People give too little thought to it: they become ill or suffer an accident and are unable to work for an extended period. What now? While the situation may not necessarily be a gloomy one, it is important for both the employee and the employer to be informed about their rights, obligations and options.
Many insurers in Switzerland offer disability insurance that provides income if an employee is unable to work. Disability insurance protects against financial difficulties in the event of an illness or accident and offers financial security when an employee is not capable of working. But it is important to look closely at the material and to read the fine print in order to gain as thorough an overview as possible. In Switzerland, there are dozens of providers of this sort of insurance. It can be truly difficult to get an overview.
Some believe that employers are required to continue paying an employee’s salary in the event of illness or accident. However, this is not true, or is only partly true. In many cases, the employer is not obliged to pay 100% of the employee’s salary, and the continued payment of salary is only guaranteed for a certain period. It is precisely in this sort of situation that disability insurance can help. This type of insurance aims to bridge financial gaps as a result of lost earnings that can occur after even a brief period. Insured persons must be aware, too, that this type of insurance involves waiting periods:
2, 7, 14, 21, 30, 60, 90, 120, 150, 180, 270 or 360 days
These waiting periods are communicated and discussed before the contract is concluded and then defined in the corresponding contract. Entitlement to the benefits only commences after the waiting period stipulated in the contract. Insured persons should be aware that the insurance ends after the benefits have been exhausted or when the individual reaches AHV retirement age. The benefits of income insurance or daily allowance insurance are typically exhausted after 365 or 730 days. Waiting periods and limited benefit periods are facts that, unfortunately, insured persons are often not aware of.
A must for self-employed persons
Entrepreneurs who are work at their own company are covered by the company’s insurance policy. But this is not the case for sole traders and for members of general and limited partnerships. These individuals should be sure to conclude adequate loss of earnings insurance. While doing so is not mandatory, a disability pension will likely not be sufficient in the event of a permanent disability.
What happens after this benefit has been exhausted?
An inability to work can be covered by taking out a disability annuity. A disability annuity pays the insured pension after the end of the waiting period (3, 6, 12, 24 months) until the end of the contract. This disability annuity can be concluded in both pillar 3a (tax-qualified provisions) and in pillar 3b (non-tax-qualified provisions), and they may therefore result in tax savings.
In Switzerland, the following two variants are the most commonly offered income insurance for both loss of earnings insurance (daily allowance) and disability annuities.
Fixed sum insurance
This variant is especially suited for self-employed persons, housewives and house husbands. The insured daily allowance is paid irrespective of the actual loss of earnings.
This variant is the traditional and most frequent method of insurance. With this form of insurance, the insured daily allowance is paid out to a maximum of the AHV salary before the inability to work.