How do you cover loss of earnings from self-employment?
Unlike employees, the self-employed in Switzerland do not benefit from automatic protection against loss of income in the event of illness. For them, an interruption of activity can result in a total absence of income, jeopardizing their finances and those of their business.
In this case, it is wise to take out daily allowance insurance to protect against loss of earnings in order to secure an income during periods of work incapacity.
How daily allowance insurance works
The daily allowance insurance aims to compensate for income loss due to work incapacity caused by illness. It ensures a daily payment based on a predefined amount for the duration of the incapacity.
Types of insurance to cover loss of earnings
There are two main ways of covering loss of earnings due to illness in the self-employed sector:
- LAMal insurance : Subject to the principles of social insurance, it is offered by health insurance companies. Although optional, it enables the self-employed to take out health insurance cover.
- Insurance under the LCA : Certainly private, this option is more flexible and can be tailored to the self-employed person's specific needs. It can include customized waiting periods and selected indemnity amounts. It generally covers illness and accident.
Who needs daily allowance insurance?
Although not mandatory, self-employed individuals concerned with protecting their income should consider taking out this insurance. In the event of illness, the absence of income can quickly become problematic, especially for those who do not have savings to cope with such situations.
The self-employed who derive most of their income from an activity that cannot be performed by another person, or who have no immediate back-up, are particularly concerned.
Payment of contributions
The financing of daily allowance insurance operates based on contributions paid by the insured. For insurance policies taken out under the LAMal, the calculation of premiums depends on age, the chosen indemnity amount, and the region. On the other hand, in the context of private insurance governed by the LCA, premiums can vary based on gender, age, and medical history.
The contributions are calculated to cover the expenses of the current year as well as the reserves for potential claims. This ensures that the insurer has the necessary funds to pay out allowances while maintaining a certain flexibility in premiums.
In all cases, the benefits offered by daily allowance insurance may vary depending on the contract:
- Amount of compensation : Generally calculated as a percentage of declared income or as a fixed daily amount. A self-employed person can choose coverage of up to 80 % of income.
- Waiting time : The longer the waiting period, the lower the premiums. This can range from a few days to several weeks, depending on the coverage chosen.
- Payment period : The maximum duration of benefit payments for a single case of illness is 720 days, covering periods of prolonged absence up to the point of entitlement to an IV pension.
Loss of earnings insurance VS Disability insurance (AI)
Loss of earnings insurance and disability insurance (DI) have distinct but complementary objectives.
Loss-of-earnings insurance is designed to compensate the income of workers, particularly the self-employed, in the event of temporary incapacity for work due to illness or accident, giving quickly access to immediate financial support for a fixed period.
In contrast, disability insurance (AI) comes into play when a work incapacity becomes permanent, providing long-term income in the form of a pension for those recognized as disabled. The AI intervenes much later, approximately 2 years after the onset of incapacity.
