Disability insurance for self-employed professionals
If you work as a self-employed professional (zzp’er), you will not get paid if you are unable to work due to illness or accident. If you want to ensure your income, you need to take out your own insurance. This is called disability insurance (Arbeidsongeschiktheidsverzekering, AOV). You can choose to set aside money, join a bread fund, or take out insurance. Read more about your options.
Who is disability insurance (AOV) for?
Disability insurance is for entrepreneurs and zzp’ers who independently earn income from their business. For example, sole proprietors or director/major shareholders (dga). You may fall ill or suffer an injury, (temporarily) preventing you from working. You then must provide your own replacement income. With an AOV, you insure yourself for a certain amount that you can live on. You agree on this amount with your insurer.
Is AOV compulsory?
Occupational disability insurance for entrepreneurs is not mandatory right now. In the future, you may be required to take out disability insurance (AOV). You will then be entitled to disability benefits if you can no longer earn the minimum wage due to long-term illness. Now, entrepreneurs and zzp'ers are sometimes unable to get insurance. They are excluded, for instance, because of their age, medical condition, or medical history. The effective date of the change in law is not yet final. The House of Representatives and the Senate still have to approve the proposal.
Read more about the plans for compulsory AOV here.
Disability insurance for zzp'ers
Many self-employed people are not, or not sufficiently, insured against disability. It is good to check what happens if you fall ill. As well as taking out AOV, you can also look at other options. Such as donation circles (see below).
What are the costs of an AOV?
The monthly premium for an AOV depends on a number of factors, such as:
- Your job. Do you have a high risk of physical or stress-related complaints?
- Your age. AOV premiums are often higher after a certain age.
- The own-risk period. This is the period in which you yourself compensate for your loss of income if you fall ill. This is also called waiting time.
- The coverage you choose. The more extensive the cover, the higher the premium.
Read more about the costs of an AOV with a calculation example here.
AOV and taxes
Disability insurance insures your personal income. So, the premium is not a business expense and is not deductible for your company.
Periodic payment
The premium is deductible in your income tax return. Does the AOV provide a periodic payment, for example monthly? In that case, you can deduct the premium for the AOV in your income tax return as 'expense for other income provisions'.
You must pay income tax on the regular payments you receive if you are (partially) occupationally disabled. In your tax return, you state the benefits as 'income from previous employment'.
Payment in one go
If the AOV provides a benefit in a lump sum, you cannot deduct the premium paid. The payment is therefore not subject to income tax. The amount does count towards your assets in box 3.
Read more about disability insurance and taxes (in Dutch) on Belastingdienst.nl.
Other options for AOV
You insure loss of income due to illness or accident in other ways as well. You decide how you want to insure yourself against disability. There are several options to choose from.
In some cases, you can take out ‘individual disability insurance on collective terms’. This is possible through various sector and professional organisations. Organisations that promote the interests of freelancers/self-employed professionals may also offer their members this option.
Did you have compulsory employee insurance through work or benefits less than 13 weeks ago? If you start your own business, you can take out voluntary illness and disability insurance with UWV. The deductibility of the premium for the voluntary UWV insurance is the same as for an AOV that is not through UWV. If you have difficulty finding disability insurance due to your medical history or other reasons, you can take out voluntary insurance with UWV in certain cases.
Some insurance companies offer private safety net insurance (in Dutch) for beginning zzp'ers. The condition for this insurance is that you cannot take out a normal AOV for medical reasons and you have been self-employed for less than 15 months. The rules for deducting the premium for the private safety net insurance from your income tax are equal to those of the AOV.
Other alternatives are crowdsurance or a donation circle. These are all groups of members that agree to help each other financially in case of illness or disability. Participants make mutual agreements and save money to support each other. If you are ill, you receive financial contributions from other members to supplement your income. There is often a waiting period, 2 months for example, during which you will not get paid.
Members of a donation circle usually know and trust each other and meet in person. Crowdsurance participants do not know each other personally and are not required to attend meetings.
You can also choose to combine a donation circle and AOV with an own-risk period of, for example, 2 years. If you become ill or incapacitated for work, you will receive gifts from the donation circle for the first 2 years. After that, you will receive income from the AOV. Because of the long own-risk period, your AOV premium will be lower.
Check this table on kvk.nl for the differences between an AOV, donation circle, crowdsurance, and voluntary insurance with UWV.
Donation circles and taxes
The monthly deposits you make into a savings account when you belong to a donation circle are private capital. These are not a business expense and are not deductible for your company. These savings are included in your assets in box 3 of your income tax return. The money you receive from a donation circle is composed of smaller gifts from the other members. You may receive a certain gift amount tax-free from each member per year. Higher than a maxium amount, you pay gift tax (schenkbelasting, in Dutch). Contributions you make to other members in your donation circle are also not deductible for income tax purposes.