 amending circular letter 16/9 (1 February 2026) (in French)
• Service-Public.gouv.fr – Life insurance: taxation of gains on withdrawal (fact sheet F22414, checked on 15 April 2026) (in French)
• impots.gouv.fr – Investment income (2026 social charges: 18.6%, 17.2% maintained for life insurance and capitalisation contracts; page updated on 8 April 2026) (in French)
• Légifrance – Article L. 136-8 of the French Social Security Code (IV: 9.2% CSG rate maintained for income from life insurance and capitalisation contracts) (in French)
• Légifrance – Article 990 I of the French Tax Code (CGI) (allowance, rates, spouse exemption, territorial scope) (in French)
• impots.gouv.fr – Life insurance beneficiary: how the sums received are taxed (articles 990 I and 757 B of the CGI)
• BOFiP – BOI-CF-INF-20-10-50: penalties for reporting obligations (articles 1649 AA and 1766 of the CGI), § 40 (in French)
• impots.gouv.fr – Form 2778-SD (levy on income from foreign life insurance contracts) (in French)
• French National Assembly – Ministerial answer to question no. 33936 (FGAP, article R. 423-7 of the French Insurance Code, €70,000 ceiling) (in French)
• ACPR – Guarantee funds in the event of an insurer's failure (FGAP: €70,000; no intervention for EEA insurers operating in France under freedom of services or through a branch) (in French)
• Agencia Tributaria – Personal income tax (IRPF) manual: unit-linked insurance contracts (article 14.2.h of Law 35/2006)
• BOE – Law 35/2006 on personal income tax (IRPF), consolidated text (article 14.2.h), version of 7 October 2026 (in Spanish)
• EIOPA – Consultation on minimum common standards for insurance guarantee schemes (5 May 2026)

Texts checked on 29 October 2026. This content is for information only and does not replace a review of your situation.