Disability: Disability pension offsets lost earnings

What are singles entitled to in the event of disability?

Are you financially secure if you fall ill and can no longer work? It's an important question that singles should ask themselves. When are you entitled to a disability pension if you are unable to work, and who would receive benefits from the AHV and pension fund in the event of your death? 

Financial freedom, even in the worst-case scenario

Without a second income, your most valuable asset is your own ability to work. But what if you lose this asset temporarily, or even permanently, due to illness or accident? To cover your cost of living even in an unexpected event, you must take a careful look at your financial security. Accident insurance, Federal Disability Insurance, and the pension fund are an important part of this, but there are even more ways to compensate for lost earnings.

Which social insurance applies, and when?

Different insurance carriers are responsible, depending on whether it is a case of disability due to accident or illness, or death. 

Accidents and occupational illness If you have an accident or job-related illness, the AHV (Federal Old Age and Survivors' Insurance) and accident insurance will pay benefits. You will receive a daily benefit from the accident insurance if you have a short-term disability. For long-term disability, the accident insurance and AHV will pay you a disability pension. In the event of your death, your children, if any, would receive a survivors' pension. 
Illness If you are unable to work temporarily due to illness, your employer must continue to pay your salary for a certain amount of time. If you are disabled for a longer period of time, the AHV and pension fund will pay benefits. If you have children, they will be paid a survivors' pension on your death. Depending on the pension fund regulations, other family members may qualify for assistance.

Continuing salary payments during illness

Employers are obligated to pay 100 percent of their employees' salary for a certain amount of time in the event of illness. According to the Swiss Code of Obligations, the minimum period is three weeks in the first year of company service. After that, the time period depends on what is called the Bern, Basel, and Zurich scale. Many employers purchase daily benefits insurance in order to pay their employees 80 percent of their salary in the event of longer absences. At least half of the premium must be paid by the employer and the rest by the employee. See your employment regulations for specific details.

First pillar: AHV/IV benefits

Insured persons receive a disability pension for long-term disability

If you suffer from long-term physical, psychological, or mental disability problems due to an illness or accident and cannot perform your regular duties, you will receive a disability pension. Disability pensions are paid to persons who are not eligible for any employment on the job market.

The payments are calculated based on the insurance term and income. The degree of disability also determines the pension amount. For disability of 40 percent or more, the pension is one-fourth and for 70 percent or more disability, the insured receives a full pension.

Death benefits are paid out only in the event of survivors

The AHV pays death benefits only if there are survivors. If you have children, they will receive benefits until their 18th birthday or, if they are in school, they will receive benefits until they graduate, but only until age 25.

Second pillar: Benefits from the pension fund

The amount of the disability pension is based on the pension plan

If you are unable to work due to illness and receive a disability pension from the first pillar, you will also receive a disability pension from the pension fund. The amount depends on the pension plan of the respective pension fund. For details, see your pension statement. If you have children, they will receive a disabled person's child's pension. This is 20 percent of the disability pension.

Pension funds are not required to pay out family benefits

Any children will receive an orphan's pension upon the insured person's death. In the absence of a person entitled to the pension, pension funds are not required by law to pay your benefits to any other survivors. In this case, your retirement assets will be revoked and placed in the pool for all insureds.

However, many pension funds voluntarily opt to make a single, lump-sum payment, known as "death capital." These will usually go to your parents or, if they are also deceased, to your siblings. The benefit amount and customization options for the beneficiaries can be found in the pension fund regulations. As a rule, the pension fund benefits apply in the event of death due to illness.

Third pillar: Private pension provision benefits

The insureds may choose the beneficiary themselves.

The private pension is not only very suitable for retirement but also for setting aside capital for the worst-case scenario. In the event of your death, any children take first priority in the order of beneficiaries. If you do not have children, instead the benefits can be granted to someone who you supported to a significant extent in your lifetime. You can also appoint multiple beneficiaries and specify their entitlement individually.

Other types of insurance

Third-pillar coverage can be obtained from an insurance company if you wish to provide additional financial security for yourself. You can combine retirement savings with a disability and/or life insurance policy. But beware: A portion of your payment will be used to finance insurance coverage, and will not be available upon retirement. As an alternative, you can set up a retirement savings plan with a bank and conclude a separate risk policy with an insurance company.

Disability insurance helps you maintain the standard of living

If you become disabled as a result of accident or illness, disability insurance will ensure that you can maintain your usual standard of living. The disability pension closes the income gap between the federal and employee benefits insurance (second pillar) disability benefits and the actual costs of living, which tend to be higher.

Term life insurance guarantees financial stability for survivors

In the event of your death, your beneficiaries on file with the insurance company will receive a pre-determined lump sum or pension immediately. This is particularly advisable, for example, if you want to cover the cost of education for your children, or ensure the financial security of your own company.

Do you have questions about your financial security?

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