Do Not Leave Your Family to Fate
Strokes of destiny that result in disability or even death often inflict virtually unparalleled suffering. And as a consequence, financial worries can burden the family even more. That is why it is important to think carefully about unpleasant events too.
Switzerland's three-pillar principle not only covers pension provision for the period after retirement. It also provides risk protection in the event of death or disability-related earnings incapacity. It is not easy to estimate the level of benefits because several different social security organizations potentially provide benefits. For the same reason, it is also important to coordinate these benefits with each other in order to avoid over-insurance, for example.
In the Event of Earnings Incapacity
Families with children receive particular consideration under the three-pillar principle. If the earnings incapacity is likely to be permanent, a disability pension is paid from the first pillar (IV). If there are children (up to the age of 18, or 25 if in education/training), a child's pension will also be paid (40% of the disability pension per child). The benefits from the second pillar (BVG) cannot be specified on a general basis, because the individual pension funds often cover far more than the statutory BVG insurance. At present, the mandatory accident insurance (UVG) insures a maximum gross salary of CHF 148,200. For higher incomes, the question arises as to whether the pension fund insures these salary components too in case of accidents, or whether the employer has taken out supplementary accident insurance (UVG-Z). The third pillar is used to close pension gaps that are not covered by the first and second pillars. For example, gaps due to earnings incapacity may be offset by taking out insurance for a disability pension or a lump-sum payment in the event of disability.
In the Event of Death
In the event of death, a wife with children receives a lifelong widow's pension from the first pillar (AHV). Without children, this only applies if the surviving dependant is at least 45 years old and the couple was married for at least five years. However, widowers only receive a surviving spouse's pension if there are children under the age of 18 to be cared for. If there are children (up to the age of 18, or 25 if in education/training), an orphan's pension will also be paid. The individual insurance certificate and the pension fund regulations must be consulted for details of the second pillar benefits. If the first and second pillars do not provide sufficient financial cover in the event of death, it is advisable to take out term life insurance in the third pillar. One advantage here is that, with policies taken out under pillar 3a, the premiums can be deducted from your taxable income up to a maximum amount.