Life insurance is something many French people have, yet its taxation remains somewhat unclear... especially when it comes to withdrawals. Between the 8-year rule, contributions made after 2017, the annual allowance, and social levies, it's easy to get confused. Here is a guide to understanding what is taxed in 2026, and how to avoid any unpleasant surprises. Before diving into the numbers, here's a useful reminder: life insurance is often chosen for its flexibility, its taxation over time, and its transmission possibilities. If you want a quick and practical summary, you can also check out [the advantages of life insurance](https://www.labanquepostale.fr/particulier/epargner/assurance-vie-et-solution-retraite.html), then come back here for the tax, withdrawal, allowances, and social levies part.
Life insurance: a widely popular investment, not just among retirees.
When a product is held by a large portion of households, there's a reason... By the beginning of 2024, 41.7% of households had life insurance. And the number has been steadily increasing for the past twenty years. Another interesting detail: ownership is also increasing among those aged 70 or older, which is not always the case with other types of investments (clearly showing the interest in estate planning).
In short, life insurance is not just a "rich person's thing" nor is it a product reserved for experts. In terms of stock, we're talking about tens of millions of policies, and millions of policyholders. So yes, understanding the tax implications is useful... even if one doesn't like dealing with brackets and rates.
Opening a life insurance policy in 2026: laying the right foundations for taxation
It is often thought that taxation begins at the time of withdrawal. In reality, everything is decided much earlier.
- The opening date of the contract: it triggers the so-called "seniority" (and therefore the 8-year milestone).
- The date of contributions: since the reform related to contributions made after September 27, 2017, this point has become central.
- The total amount contributed: beyond a certain threshold (150,000 euros), a portion of the earnings may be taxed differently, even after 8 years.
If you are considering opening a life insurance policy, keep this simple idea in mind: it's not just "a product," it's a tax framework that evolves over time.
Withdrawal, partial redemption, full redemption: what is actually taxed
First rule, and it changes everything: you are not taxed on what you have paid in (the premiums, otherwise known as the capital), but on the portion of profit contained in the amount withdrawn.
If the contract has increased in value, a withdrawal mechanically contains:
- a "capital" part (your payments),
- a "products" part (interest, capital gains, earnings).
And for a partial surrender, the taxable profit portion is calculated pro rata, based on the value of the contract and the total premiums paid. In other words: even if you withdraw "just a little," you also withdraw a bit of profit... and therefore a bit of tax liability.
(A small digression, but useful: many people think "I withdraw 5,000 euros, so I pay taxes on 5,000". No. The tax office looks primarily at the fraction of profit in those 5,000... it's more subtle.)
In 2026, two key tax benchmarks to be aware of: the 8-year rule and the payment dates.
For the taxation of withdrawals, we can summarize the logic with two questions:
- Does the contract have more or less than 8 years?
- Do the gains come from payments made before or after September 27, 2017?
Then, if necessary, we add a third parameter: the total amount of premiums paid across all contracts, especially for the threshold of 150,000 euros.
Withdrawals in 2026: Taxation of payments made after September 27, 2017
Since the introduction of the Single Flat Tax (the famous "flat tax"), understanding it has become simpler... provided that one does not overlook the details.
1) Contracts of less than 8 years: generally, the gains withdrawn are subject to the PFU at 30%, which is:
- 12.8% for income tax,
- 17.2% for social levies.
2) Contracts of more than 8 years: there are two scenarios, and this is where it gets interesting.
- If the total of premiums paid (tax base) is less than or equal to 150,000 euros: income tax generally drops to 7.5% on the gains withdrawn (to which the 17.2% social levies still apply).
- If the total exceeds 150,000 euros: a portion of the gains may remain at 7.5%, but another portion may revert to 12.8% (thus reconstructing the 30% on the concerned fraction). The calculation depends on the portion of contributions below and beyond the threshold.
Important: the threshold of 150,000 euros is calculated by adding up the premiums paid across all relevant contracts, taking into account capital repayments that have already occurred. It is not simply "one contract = one threshold."
What about the payments before September 27, 2017? (yes, they still exist)
If your life insurance policy is old, or if some of the payments were made before the end of September 2017, there may still be older rules in place, including the option for a flat-rate withholding tax (PFL) depending on the duration of the contract, or taxation according to the scale. In practice, for many savers, this results in a "hybrid" contract: part of the earnings follow post-2017 rules, while another part may follow earlier rules.
This isn't necessarily a problem, but it's important to be aware of it, as it can influence the choice between "flat tax or scale". And typically, this is the kind of detail that one discovers... after the fact.
The allowances after 8 years: 4,600 euros or 9,200 euros, how does it really work?
Everywhere we read "after 8 years, a 4,600 euro allowance"... and some think it's an allowance on the contract. In reality:
- The allowance applies to the gains withdrawn (the proceeds),
- It is annual,
- It applies to all withdrawals of the year across all contracts,
- It is 4,600 euros for a single person, or 9,200 euros for a couple subject to joint taxation.
Two points that often surprise:
- The allowance is not "stocked": if you withdraw nothing one year, the allowance is not carried over.
- Social levies are still due: the allowance reduces income tax, but does not erase the 17.2% on the gains.
So yes, after 8 years, one can optimize the withdrawal schedule. But one must think in terms of "share of gains," not "amount withdrawn."
Social charges in 2026: when do they apply, and why does it sometimes feel like we're paying them twice?
In life insurance, social levies are a separate issue. It's not glamorous, but that's where the surprises lie.
The principle: the gains withdrawn are subject to social levies (at the posted rate of 17.2% in 2026 for this type of income).
The practical nuance: depending on the nature of the investment, the levy can be collected:
as you go on certain interests of the euro funds (they are pre-deducted when the interests are credited), at the time of withdrawal for other investments, especially when the tax has not already been deducted upfront.
As a result: one might get the impression that "it has already been taken," only to see another line at the time of withdrawal. In reality, you don't pay twice on the same base, but there can be a timing difference, and it's this difference that makes the understanding unclear.
Note: at the beginning of 2026, there are also discussions about the evolution of certain levies on financial income. In real life, the right reflex is simple: at the time of a withdrawal, look at the rate applied on the tax form, and if necessary, check on an official source. It's not very fun, but at least it's factual.
Quantitative Comparisons: Three Withdrawal Scenarios for 2026
Figures speak better than a long speech. Here are three very simple cases, deliberately "close to real life". (The amounts are rounded, the objective is to understand the mechanics.)
**Scenario 1: 5-year contract, withdrawal of 10,000 euros**
You have paid in 50,000 euros, the contract is worth 70,000 euros. The latent gain is therefore 20,000 euros.
You withdraw 10,000 euros. The share of gains in the withdrawal is about: 20,000 / 70,000 = 28.57%, so gains withdrawn? 2,857 euros.
Taxation (standard case post 2017, less than 8 years): PFU 30% on 2,857? 857 euros.
**Estimated net**: 10,000 - 857? 9,143 euros.
**Scenario 2: 10-year contract, same withdrawal, single person**
Same contract, same figures, gains withdrawn? 2,857 euros.
After 8 years, the annual allowance is 4,600 euros on the gains withdrawn. Here, your withdrawn gains (2,857) are lower than the allowance... so income tax can be zero on this fraction.
But social levies remain due: 17.2% of 2,857? 492 euros.
**Estimated net**: 10,000 - 492? 9,508 euros.
**Scenario 3: contract of more than 8 years, high premium payments**
You have several contracts, and the total of premiums paid exceeds 150,000 euros. You make a withdrawal containing 10,000 euros of gains.
Part of these gains may be taxed at 7.5% (IR) and part at 12.8% (IR), depending on the fraction beyond the threshold, and social levies (17.2%) are added anyway.
This scenario can lead to a total tax close to 30% on the concerned fraction, even after 8 years. Hence the importance of properly identifying the tax exposure.
What we take away: **the duration and the allowance change the bill a lot**, but **social levies are almost always there**.
Statement, Options, and Small Traps: Flat Tax or Progressive Scale, and the Story of the Withholding Tax Form.
In practice, when you withdraw, the institution provides you with a summary tax document and also transmits the information to the tax authorities. Therefore, your tax return may be pre-filled. However, pre-filled does not mean "perfect". You need to verify, especially if you have multiple contracts or contributions from different periods.
Regarding the tax choice:
- The Flat Tax is the default regime for many investment incomes.
- The option for the progressive scale exists, but it is often global (it concerns all the movable capital income of the year). So, you do not decide contract by contract, in a "this one at the Flat Tax, that one at the progressive scale" manner.
There are also specific cases (redemption motivated by certain events, request for exemption based on the reference fiscal income, etc.). It's not rare, but it's also not the majority of situations. If you are concerned, you should refer to an official source, as the conditions are precise.
What if the goal is retirement? Two simple ideas (without selling a dream)
Life insurance is often talked about as a "retirement supplement." Yes, it can serve that role, but it largely depends on how it is used.
- Idea 1: If you use life insurance as a source of occasional income, the tax implications of withdrawals matter more than the advertised return. Two contracts with similar returns can yield different net amounts depending on the age of the contract and the withdrawal schedule.
- Idea 2: Retirement is a long-term prospect. The tax system for life insurance is designed to benefit long-term holding (8-year rule, annual allowance). So if you change your mind every 18 months, it doesn't work as well... and that makes sense.
(I'm saying it as I see it: people often want a "flexible" product, but withdraw too early, and then they are disappointed. It's not always the fault of the product.)
Nota Bene: Mini Glossary for Reading Life Insurance Taxation Without Pain
- **Life Insurance**: A savings vehicle with a tax framework, potential availability through withdrawals, and specific rules for transfer upon death.
- **Life Insurance Policy**: The legal document of the investment, with an opening date, contributions (premiums), and a cash surrender value.
- **Premiums**: Your contributions, your capital.
- **Returns**: The earnings, interest, capital gains, which are taxable.
- **Partial Redemption**: Withdrawal of a portion of the contract's value.
- **Flat Tax**: A single flat-rate tax, often 30% in total (12.8% + 17.2%).
- **Allowance after 8 years**: An annual reduction on withdrawn gains (4,600 or 9,200 euros), which does not eliminate social levies.
Conclusion: In 2026, the taxation of life insurance is primarily managed at the time of withdrawal.
If we were to summarize without distorting the reality:
- A withdrawal is not taxed on the capital, but on the portion of gains included in the amount withdrawn.
- After 8 years, the annual allowance (4,600 or 9,200 euros) can significantly reduce income tax, but social levies are still due.
- Since contributions made after September 27, 2017, the flat tax system simplifies... except when you exceed 150,000 euros in premiums paid.
- The right approach is to think in terms of a withdrawal schedule, not just returns.
And if you were to remember just one sentence: The taxation of life insurance is rarely "bad", but it is rarely intuitive... so it's better to understand it before hitting "confirm withdrawal".