Disability insurance for self-employed professionals

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If you work as a self-employed professional, (a 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).

Who is disability insurance (AOV) for?

Disability insurance is for entrepreneurs and zzp’ers who depend on the income they earn from their business. For example, sole proprietors or director/major shareholders (dga). You must provide your own replacement income if you are unable to work.

Is AOV compulsory?

Occupational disability insurance for entrepreneurs is not currently mandatory. However, it does protect you if you are unable to work temporarily or permanently due to illness or injury. With an AOV you insure yourself for a certain amount you can live on. You agree on this amount with your insurer.

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.

Cost of 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.

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 can decide how you want to insure yourself against disability. There are several options to choose from.

Collective insurance

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.

Voluntary insurance via UWV

If you start your own business, you can take out voluntary illness and disability insurance with UWV. You must apply to UWV within 13 weeks after your mandatory insurance through work or benefits has stopped. 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.

Private 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. Insurers will sometimes refuse to cover zzp'ers with severe medical conditions or mental health complaints, for example. In such cases, you can make use of private safety net insurance (in Dutch) offered by some insurance companies. 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.

Crowdsurance and donation circles

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. They are based on trust and solidarity. 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.

Combining a donation circle with AOV

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.

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.

Questions relating to this article?

Please contact the Netherlands Chamber of Commerce, KVK