Disability and death insurance – an overview

Careful provisions under disability insurance can protect you and your family from the financial consequences of such unforeseen events. We have summarised the most important information to protect against risks such as disability or unexpected loss.

What is disability?

Disability occurs when a person is incapable of working for an extended period, i.e. for more than one year, due to a serious impairment of their health, be it physical, intellectual or psychological. The reasons for this can be manifold and complex:

• Accidents leading to permanent injuries,
• Chronic diseases that restrict the person's ability to work,
• Congenital diseases affecting the ability to work from birth.
  

Difference between incapacity to work and disability:

Incapacity to work refers to a person's temporary inability to perform their current professional role, e.g. the inability to work on the computer after breaking an arm.

Incapacity to earn (disability) means that a person is no longer able to work at all due to health restrictions, such as a severe visual impairment, which precludes any form of gainful employment.

The following scenarios arise in relation to financial security:

In the event of disability resulting from an accident, the accident insurance concluded via the employer generally applies and offers financial protection.

Disability due to illness often results in a financial shortfall. Legal security is often not enough to compensate for the complete loss of income, which poses major challenges for those affected.

These distinctions are important for taking the right precautionary measures and protecting yourself and your family against the financial consequences of incapacity to earn and occupational disability.

Protection against disability

Protection against disability is crucial for financial security in the event of loss of earning capacity due to accident or illness. We show the various types of support and their importance for the financial stability of those affected.

Disability due to accident

If a person’s capacity to work is permanently restricted as a result of an accident, the benefits of statutory accident insurance and AHV/AVS and disability insurance will in many cases be taken into account. These institutions are designed to cushion the financial loss caused by the sudden loss of income. As a rule, those affected can expect compensation of up to 90% of their previous salary. The aim is to ensure that quality of life can be maintained as far as possible in spite of the new challenges.

A practical example would be a carpenter who, following a serious accident at work, is no longer able to work. In such a case, the accident insurance would step in to compensate for the financial loss.

Disability due to illness

The situation is different for disability caused by a protracted illness. In this case, the pension fund plays a central role. The pension fund makes annuity payments which cover about 60% of the last income drawn. This measure is intended to bridge the financial gap resulting from the loss of the accustomed income. However, there may still be a shortfall in income of around 40% compared to the previous salary.

An example would be an IT specialist who can no longer work on a computer due to a serious illness such as advanced rheumatoid arthritis. In this case, the pension fund would step in to compensate for some of the loss of income, but there would still be a significant income shortfall.

Future provisions for the self-employed

Self-employed persons who do not belong to a pension fund are only entitled to basic coverage in the event of disability through the 1st-pillar disability pension of a maximum of CHF 29 400 per year. Without private accident insurance, they also are not covered in the event of an accident. It is therefore essential for self-employed persons to take out additional disability insurance, which pays a regular pension in the event of permanent disability.

For the self-employed, it is important to provide beyond basic cover and to build a financial safety net with specific insurance solutions.

Protection in the event of death

Making the right provisions for the future means not only protecting yourself against the immediate financial consequences of death, but also enabling your survivors to enjoy a stable and self-determined financial future. It is an investment in the family's financial security and well-being.

Accidental death

In the event of accidental death, the safety nets provided by the AHV/AVS and accident insurance apply, which together cover around 80% of the deceased’s lost salary income. The aim of this scheme is to cushion the financial shock to the survivors and to provide them with support so they can maintain their standard of living as far as possible.

A specific example would be a bus driver who dies in a traffic accident. His family would be financially supported by the insurance benefits, so that at least a large part of the loss of income would be compensated.

Death due to illness

The situation is different in the case of death due to illness. In this case, the surviving dependants are faced with insurance cover which only replaces about 40% of the previous salary income. For the deceased ‘s family, especially if they were dependent on the income, this significantly lower level of protection can pose a significant financial challenge.

Take the example of a teacher who dies after a long illness. The family would have to make do with significantly less financial support, which makes it even more difficult to cope with everyday life and to maintain their standard of living.

Death and disability insurance options

Disability income insurance

Disability income insurance is intended to mitigate the financial losses that may arise as a result of disability due to illness or accident. After a certain waiting period, the insured persons receive a pension, the level of which is dependent on the degree of disability. Insured persons can choose from a range of pension models, which offer constant or increasing support depending on their personal preferences and life situation.

Term life insurance

Term life insurance offers the survivors financial protection in the event of the insured person's death. It pays either a pre-defined annuity or a one-off lump-sum payment. Policyholders have the option of adjusting the payment arrangements individually to the needs of their dependants, either as a fixed sum or in a degressive form.

Protection for cohabiting couples

For couples in a non-marital relationship, financial security in the event of the death of one partner is more complex. As a rule, the survivor is not entitled to annuity benefits, so additional private provisions are essential.

If one person dies in such a situation, especially if there are children, the remaining partner will not receive any financial support without the corresponding precautionary measures.

Frequently asked questions about disability and death