Disability insurance for entrepreneurs
Four in ten self-employed entrepreneurs in the Netherlands work without a disability insurance (AOV). For most of them, this is not a matter of principle, but a financial one. An AOV for self-employed persons and SMEs is not cheap in the least. Especially if you are only partly dependent on the income from your own company, or if you do not earn that much because you have just started, for example, an extra expenditure of several hundred euros per month is not a side issue. You will then think twice before taking out an expensive insurance policy, which you are often tied to for years.
Since the government's plans to make an AOV mandatory for entrepreneurs, however, it is a recurring question for many entrepreneurs: should I take out an AOV in anticipation of that obligation? Or is it better to wait? And what options are there?
What does an AOV for entrepreneurs entail?
Basically, an AOV does exactly what the name suggests: provide an income in the event of (temporary) incapacity for work. However, the AOV for entrepreneurs goes a bit further than that in all cases.
With most insurers you have extensive options about how you want to organize your AOV. You can then choose, for example, what percentage of your regular income you want to be paid out in the event of incapacity for work, how many months you want to be able to receive that benefit, et cetera. With flexible insurers you can therefore determine a lot of details of your AOV yourself. There are many differences between insurers, so before you arrange anything at all, you should always contact the various providers of such insurance. Compare AOV.
Most AOVs also offer a lot of extras, such as preventive medical check-ups (to prevent incapacity for work) and advice programs in the event of incapacity for work to enable you to return to work as quickly as possible. In this way you are professionally supported by medical experts and you are not alone in the event of illness. An AOV is therefore more than just a pot of money that is opened.
AOV, buffer or bread fund?
Such an extensive package may cost a bit. You can't get an AOV for a few bucks. Depending on your wishes and your field of expertise, you pay more than a hundred to in some cases hundreds of euros per month. That is expensive if you never use it. That is why there are also alternatives.
A popular alternative is a bread fund. This is a fund into which colleagues make a monthly contribution. This pot is tapped as soon as one of the participants in the bread fund becomes incapacitated for work. The costs with a bread fund are often lower than with an AOV. A bread fund only provides financial support; there are no medical experts on hand and you cannot put together a comprehensive support package. However, you can often easily stop your participation in a bread fund and also get a part of your investment back, where you often take out an AOV for a longer period of time.
Some entrepreneurs also choose to build up a buffer themselves for bad times. That is of course the cheapest option, but to be able to bridge work disability for a longer period of time, you will have to set aside a fair amount of money. Not every entrepreneur is able to do this.
Not required, but can you arrange something?
As mentioned, the government intentions to make an AOV compulsory for entrepreneurs. The background to this idea is that it is undesirable for entrepreneurs to work without insurance. The aim is to prevent the Dutch from losing their income due to illness, having to claim benefits such as social assistance, or even ending up in poverty. A noble pursuit, you might say.
Nevertheless, not every entrepreneur is waiting for such an obligation. This is mainly due to the costs: an AOV is expensive. In addition, many self-employed people are not interested in such insurance at all because they have a paid job in addition to their work as a self-employed person.
An AOV (or participation in a bread fund) is therefore especially recommended if you well depend on your income as an entrepreneur. A common misconception is that such insurance is only interesting for entrepreneurs who do physically demanding work, such as construction workers. The truth is that disability can happen to anyone and come in all kinds of forms. Think of a traffic accident or mental problems. When it comes to your income and therefore your entire life, you want a bit of security.
Act now or wait?
Not all details of the AOV obligation are known yet. Is it wise to act now?
If you meet the above classification, then: yes. It can take years before the obligation is completed and takes effect, and walking around uninsured for years while you need your income as an entrepreneur to pay your mortgage and get a living, that is irresponsible.
If that's not the case, it may pay to be patient a little longer. Insurance premiums are expected to fall in the near future, as a result of the approaching AOV obligation from the government. The insurance imposed by the government will then not run through insurers, but through the UWV and the Dutch Employee Insurance Agency tax authorities. There is therefore a good chance that the huge premiums that entrepreneurs sometimes have to deal with will soon be a thing of the past.