Disability Insurance

Banks, Insurances & Third Pillar
1

Hello :wave:

I’m not a fan of combined 3a insurance, luckily I don’t have any.

As I understand it, however, it would cover one or all of the following points:

  • Lump-sum death benefit for dependants (“Todesfallkapital”)
  • Premium waiver in the event of disability (“Prämienbefreiung”)
  • Income in the event of disability (“Erwerbsunfähigkeitsversicherung”)

I have decided for myself that I don’t need “Todesfallkapital” or “Prämienbefreiung” insurance because I don’t have a wife, children, house or other persons who are dependent on me.

But I’m wondering whether I should take out disability insurance. Independent without 3a, of course. However, I find it difficult to find online quotes because most insurance companies want to talk to you with an advisor. But before that, I want to think about the subject myself and get as much information as possible.

The following questions arise:

  • How much should the insurance pay out per month in the event of disability: Do I understand correctly that I add the insurance benefit from pillar 1 and 2 and then simply insure the rest?
  • It seems that many such insurance policies also have a term until retirement. Is this normal?
  • And last but not least: do you have any specific recommendations?

Best,
Markus

1 Like
2

First, I would check out what 2nd pillar + IV would give, and then see if you really need it (the 2nd pillar can be widely different from contract to contract).

Yes, because than AHV and the normal pension would kick in.

I cannot recommend any special insurance company on that topic, since I determined that my 2nd pillar + IV should be enough.

3

I had it calculated a while back with AXA. IIRC for a monthly disability pension of CHF 2’500 (30k per year), I would have paid something like CHF 1000-1200, can’t remember exactly. Note that this is the insurance cost for a 39-year-old non-smoker with an office job, no risky hobbies and a normal BMI. It would go up the older you get.

Also remember that, apart from being unlikely, most disabilities are:

  1. not total, so you might only be 50% disabled and might still be able to work, and would only get a reduced disability pension, and
  2. temporary (e.g. burn-out/depression) and “over” after 2 years, which is the wait period before these insurances (and IV) start paying a disability pension.
4

I second this. Many pillar 2 pension plans already include supplemental disability insurance which insures all or most of your salary. When that is the case, the premiums are deducted from your salary along with your pension fund contributions, so you are already paying for it out of your own pocket. The advantage is that the premiums are often a bit lower than individual insurance since it is a collective policy.

Private insurance (pillar 3a or 3b) is only worth considering if your employer’s pension plan doesn’t include supplemental disability insurance that insures your full salary. That may also be the case if only a portion of your salary is covered by your pillar 2 pension plan (e.g. you earn a high income).

DI (IV) is kind of a last resort. Unless you’ve contributed to the AHV/IV for decades, your disability pension will be a bad joke unless you qualify for supplemental benefits (e.g. you have little income or wealth and will remain in Switzerland).

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5

If you actually think about getting a life insurance, then why not include disability risk? If you have people that depend on you, it can literally be the same (or even worse) outcome financially if a disability occurs as if you would die. Or am I missing something?

6

well that’s a good question. I haven’t given it enough thought. Essentially it’s because I am lazy. Dead or not is unambiguous. But disable is a ambiguous concept to me. Does unable to work qualifies? Does lose a leg but still can work qualifies? Losing a toe? Hearing function drops? And is the concept the same across all insurance companies?

I guess, I hope, it’s a well established concept and is standard among all insurance company. But basically I am just avoid spending time on learning the concept.

But since we are already on this topic, could you maybe shed some light?

7

In my understanding, it will be the doctor mandate by the insurance that will Qualify your % of disability.
If you have a bike accident broke a vertebrae on the make and can only move tong or eyes they may state you are 80% disable.
You will get 80% of the invalidity mentioned in your contract or 2nd pillar. I’m not sure if a private disability insurance will be summed to your 2nd pilar invalidity or only contribute to the difference.

Anyone has experienced a real invalidity compensation?

8

It’s complicated and expensive. As someone who doesn’t do well with mental load (and left a 4 figure claim to avoid the insurance claim hassle), I decided it was not for me.

Now I buy insurance for only extreme things: death, destruction of my house.

9

That’s exactly what I do now as well.

10

Most of the insurance policies discussed here pay out once. What do you think of disability insurance? So those that pay out e.g. 2k/month for a lifetime in the event of disability? The argument there is that the insurance benefit from AHV+BVG does not cover everything or could be too low.

12

From what I’ve seen: Health insurance companies offer capital insurance in case of disability, i.e. you get a lump sum payment. “Regular” insurance companies however offer annuity insurances where you get a monthly payment.

May I ask what you ended up doing for yourself?

13

At the beginning of my career I was told that getting sick and then disbled was an undercovered risk. So I decided to pay a consultant to explain and recommend sth. I remember two things:

  • it really is expensive
  • hesaid that most people who become disabled tend to spend much less money. I have also read research about spending less when people retire

So in the end I didn’t do it.

1 Like
14

I’m still a bit unsure, but I also don’t want to talk to insurance salespeople.

So I’ve decided to take the risk.

16

As a first step, I would recommend checking your occupational pension plan.

  • If your pension fund only has the compulsory disability and life insurance (the pensions are a percentage of your pension benefits), then getting supplemental insurance (3a or 3b) is definitely worth considering. That is especially true if you have a good income, and wouldn’t be content with social disability insurance (DI) plus possible supplemental benefits. Young adults likely have very little in the way of pension benefits, so their disability pension from their pension fund is generally not even worth accounting for.

  • If your pension fund has supplemental disability and life insurance that covers your entire INSURED salary, then getting additional insurance (3a or 3b) may not be necessary. However, if your actual salary is much higher than your insured salary as stated in your pension fund statement, then getting additional insurance to close the gap is worth considering.

It is good to bear in mind that you are covered against disabilities that result from accidents by the accident insurance you get from your Swiss employer (if you work for a boss). The benefit is up to 80% of your insured salary, right from the start.

So the deficit in compulsory insurance primarily affects disabilities resulting from illness. That is what you may want to cover with private insurance, if your pension plan doesn’t already include good supplemental insurance.

3 Likes
17

That’s exactly right.

I am looking into this for a friend who knows next to nothing about these topics and just found out that she only has compulsory coverage in her 2nd pillar.

Taking out disability insurance actually isn’t that expensive, it’s around 100 CHF per month. The other topic is that she’ll have much less money in her pension fund when she retires; but that’s a topic for another day.

18

Dear Mustachians,

Following MP’s recent post on the best life insurance of 2024, I wanted to start a discussion about disability insurances for the specific case of self-employed mustachians.

For a self-employed person, there is no mandatory disability insurance in case of either accident or illness.

  1. Accident — No more accident insurance via the employer. To cover the medical costs of an accident, the self-employed person can include the “accident” option into their illess health insurance (behind the same deductible of up to 2500 Fr. and 10% co-payment up to an extra 700 Fr.). However, if the self-employed person is unable to work because of an accident, no disability annuity or lump-sum amount is paid (whereas an employed person is usually covered up to 80% of the salary)
  2. Illness — Similar to employed people, if the self-employed person is unable to work because of an illness, no annuity or lump-sum amount is paid

Given these risks, I wonder how self-employed mustachians cover themselves against the unability to work.

Any recommendations ?
Many thanks!

19

There’s already a thread about this topic: