Every year, thousands of self-employed professionals in the Netherlands miss work for at least 4 days due to illness or injury. Many zzp' ers are not or insufficiently insured against incapacity for work: in 2019, 41% of the 1.1 million zzp’ers in the Netherlands had no insurance. Not taking out insurance saves money, but comes with a risk. If you do not take out insurance, you will not have any income if something happens. If you do choose to protect yourself against incapacity from work, you have several options: you can set money aside, take out insurance or participate in a donation circle. You can deduct the premium payments for your disability insurance from your tax income.
Compulsory disability insurance for zzp'ers
In December 2021, the Dutch government adopted legislation that will make it compulsory for self-employed professionals to take out disability insurance (AOV). This legislation is expected to come into effect in 2024. The new law means that all self-employed professionals must be insured against disability until their age of retirement. The new AOV will be carried out by the Employee Insurance Agency UWV. Affordability of the AOV has been taken into account. The premium of the compulsory insurance will be much lower, but as a result the pay-out of the insurance will be equal to the legal minimum wage in the Netherlands. The premium will be tax-deductible. See also the article Pension agreement: old age pension and mandatory disability insurance (AOV) on the KVK website.
Private disability insurance
Disability insurance (Arbeidsongeschiktheidsverzekering, AOV) covers the costs you incur if you fall ill or become injured or incapacitated for work. It also provides funds for your next of kin, should you meet with a fatal accident. The monthly premium for the 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. After a certain age you can no longer take out AOV. Or only at a higher premium.
- The deductible excess period. That 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.
There are options to lower the monthly premium:
- Choose a shorter pay-out period, like two or five years
- Choose a longer deductible excess period
- Join a collective AOV through your industry or professional organisations
- Join a collective AOV through your interest group for self-employed professionals
When making a choice, take into account the income of your partner, your financial reserves and the risk of a limited coverage. If you had already taken out disability insurance in your home country, check if you are still insured when you live and work in the Netherlands.
You are allowed to deduct the AOV premiums in your income tax return as ‘expenditure for other income provisions’, but only if the payments you receive if you become ill or injured are periodic. You pay income tax on the payments you receive. In your tax return you state this as ’income from previous employment’. If you receive the AOV benefit as a lump sum, you cannot deduct the premiums from your income, but the benefit will be untaxed.
Safety net insurance
For a small group of self-employed professionals it is not possible to take out a regular AOV, due to severe medical problems. They can make use of private safety net insurance (in Dutch). 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 fifteen months. Is the insurance company where you want to take out this insurance a member of the Dutch Association of Insurers (Verbond van Verzekeraars)? And does the insurance company offer disability insurance? Then the insurance company is obliged to offer such a safety net insurance. The rules for deducting the premium for the private safety net insurance from your income tax are equal to those of the AOV.
Voluntary Sickness Benefits Act and WIA
If an insurance company refuses you, a self-employed professional, as a client due to existing illness or injury, you can take out a voluntary sickness insurance with the UWV (in Dutch). This health insurance pays out when you are sick and can no longer work. The maximum amount that can be insured is the last-earned daily wage, as long as this does not exceed the statutory maximum premium daily wage. The benefit depends on how incapacitated for work you are (in percents). The UWV determines this on the basis of suitable work. In the event of long-term incapacity for work, the UWV will look at what you can still do. The benefit consists of a maximum of 70% of the insured amount for a period of two years maximum. The premium is 9.8% of the insured amount. In addition to the voluntary sickness insurance, the UWV also offers the voluntary WIA insurance (Work and Income According to Labour Capacity Act). The WIA insurance comes into effect when the two years of voluntary sickness insurance are up. If you want to be insured after those two years, you must take out the WIA insurance directly with the Sickness Benefits Act insurance. The insurance is also linked to the maximum daily premium wage. To receive benefits, you must be incapacitated for work for at least two years with a percentage of 35%. ZZP Nederland provides more information (in Dutch).
An alternative to insurance is crowdsurance. This is not an insurance but a donation circle, a mutual financial support system. There are several forms of donation circles (in Dutch) in the Netherlands, such as Broodfonds, SharePeople, Ziektefonds, SamSamkring, CommonEasy en Voorzieningenfonds. These are all groups of members that agree to help each other financially in case of illness or disability. Here is how it works: you deposit a certain amount into a personal bank account. You deposit this amount every month until you have built up a certain buffer. You may withdraw the amount that exceeds this buffer. If someone in the donation circle falls ill, after two months, the fellow members receive a payment request for part of the amount needed to help the patient with his or her income. There are some differences between the different circles as the group members determine the rules together. Two donation circles are explained here.
A bread fund (broodfonds, in Dutch) is based on trust and transparency. The members know each other and meet in person. A collective of maximum fifty entrepreneurs put money aside every month in their own bread fund account until a maximum has been reached. The monthly deposit for a bread fund varies from about €30 to just over €100 per month (in 2020). If someone from the group is sick for longer than the agreed 30-day deductible period, the other participants will transfer an amount from their bread fund account to the patient each month. The benefit you receive from a bread fund depends on the contribution. There is a minimum and a maximum amount. The money you deposit every month stays yours. When you leave the fund, you will get that amount back. Minus the amounts you have donated to sick fund members.
Sharepeople is an online network and has no maximum amount of members. Participation is for everyone who is fully able to practice their own profession and who is younger than sixty at the start of participation. Beforehand you determine how much net income you would need if you were to become ill. Based on the ‘disability percentage’ (the number of sick people compared to the number of participants), you make a donation once per month.
The deposits in your crowdsurance bank account remain your own, personal capital. That is why they are not deductible for income tax as a premium for an income provision, as is the case with payment of a premium at an insurer. Nor are the donations you make to another member, who is ill or injured, tax-deductible. But the payments you receive from the fund, the gifts of the other participants, in case you are too injured to work, are not taxed with income tax.
When the AOV becomes compulsory, you could opt for a combination of a donation circle and AOV with a deductible period of two years. That way, if you become ill or incapacitated for work, you will receive gifts from the donation circle for the first two years. After that, you will receive income from the AOV. Because of the long deductible period of your AOV, your premium will be lower.
For more information, you can contact one of the organisations that promote the interests of freelancers/self-employed professionals. They can offer you legal advice, information about further education and much more.