Using your French life insurance policy as loan security after 60

Pledging an assurance-vie (the French life insurance savings wrapper) means offering the policy as security for a bank loan. Nothing is sold or transferred: the money stays invested and keeps earning, but the bank gains a priority claim on its value if the loan goes unpaid. The arrangement, called nantissement, is governed by Article L132-10 of the Code des assurances (the French insurance code).

For older savers the appeal is twofold. A pledge can replace or supplement borrower insurance that has become expensive, and it avoids cashing in an old policy whose tax seniority and inheritance treatment are worth a great deal. Plenty of French residents over 60, including many British and Irish retirees who opened a policy after moving here, sit on substantial capital they would rather not touch while still needing cash for a project.

How a pledge on a policy actually works

Three parties are involved: you as borrower, the lending bank, and the insurer, which must be formally notified of the pledge. From that notification onwards, no withdrawal or policy advance can be made without the bank's consent. You remain the owner, you still receive the annual returns and you can sometimes switch between funds with the bank's approval.

How much the bank will lend against it

No bank lends 100% of the pledged value. It applies a haircut that depends on how volatile the underlying funds are. As a guide, one French wealth management firm quotes 2026 lending ratios of 80% to 90% on the capital-guaranteed euro fund, 60% to 70% on cautious bond profiles and 40% to 50% on equity unit-linked funds. A mixed policy sits somewhere in between.

Pledge, policy advance or withdrawal: three ways to raise cash

A pledge is not your only choice. A policy advance (avance) is a loan made by the insurer itself, with no bank involved, often for three to five years. A partial withdrawal (rachat partiel) takes money out for good. Here is how they compare for a senior saver.

Why an old policy is worth keeping intact

Premiums paid before age 70 benefit from an allowance of €152,500 per beneficiary on death; premiums paid after 70 fall under a far less generous regime. After eight years, withdrawals also enjoy an annual allowance on gains of €4,600 for a single person. Cashing in and reinvesting throws those advantages away, which is why pledging usually beats selling. Bear in mind that the tax treatment of an assurance-vie for a UK or US taxpayer can differ sharply from the French one; take cross-border advice before you restructure.

Worked example: a 66-year-old buying a studio to let

Helen, 66, holds a policy opened in 2004 and now worth €200,000, of which €150,000 is in the euro fund. Retired on a €2,900 monthly pension, she wants to borrow €90,000 to buy a studio flat to rent out. Her bank agrees to fund the whole purchase against a pledge of €110,000 of the policy, with no borrower insurance, since the haircut leaves ample margin.

Interest-only or amortising: weighing the two

Repaid in full over seven years at 3.5%, the monthly instalment would be about €1,210, or 42% of her pension: too heavy. As an interest-only loan (prêt in fine) over seven years at 4%, she pays only the interest, about €300 a month, which €450 of rent covers comfortably. The capital will be repaid at maturity by a withdrawal from the policy or by selling the studio.

That comfort comes at a price. Over seven years the interest-only version costs roughly €25,200 in interest, against about €11,600 for the amortising loan. Helen accepts it because her euro fund keeps earning throughout and the rent covers the cost. Without rental income the sums would look much worse, and a shorter amortising loan would be the sensible choice.

The steps, in the right order

A pledge requires coordination between bank and insurer, so allow several weeks.

1. Ask your insurer for a statement of surrender value and the split by fund.
2. Check whether a beneficiary has formally accepted the policy: if so, their written consent is mandatory.
3. Approach several banks, or a broker, with the policy value and a costed project.
4. Negotiate the lending ratio, your right to switch funds and the margin call threshold.
5. Sign the pledge agreement and have the bank notify the insurer.
6. When the loan ends, insist on a written release (mainlevée) so the policy is free again.

Why a bank may turn the pledge down

Some banks refuse a policy held with a competing insurer, or set a minimum value, often from €50,000 for a French policy. A policy heavily invested in equities is seen as too unstable to rely on. And insufficient income remains a reason to refuse: the pledge secures the capital, not the monthly payments. Policies held with a Luxembourg or Irish insurer can be pledged too, but fewer French banks accept them.

Common pitfalls and how to handle them

The first pitfall is the margin call. If unit-linked funds fall and the pledged value drops below an agreed threshold, the bank can demand partial repayment or extra security within days. Pledging the euro fund first is the safer route. Another mistake is locking up all your savings, when a free reserve remains essential for health costs or long-term care.

If the borrower dies while the loan is running

On death, the bank takes the outstanding balance from the policy and the insurer pays what remains to the beneficiaries, so their inheritance shrinks accordingly. If preserving that legacy matters, additional death cover or a short amortising loan limits the effect, at the cost of a higher monthly payment.

Fall-back options

If the pledge is refused, a policy advance provides cash with no bank and little income scrutiny for a one-off need. Homeowners can unlock the value of their property through a mortgage-backed loan. Larger portfolios can use a crédit lombard, a credit line secured on investments and offered by private banks.

Frequently asked questions

Does a pledge reset the policy's tax seniority? No. The policy is neither cashed in nor closed, so its opening date and the treatment of past premiums are unchanged.

Can I pledge a policy after 70? Yes. Age does not prevent a pledge; the bank decides on the basis of the policy value and your income.

Is an insurer's advance dearer than a bank loan? That depends on the insurer, which sets its rate by reference to the policy's return. Always compare it with a bank offer secured by a pledge.

Do I need to tell my beneficiaries? Not unless one has accepted the policy. It is still wise, because the pledge reduces what they receive if the loan is still running at your death.

Can a pledge be combined with a state-backed home loan? It can supplement standard financing, but check the conditions of each regulated loan before offering it.