Disability and loss of income: how you can protect yourself

Fortunately, the Swiss population enjoy above-average health by global standards. We have a high life expectancy and are among the countries with the best standards of living. But you never know what fate has in store for you. An accident or illness can happen to anyone. In Switzerland, there were an additional 16,600 people in 2020, so that by the end of the year a total of 218,000 people were dependent on a pension or disability insurance. For 8 out of 10 people, the cause was an illness, 13% are suffering from a congenital defect and in only 6% of cases was this attributable to an accident. The financial losses can be particularly severe in the case of disability due to illness so that in most cases only 60% of previous income is available. This can quickly make it difficult to cover daily living costs, let alone afford a holiday or a home of one's own.  A disability insurance pension ensures you remain on an even financial keel in this situation.

In the case of illness, continuing salary payments and daily sickness benefits end after two years at the latest, resulting in a noticeable reduction in disposable income. In addition to the benefits from pillar 1 (OASI/DI), benefits from occupational retirement provision (pension fund) also help to keep your finances on an even keel, provided that you have joined a pension fund. Together, these should replace at least 60% of your previous salary. If the pension from your occupational retirement provision only covers the statutory minimum, the loss of income may be greater. If you have children, they are also entitled to benefits in the form of a pension until they reach the age of majority or complete their initial education.

In order to maintain your accustomed standard of living it is worth taking out private coverage in the form of disability insurance. This enables you to protect yourself and your dependents from financial losses, and ensure that you and your family can remain in your own home, pay the mortgage and meet your financial obligations. The crucial thing is to be well aware of your own financial situation at every stage of life and to know how you can influence it. Here you will have to ask yourself a number of questions: 

1. Partner: When it comes to financial security in the event of disability or death, it is important to think about your partner as well. Are you married or cohabiting? Do you have children together? Does one partner only work part-time or not at all? All this influences your financial situation and your family's cash requirements.  If one partner takes care of the children and the family, it is particularly important to provide well for both partners as you could face considerable additional costs for child care. Single parents are particularly hard hit, so it pays to have good insurance. 
    
   Good to know: By law, social security benefits are only paid to married couples in the event of death and only if certain conditions are met. Depending on the pension fund regulations, it is possible to designate unmarried partners as beneficiaries in the second pillar. In pillar 3b, on the other hand, beneficiaries can be designated as desired. 
2. Homeowners: Your home provides security and stability, particularly in exceptional life situations. A reliable income is particularly important for homeowners to cover current housing costs. So it pays to have additional insurance. In the event of death, the home remains affordable for the surviving dependants and a move can be avoided, thanks to the risk coverage of a life insurance policy.
   
   Good to know: Disability can be insured together with term life insurance in the same policy, thus saving premiums. 
3. The self-employed: Are you self-employed and not affiliated to a pension fund? This means that benefits will be minimal in the event of disability. You must reckon with significantly less than 60% of your previous salary. If the surviving dependants after an event of death are entitled to claim OASI benefits, these will usually be just a mere fraction of previous income. It generally pays for people without a pension fund or with a minimal pension fund solution to take out additional insurance.  
4. Young people: They have their whole life ahead of them and disability is particularly hard on them – not only emotionally, but also financially. Education and training, nursing care costs and reintegration measures are expensive. However, the benefits provided by state retirement provision are low at this age, which can lead to long-term financial hardship. Additional insurance coverage makes sense.