Insuring against incapacity for work
As a self-employed professional, you are not automatically guaranteed an income in the event of illness. Fortunately, you can insure yourself against this. Which options do you have and what do you need to look out for?
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Why take out insurance?
As a self-employed professional, you do not pay any premium to employee insurance schemes and you are therefore not entitled to a benefit in the event of, for example, illness/incapacity for work. As a self-employed professional, you are not therefore compulsorily* or automatically insured against the loss of income as a result of illness. (Your health insurance will reimburse your healthcare costs, but not the loss of income). Some savings will easily tide you over if you catch the flu, but what if you break your leg, leaving you out of action for a few months? And what do you do if you become fully unfit for work and can never work again (fully)?
When considering income protection insurance, look at those three different periods: How will I cope with a few weeks of illness? How will I cope with up to two years of illness? And how will I cope with illness that lasts longer than two years or which is chronic?
*A legislative proposal for compulsory invalidity insurance (arbeidsongeschiktheidsverzekering, AOV) will be introduced for self-employed professionals in 2024. This is being considered, because less than 20% of self-employed persons currently have insurance against loss of income in the event of illness.
Invalidity insurance via an insurance company
Invalidity insurance can lessen the impact of your loss of income in the event of illness in both the first two years and thereafter. The level of the premium is further dependent on your age, how many hours you work per week and your profession. In addition, you determine the ‘waiting period’ yourself, also referred to as the ‘eigen-risico-termijn’ (excess period). This is usually at least six weeks and no longer than two years. The longer the waiting period, the lower the monthly premium. You agree the level of any benefit with the insurance company. In addition, you can determine yourself how long you will receive the benefit, no later than until state pension age. The invalidity insurance is therefore always a tailor-made insurance policy.
You can substantially reduce your monthly premium by opting for a long waiting period of two years. You will then be insured, in any case, in the event of long-term incapacity for work. You can then come to a different arrangement for the first two years, such as saving money or joining a solidarity fund. In that case, you will have covered the greatest financial risk.
Via your professional organisation
Professional organisations, such as representatives and trade unions, often offer invalidity insurance policies from insurance companies too. In that case, there will often be a discount and collective conditions. Ask for information from your professional organisation.
An insurance company may sometimes reject a customer for regular invalidity insurance, for example because someone is chronically ill. Is that the case with you? If so, you may be entitled to a ‘safety net insurance’ (vangnetverzekering) with the insurance company where you were rejected on medical grounds. This also applies to those persons who, for example, are only eligible for invalidity insurance for a very high premium due to a chronic illness. A condition for this is that this insurance must be taken out within 15 months after the start of the business. The waiting period of this insurance is 12 months and the monthly benefit is a maximum of 70% of the minimum wage, equivalent to the social minimum.
Together with a group of participants, you can form what is referred to in Dutch as ‘schenkkring’ (donation circle). When a group member becomes unable to work, each participant ‘donates’ an amount agreed in advance to the account of this person. This provides this person with the money for day-to-day living costs or ‘daily bread’, which is where the name for the most well-known solidarity fund in the Netherlands comes from: the ‘broodfonds’ (bread fund). All these funds apply a maximum period of two years during which this money is paid out. You can therefore combine this with invalidity insurance, in which you agree a waiting period of two years. You may want to consider this, because solidarity funds often apply a lower monthly amount than a regular invalidity insurance.
Bread fund (Broodfonds)
This concept is based on trust; each participant must be nominated and the group may not be larger than 50 participants. Each participant opens an account into which an amount, agreed upon in advance, is paid. The monthly deposit is linked to the amount of the monthly donation. The waiting period is usually two to four weeks depending on the bread fund in which you participate.
New and similar initiatives
In addition to the bread fund, other initiatives exist that work in a similar way. Examples of this include the Ziektefonds, SamSam, Voorzieningenfonds and SharePeople. In the case of SharePeople, for example, you pay a fixed amount per month for the administrative costs and in addition you donate to sick participants. You donate no more than 8% of your income – and if the percentage of sick people is lower at that time – you pay less (on average 2%). In general, these initiatives pay out for a maximum of two years and do not, therefore, offer income security in the event of long-term incapacity for work. There are exceptions – be sure to carefully research what the coverage and conditions are.
Optional insurance Employee Insurance Agency (UWV)
In the case of starting entrepreneurs who have left salaried employment, it is also possible to take out optional insurance with the UWV. One important condition for this is that the insurance must be taken out within one year after termination of the employment and within 13 weeks after starting the business. As a starting entrepreneur, you can choose between sickness benefit insurance and insurance under the Work and Income (Capacity for Work) Act (WIA-verzekering). For the short term, benefit lasting a maximum of 2 years, you should opt for sickness benefit insurance. For the long term, thus after 2 years of illness, you should opt for the WIA. You cannot choose the WIA without choosing sickness benefit insurance, although the other way round is possible.
You can also, of course, put money aside yourself, for example in a business savings account. Take into account, however, that you have to pay wealth tax if your savings exceed the so-called tax-free allowance (in 2023: €57,000).
Combination of work in salaried employment and work as a self-employed professional
Many starting entrepreneurs deliberately choose a combination where they also still work in salaried employment. If you have an employment contract, you are required to be insured against loss of income via your employer. The benefit that you receive on a monthly basis in the event of illness is a minimum of 70% of your most recent salary. If this is lower than the social minimum, you can apply for an allowance. You can also take out regular invalidity insurance (for your work as a self-employed professional) in order to increase this benefit.