Euro funds or unit-linked: how to split a life insurance policy

In short:
The euro fund guarantees the capital paid in, net of management fees, but its return stays close to inflation over the long run.
Unit-linked supports carry no capital guarantee, their value follows the markets they are invested in.
The split follows from your investment horizon, not from an opinion on the markets.
Most contracts tie the best euro fund rate to a minimum percentage held in unit-linked supports.

Two engines, two functions

Inside a life insurance policy, your money splits across two categories of support.

The euro fund is guaranteed by the insurer: the capital paid in cannot fall because of the markets, and interest credited each year is permanently acquired. In exchange, the return is modest and largely dependent on bond yields.

Unit-linked supports are everything else: equities, bonds, ETFs, SCPI property funds, unlisted funds. No capital guarantee, a value that rises and falls, and higher return potential over the long run.

The horizon decides, not intuition

The question is not to guess the direction of markets, but to know when you will need the money.

Horizon	Common orientation	Logic
Under 3 years	Overwhelmingly euro fund	Capital must be available without risk of loss
3 to 8 years	Balanced split	Time absorbs part of the fluctuation
Over 8 years	Significant unit-linked share	A long horizon smooths market cycles

This grid is not personalised advice: it only holds once adjusted to your situation, your emergency savings and your real tolerance for drawdowns.

The bonus rate trap

Many contracts advertise an attractive euro fund return on condition that you invest a minimum share in unit-linked supports, often 30 to 50%. The offer can be worthwhile, but it shifts the risk: you accept market exposure to gain a few tenths of a point on the guaranteed portion. The calculation has to be run on the whole contract, not on the headline line.

Keeping flexibility

A well-chosen contract lets you switch between supports free of charge. That means the initial split is not final: it is revised as the horizon approaches, typically by gradually securing the portion that will be spent first.

Frequently asked questions

Should you choose the euro fund or unit-linked supports?

Both, in a proportion dictated by your investment horizon. Under three years the euro fund is the obvious choice, since the capital must stay available without risk of loss. Beyond eight years a significant unit-linked share becomes coherent, as the duration absorbs market cycles. In between, a balanced split is common.

Is the euro fund really risk-free?

The capital paid in is guaranteed by the insurer, net of management fees, and credited interest is permanently acquired. The risk is therefore not a capital loss but an erosion of purchasing power: if the rate paid falls below inflation, the real value of the savings declines even though the balance rises.

Because the bonus rate advertised on the euro fund works as a commercial lever to steer savings towards non-guaranteed supports, on which the insurer earns more fees and carries no risk. The offer can still be worthwhile, but it has to be judged on the performance of the contract as a whole.