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Peru: Mandatory death and disability insurance coverage expanded

Total Rewards|Integrated Wellbeing|Future of Work
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By Patricio Velasco | February 28, 2020

Employers must now provide accidental death and disability insurance coverage from date of hire rather than after four years of service.

Employer Action Code: Act

Legislation approved in late 2019 and implementing regulations released in early February require that employers now provide employees with accidental death and disability insurance coverage from the start of employment (rather than after four years of service). The same change will apply to the mandatory life insurance for natural death, from 2021. The new law also includes provisions to strengthen workplace safety.

Key details

The new rules apply to all employees and include the following:

  • Effective January 1, 2020, employers must cover all employees for accidental death and disability (total or partial) from the start of employment. The previous four-year waiting period for coverage has been abolished. The minimum level of insurance coverage (32 times monthly pay) is unchanged.
  • Effective January 1, 2021, immediate coverage from date of hire will apply to life insurance for natural death (also abolishing the current four-year waiting period). The minimum insured amount (16 times monthly pay) is unchanged.
  • All life and accident death and disability contracts will have to be registered with a central registry (to be established by the Ministry of Labor and Promotion of Employment), to allow employees to check and confirm their coverage and beneficiaries. Further guidance on the matter is expected to be published later this year.
  • The law prohibits payments to intermediaries for arranging the mandatory life and disability insurance policies.
  • Employer liability exemptions for death or disability claims due to work-related causes no longer apply in the event of employer negligence or noncompliance with health and safety rules and protections.  
  • Labor inspectors now have the power to order an immediate shutdown of operations of up to 30 days in the event of a fatal work accident. Workers are entitled to their normal pay and benefits for the duration.    

Employer implications

In addition to incurring the additional cost related to accelerating life insurance coverage for all employees to the start of employment, companies should also review their policies and current compliance with labor inspection provisions. If it withstands legal challenges, the prohibition of brokerage fees for arranging life insurance policies could have a significant impact on the insurance market as well by making market pricing on policies harder for companies to obtain.

Note that the government is also considering various labor law changes on such topics as benefits in kind, probationary periods, and compulsory and automatic retirement; however, those proposals are still in the early stages of legislative development.

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