Life annuitiesLife Annuity Insurance. Decree Law No. 3500
LIFE ANNUITY INSURANCE DECREE LAW No. 3.500
1. PENSION SYSTEM
D.L. 3.500, of 1980, established the current Pension System (the System) based on individual capitalization regime. Capitalization is made in Pension Fund Administrators (AFP).
Upon compliance with the requirements established to obtain a pension, the member or his/her legal beneficiaries may dispose of the balance of the individual account to create a pension.
2. PENSIONS COMPRISED BY THE SYSTEM
Pensions comprised by the system are old age, advance old age, disability, and survival.
3. PENSION MODALITIES
The system offers to its members or their beneficiaries, as the case may be, the following modalities through which they may opt to create one of the following pensions: immediate life annuity, temporary income with deferred life annuity, and scheduled withdrawal.
3.1 Immediate Life Annuity
Shall mean such pension through which the member or his/her beneficiaries, in case of death of the member, takes out with the Life Insurance Company of his/her election an immediate life annuity insurance, whereby the company shall commit itself to pay a life annuity to the member for life, and to pay survival pensions to his/her beneficiaries, as the case may be, from the effective date of the policy.
3.2 Temporary Income with Deferred Life Annuity
shall mean such pension modality through which the member or his/her beneficiaries, in case of death of the member, takes out with the Life Insurance Company of his/her election a deferred life annuity insurance, whereby the company shall commit itself to pay a monthly life annuity for life as from a future date determined in the insurance contract, withholding in his/her individual account enough funds to obtain from the Pension Fund Administrator a temporary income during the period elapsed between the date of selection of the pension modality and the date in which the deferred life annuity will start to be paid by the insurance company with which the contract was entered into.
A temporary income shall mean such withdrawal, agreed with the AFP, made by the member with charge to the funds kept in his/her individual capitalization account, after taking out a deferred life annuity insurance. The temporary income shall be an annual amount expressed in UF and will be paid in twelve installments.
IMPORTANT: the deferred life annuity taken out shall not be under fifty per cent of the first monthly payment of temporary income, or exceed 100% of such first payment. Definite amount of the temporary income is calculated by the Administrator after transferring the sole premium for the life annuity.
3.3 Scheduled Withdrawals
Shall mean such pension modality obtained by the member with charge to the balance kept in his/her Individual capitalization Account as a result from annual withdrawal of an amount expressed in Unidades de Fomento (UFs), resulting from the division of the effective balance of the individual capitalization account by the capital required to pay a pension unit to the member, and to his/her beneficiaries, after his/her death. It implies monthly withdrawal of an amount from the individual capitalization amount, and is re-calculated every year. Once funds of his/her Individual Capitalization Accounts are exhausted, the member shall only be entitled to receive the minimum pension guaranteed by the State, provided that he/she meets the requirements provided by law.
4. WITHDRAWAL OF FREE AVAILABILITY SURPLUS
If the person takes out a life annuity amounting to 120% or more of the minimum old age pension, and amounting at least to 70% of the average of his/her compensations received and declared incomes, once the premium is paid to the insurance company, may freely dispose of the surplus justify in the individual capitalization account. For these purposes, a Request of Payment of the Surplus shall be signed at the time of choosing the pension modality.
The amount of the free availability surplus is calculated by the Administrator after transferring the sole premium for the life annuity.
Notwithstanding the foregoing, the person may always dispose of such surplus to increase the amount of the pension being received.
5. LIFE ANNUITY TYPES
Depending on the type of pension, life annuities could be:
Normal or Anticipated Old Age Life Annuity
Disability Life Annuity
Survival Life Annuity.
5.1. a Normal old age life annuity
It is the life annuity that could be contracted by an affiliate pensioned for old age at 65 years for men or at 60 years for women.
In order to chose this modality, the affiliate should have enough funds in his/her individual account to contract a pension equal or higher than the minimum old age pension granted by the State.
5.1. b Anticipated old age life annuity
It is the life annuity that could be contracted by an affiliate before the legal age of retirement.
To be able to exercise this option, the affiliate should have enough funds in his/her individual account to contract a pension equal or higher than 50% of the average salaries received and tax income declared in the last 10 years before the month of submitting the pension application, updated in accordance with the IPC [Consumer Price Index]; and equal or higher than 110 % of the minimum old age pension granted by the State.
5.2 Disability life annuity
They are life annuity that could be contracted by the affiliates declared disabled by the Medical Commission referred to in art. 11 of the D.L. 3,500, from 1980, and who have the right to a pension of:
Total disability, for affiliates who have lost their work capacity of at least two thirds.
Partial disability for affiliates with loss of their work capacity equal or higher than 50% and lower than two thirds.
5.3 Survival life annuity
They are the pensions that could be contracted by the members of a family group of a dead affiliate as stated in the D.L. 3,500, from 1980 as beneficiaries of survival pension.
These persons are:
- The surviving spouse
- The disabled surviving spouse
- Children
- Mothers of children without marriage relationship
- Parents, in case of the non existence of the above mentioned parties, principals of a familiar allowance from the decedent.
IMPORTANT: To be entitled to contract a survival life annuity, there must be an agreement of all the beneficiaries with right to survival pension from the dead affiliate.
BENEFICIARIES OF PENSION OF THE SURVIVAL LIFE ANNUITY INSURANCE
They are the persons complying with the legal rights to be beneficiaries of the survival pension, who should be individualized as such in the insurance contract.
Article 13 of the D.L. 3,500, from 1980, sets forth imprisonment penalties for the persons who hide the existence of eventual beneficiaries of survival pensions.
IMPORTANT: If after the entering into of a contract there are other persons with right to survival pension, they will be included as beneficiaries, recalculating the pensions initially determined in accordance with the provisions stated in the law and the insurance policy.
AMOUNT OF SURVIVAL PENSIONS OF LEGAL BENEFICIARIES
Survival pensions of legal beneficiaries of the deceased affiliate will be equivalent to the percentages of the life annuity of the insured affiliated provided by the law.
PENSION DURATION FOR SURVIVAL PENSION BENEFICIARIES
The pensions of the beneficiaries of survival pension are for life, except in the case of the non disabled children who have right to temporary pensions until they are 18 years old or until they are 24 years old if studies are accredited.
Disabled children will have right to a life annuity pension only if the disability occurs before having the above stated ages.
6. MAIN CHARACTERISTICS OF THE LIFE ANNUITY INSURANCE
COVERAGE
In compliance with this insurance contract the insurer will pay the insured a monthly life annuity according to the provisions set forth in the D.L. 3,500, from 1980; and upon his/her death to his/her legal beneficiaries, as applicable.
Upon the death of the insured the company will pay for once a mortuary installment equivalent to 15 UF, to the person who demonstrates having incurred in the expenses of the insured's funeral.
The life annuity insurance contract should be adjusted to the General Conditions of the Policy registered in the la Superintendence of Securities and Insurances (the texts of the policies related with this issue can be consulted in the
Register of Policies of this Web site).
IRREVOCABILITY
The immediate life annuity insurance contract and the differed life annuity have an irrevocable nature and after entering them into, the parties could not terminate or void it in advance.
CONTRACT EFFECTIVENESS
The life annuity contract is effective from the date when the Pension Fund Management *** where the affiliate is incorporated, carries out the transfer of the sole premium.
The insurance is in effect until the death of the insured or the death of the last of his/her beneficiaries with right to survival pension, if any.
INSURANCE PREMIUM
The life annuity insurance price is a sole premium payable once by the Pension Fund Management Company where the affiliate is incorporated.
ADJUSTMENTS
Both the premium and the monthly pensions assigned by the life annuity insurance contract are adjusted and determined in Unidad de Fomento (U.F.)
PENSIONS AMOUNT
The pensions determined by the life annuity insurance contract could be lower than the minimum pensions set by the law.
If after contracting the insurance pensions are below the minimum pension set forth by the law, a State Guarantee will be applicable when the requirements provided for this purpose in the pertinent regulation are met.
DETERMINATION OF PENSIONS
The pensions offered by Life Insurance Companies are determined based on the amount of money owned by the affiliate in his/her individual account in the AFP, the interest rates of the fund investment and life expectations of the affiliate and the survival pension beneficiaries, if any.
PAYMENT OF PENSIONS
The amount of the pension or monthly income is constant in time (in UF), and its payment could not be fractionated.
ADDITIONAL CLAUSE OF THE GUARANTEED PAYMENT PERIOD
Though this Additional Clause, which Conditions are registered in the Superintendence, the Insurance Company ensures the payment of the total monthly life annuity during the agreed period as set forth in the contract.
This clause is a special additional benefit that should be expressly contracted by the guaranteed insured together with the main policy of the immediate life annuity or the differed life annuity .
In the case of survival life annuity, the clause could only be contracted by the spouse, the disabled spouse and mothers of natural children; however, there must be an agreement of all the beneficiaries with right to pension.
The beneficiaries of this additional clause are the beneficiaries with right to survival pension and in case they do not exist the persons designed as beneficiaries in the contract for this additional, and if there are no comments on this respect, the legal heirs of the guaranteed insured will be understood as such.
Guaranteed pensions and pensions not received by the guaranteed insured could be paid in equal and successive monthly payments until completing the guaranteed period of payment, or for once in cash, if there are no beneficiaries with right to survival pension, as agreed.
IMPORTANT: In case of agreeing the payment for once and in cash, an updating factor will be applied which is listed in the chart that should be given by the insurance company upon submitting the quotation which is part of the conditions of the respective policy.
FORM OF CONTRACTING THE LIFE ANNUITY INSURANCE
To enter into the life annuity contract , it is necessary the affiliate or the survival pension beneficiaries, when applicable, submit a QUOTATION and the respective QUOTATION APPROVAL.
The quotation contains the pension offered by the Life Insurance Company to the affiliate or his/her legal beneficiaries, if pertinent, which should be registered in a Quotation Form of compulsory use established by the Superintendence of Securities and Insurances.
The quotation approval should be registered in the same Quotation Form.
Insurance Companies could only issue quotations to those affiliates or survival pension beneficiaries holding the BALANCE CERTIFICATE document and TEMPORARY INCOME ESTIMATE PER BALANCE UNIT, issued by the AFP and the copy of the statement of the beneficiaries.
The life annuity contract is directly entered into with the Life Insurance Company chosen by the insured. Once the PENSION MODALITY SELECTION form or the DECISION TO CHANGE THE MODALITY PENSION form is subscribed in the respective AFP, for which purposes other two insurance quotations should be enclosed, the AFP will be obliged to transfer the sufficient funds from the individual account of the affiliate to the company in order to pay the premium agreed with the Insurance Company.
PROHIBITION OF INCENTIVES TO CONTRACT LIFE ANNUITIES
The offering of sums of money different to those stated in the quotation, or of any property or value object as incentives or "gifts" made by the company, sale agents or insurance brokers to decide contracting the life annuity insurance is PROHIBITED and could endanger his/her pension.
The infringement is considered a serious failure and could be sanctioned with the suspension of sale operations of insurance, in the case of Insurance Companies and the cancellation of the authorization to operate in the case of brokers and sales agents of insurance companies.
RECOMMENDATIONS.
Upon contracting a life annuity it is important to consider that the contract is IRREVOCABLE, in consequence before enforcing the conditions offered by the Insurance Company it is important to consider the following recommendations:
READ the Form of Life Annuity Insurance Quotation , carefully, ensuring the understanding of the conditions offered, reason why it will be necessary, when pertinent, to have all the information required for this purpose from the advising insurance broker or the sale agent of the insurance company.
VERIFY that the data contained in the VERIFY that the data contained in the FORM of LIFE ANNUITY INSURANCE QUOTATION are true and consistent with the terms and conditions agreed to contract the life annuity insurance.
INCLUDE in the quotation all the beneficiaries with right to survival pension. The failure to do this, exposes you to commit a crime, in addition to damage your pension and the pension of legal beneficiaries.
BE SURE before subscribing the approval of the quotation and to read the back page of the FORM OF LIFE ANNUITY INSURANCE QUOTATION.
REQUIRE that the pension offer of the Insurance Company is contained in the FORM OF LIFE ANNUITY INSURANCE QUOTATION, as provided by the Superintendence of Securities and Insurances, and that it includes all the pertinent data.
OBTAIN and COMPARE as much insurance quotations as possible from different Life Insurance Companies, so as to be able to chose the most convenient alternative for your needs and interests. Such quotations could be required and obtained by the interested party directly in the companies, through its employees or sale agents, or through independent insurance brokers authorized by the Superintendence.
CONFIRM that the persons involved in the insurance offer are registered in the record held by the Superintendence, either as sale agents of a determined company or as independent insurance broker. Such persons should be individualized in the Form of Life Annuity Insurance Quotation.
Both records could be consulted through the site Record and Policies of this Web site.
DENOUNCE and do not deal with unauthorized persons to intervene in the commercialization of life annuity. In case of doubts, you could ask in the respective record or directly in the offices of the Department of Attention to the Insured or Brokers Control of the Superintendence.
AVOID influences or pressures upon selecting the mode of pension, considering that due to the relevance for your future, the decision of being pensioned could not be taken precipitately.
REMEMBER that the offer of any kind of incentives or benefits other than the pension stated in the quotation is prohibited and could endanger your pension. Do not accept offers in this sense and denounce them to the Superintendence of Securities and Insurances when pertinent.
REVISE the Form of Quotation before giving your consent and subscribe APPROVAL, remember that the life annuity insurance contract is IRREVOCABLE. In case of doubts, abstain from signing and ask before doing so with the respective broker or sale agent.
The foregoing information is a summary with informative purposes in relation to the legislation and regulations of the life annuity insurance of the D.L. 3,500, from 1980. For more information on this subject, you could ask in the Department of Attention to the Insured of the Superintendence of Securities and Insurances. Teatinos 120, floor 1º, Santiago.
