Last modified:Thursday 31 October 2019
Being your own boss has many advantages, but it also means that you are not automatically protected by an employer. It’s up to you to get the cover you need. There isn’t any compulsory insurance in this respect, but you might want to consider a number of options.
The average pension for the self-employed is 1,282 euros per month if you worked for 45 years. If you want to enjoy your retirement, you should work out an action plan... or take out insurance.
Voluntary Supplementary Pension for the Self-Employed (VSPS/VAPZ)
This safe and fiscally advantageous savings scheme allows you to receive a supplementary amount on top of your statutory pension when you retire. To save up that amount, each year, you deposit your own chosen amount: minimum 100 euros - maximum 8.17% of your net income over the past 3 years.
Who is it for?
Self-employed professional in main occupation or secondary occupation – provided that you pay the same social security contributions as a self-employed person as a main profession and have been active for three full calendar years. Assisting spouses (max. status) may also contribute to the VSPS/VAPZ.
Good to know: the premiums are fully deductible as a professional expense. So, fewer taxes, more pension.
With this more extensive VSPS/VAPZ insurance cover, you also receive compensation in the event of incapacity for work or disability. The maximum amount that you can save is also higher (9.4% of your net income of 3 years ago) than with a standard VSPS/VAPZ insurance.
Pension agreement for the self-employed (PAS/POZ)
This supplementary insurance gives you the opportunity to set aside even more money for your retirement on top of a VSPS/VAPZ. This allows you to reach a pension level comparable to that of a wage earner. Note that the PAS/POZ is fiscally less attractive than the VSPS/VAPZ.
Who is it for?
The new scheme is intended for sole traders and independent professionals. Self-employed professionals in a secondary occupation, assisting spouses and independent helpers also qualify under certain conditions.
Individual Pension Commitment (IPC/IPT)
For self-employed individuals who are established as a company, this is a good way to accrue pension beyond the ceiling of a VSPS/VAPZ. The premium is fully deductible, but in the corporate tax. The 80% rule applies to the maximum premium. In other words, together, the statutory and supplementary pension cannot exceed 80% of the self-employed individual’s last annual net business income.
Good to know: this insurance is solely intended for managers of a company. One of the requirements is that you receive a monthly wage.
Taking a lot of risks is fine, but it should not be with your health. That is why everyone has compulsory health insurance. However, hospital stays are not fully covered by the basic insurance scheme, even though those are the costs that can run high. By taking out an optional hospitalisation insurance, you make sure a hospital stay won’t be a prohibitive experience. Should you be hospitalised because of an accident, illness or the birth of your child, the hospitalisation insurance covers the hospital costs that are not reimbursed by your basic insurance.
As a self-employed professional, you depend largely on your own availability to keep your business running. But what if you are unable to work as a result of an illness or an accident? Your income will soon dry up. After a few weeks, you will receive a fixed daily amount from your health insurance fund, but that financial support will not be sufficient to maintain your standard of living.
What does the insurance entail?
The optional guaranteed income insurance gives you an additional benefit to supplement the payment made by your health insurance fund. The so-called own risk period and additional guarantees vary from insurer to insurer. Always gather enough information on the terms and conditions of this insurance before you commit.
Good to know: the premiums are deductible as professional expenses.
Something you would rather not think about: what will happen to your loved ones when you die? The life insurance cover ensures that the beneficiary you have chosen will receive an amount to cover any money issues or payable inheritance taxes. You will determine that amount in consultation with the insurer. You can still change the insured amount and the name of the beneficiary at a later date.
Good to know: in many cases, you can take out this insurance together with your partner. Should one of you die, the surviving insured partner will then receive the agreed amount.
Liability cover for directors
As a director, manager, management member or board member of a company or non-profit organisation, you certainly bear some responsibility: you can be legally liable for professional mistakes or negligence that cause damage to companies, non-profit organisations and third parties. In that case, you are personally or jointly and severally liable – in the case of a mistake by a felllow director – and creditors may claim your private assets.
Not a pleasant thought, wouldn’t you say? With an optional civil liability insurance for directors, you protect yourself against third-party financial claims if they ever hold you liable. And your private assets remain out of reach.
You have many options, maybe too many. If you can no longer see the forest for the trees, get advice from other self-employed professionals or entrepreneurs. This will save you from making impulsive decisions, as this may cause you to be under or over insured.