A person’s financial life goes through ups and downs, including unforeseen events like illness and accidents.
So anticipating these events is essential and crucial for future financial planning.
Taking out life insurance is a good way to protect yourself against these events, because it offers peace of mind and the certainty that money will be available even in a disadvantaged situation.
What is a insurance of life?
It is an instrument of protection of financial stability of a personal nature, which is provided by an accredited managing company, in this case a life insurance company.
In Chile, life insurance companies are supervised by the Financial Market Commission (CMF).
Why buy life insurance?
Life insurance was designed to meet the following objectives, in the event of death or disability of the insured:
- Cover the insured financially from the risk of personal and / or health accidents.
- Protect loved ones and family assets.
- Pay credits in case the insured has contracted a financial debt.
- Pay partners or creditors of the insured (in the case of a commercial company, for example).
- Guarantee an income for the insured or their beneficiaries.
Who can take out life insurance?
Anyone over the age of 18 can take out insurance, either individually or collectively (in the latter case, they are hired by a company for the benefit of their collaborators).
Life insurance is voluntary except for the type of Credit Relief associated with mortgage loans, which is mandatory.
Who is a beneficiary of this type of insurance?
Any person can be a beneficiary as indicated by the insured when contracting the policy. There is no need for any family or marital relationship.
What types of life insurance are there?
As explained by the Chilean Insurers Association (AACH), there are the following formats:
1. Whole Life: its coverage extends until the death of the insured, that is, the payment of a capital is guaranteed immediately after the insured’s death, regardless of the date when his death occurred, either due to illness or accident. The beneficiary or beneficiaries enrolled in the policy will receive compensation as soon as the death is credited.
2. Temporary Life: like the Whole Life type, the capital is payable to the
beneficiaries immediately after the insured dies of natural causes, suffers a fatal accident or accidental disability.
However, the incident must occur for a specified period (before the end of the agreed term as the duration of the insurance). If the insured lives for when this stipulated period expires, the insurance is canceled.
3. Family Protection: protects all members of the family group, whether due to death or other risks such as disability or dismemberment of the insured if it is contained in the policy. Like Temporary Life, its duration is for a defined period.
4. Disability or Invalidity: covers the insured’s disability because his physical or intellectual capacity is weakened, due to illness or accident. The compensation payment corresponds to the payment of a capital or an income, as provided in the policy. Its duration is for a defined period.
5. Assistance: covers services, assistance or expenses generated by the death
of the policyholder. Its duration is for a defined period.
What does life insurance deliver?
In general, the offer of this type of financial service includes:
- Coverage in case of death (natural or accidental) or temporary or permanent disability. This protection will depend on the needs of the user and the type of insurance.
- Additional Products:
-Saving (in this case, the insured can rescue the corresponding money after a certain time)
-Pension (life insurance with APV)
- Premium: is the monetary amount or price of the insurance that the insured agrees to pay for a certain period and term (the frequency is usually monthly).
- Policy: it is the contract by which the insurance company agrees to comply with the promised coverage.
What are the requirements to purchase life insurance?
As explained by the financial regulator (CMF):
- Minimum age (18 years) and a maximum age of the insured to enter the insurance (will depend on the insurance company and the type of insurance).
- Maximum age of the insured to provide coverage (also depends on the company and the type of insurance).
- A health statement before joining the policy. Normally, the company requests a set of basic medical exams and additional ones (depending on the contractor’s history).
What does the life policy include?
- Illnesses and types of accidents insured, as well as their intensity and duration.
- The beneficiaries (loved ones, partners, creditors, etc.) that the insured indicates will be the people assigned to receive the benefits of the policy. If there are no designated beneficiaries, the legal heirs are those who receive the capital.
How to collect life insurance?
Generally, beneficiaries must approach the insurance company with documents proving the death or judicially declared disability of the insured.
However, if there are no assigned beneficiaries or it is unknown if the person has contracted insurance, the CMF should be formally consulted. Check the procedure in the Insurance Consultation System here.
When is it not possible to purchase life insurance?
Generally, life insurance companies do not initially grant this instrument when the person contracts it to protect themselves from:
- Extreme and risky activities or sports.
- Handling of explosives.
- Work at height.
- Diseases or pre-existing health.
- Injuries or illnesses caused by war, rebellion, revolution, etc.
- Suicide or self-inferred injury.
However, some companies make exceptions and allow access to this service for a specific premium.
What precautions must be taken to take out life insurance?
Life insurance policies are standard and regulated, so the CMF recommends that individuals who evaluate contracting this instrument take the following safeguards:
- Quote more than one insurance before hiring
- Read well and understand the policy before signing
- If you have doubts about the general conditions of the contract, review the CMF policy deposit with all official versions of this document.
- Corroborate how and under what conditions the insurance is renewed.
- Confirm how the cost of insurance will be readjusted in case of renewal.
- Ratify the coverage period and validity of the instrument.
- Consult in which cases the insurance will not pay the capital to the beneficiaries
- Consult all the requirements to collect the insurance.
Reaching a certain age, financing the future of the family or protecting yourself in the event of illness or accident are some of the reasons why a person takes out life insurance.
More than cost, the decision is based primarily on the person’s stage of life and the individual circumstances surrounding it.