Work incapacity insurance in five questions and answers

Today in Belgium more than 600,000 employees benefit from collective insurance to guarantee their income. This is considerably more people than a few years ago. More and more companies are including this cover in their remuneration package. Why has this trend developed? And what precisely does this insurance cover? All you want to know, in five questions and answers.

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Why is this insurance gaining in popularity?

Anyone who is confronted by a serious accident, a disease like cancer or a psychological ailment, knows they can depend on benefit payments from their health insurance fund. The only thing is that the benefit payments are less than your normal income. Employees receive a maximum of 60% of their gross pay with a capped limit of 88.19 euro per day. If they are ill for more than a year, then the benefit payments depend on their family situation. For a couple with two incomes, in practice this will mean they will only receive 40% of their capped gross pay.

In other words, those who suffer from a protracted ailment, often have to make up the financial shortfall themselves. This can happen to anyone. We are becoming increasingly aware of this fact. Research has shown a disturbing rise in people with long-term illnesses. At the end of 2018, more than 400,000 people in Belgium had been off sick at home for more than a year. These figures have ensured there is a greater awareness. An ever-increasing number of people want to cover themselves against this. Insurers are therefore presenting their products and employers are shouldering their responsibilities.

What does a guaranteed income policy involve exactly?

Work incapacity insurance makes up for lost income in the case of a long-term absence from work due to illness or an accident while not at work. In other words, the insurance ensures there are additional payments above and beyond sick pay from social security, to (partially) make up for any shortfall in normal pay.

An important aspect in this type of insurance is the concept of financial work incapacity. This is the degree to which the ailment has an impact on the ability of the insured individual to earn an income by means of their current job. Take for example an accident in which someone loses a finger. The financial effect of being incapacitated for work will be quite different for an office administrator than for a pianist.

What happens when an employee is ill?

There is an initial qualifying period when an employee is ill. During this period the insurer does not make any payments. The length of the qualifying period depends on the policy but is normally at least one month. During the first month of absence, the employer pays a guaranteed amount of the employee’s salary.

If the employee is off sick for longer than the qualifying period, the insured employee fills in a claim form with their doctor. Based on this claim form which may possibly be accompanied by medical reports or additional information, the insurance doctor will determine the degree of financial incapacity. The minimum degree of incapacity varies from insurer to insurer, but a rule of thumb is that payments will be made when the degree of financial incapacity is 25% or more.

The insurance doctor will also check whether or not the ailment is excluded under the conditions of the insurance policy. Thus, the insurer will normally not pay out when there is any question of alcohol abuse. Another common exclusion is a pre-existing condition. This is when the insured person becomes incapacitated for work due to an ailment that they already had, within one year of taking out the insurance.

Please be aware, the insurance doctor is independent and does not work for the health insurance fund. Thus, it may be the case that an employee will receive sickness benefit from their health insurance fund but cannot count on additional payments from their insurer.

How long do payments go on for?

As well as assessing the degree of work incapacity, the insurance doctor will also estimate how long the ailment will last. Where possible, employees are expected to return to work after a certain period. Thus, the doctor could declare an employee to be 100% incapacitated for work for six months but would then gradually reduce their degree of incapacity. This means the employee would be able to gradually resume their work activities.

Most of the guaranteed income insurance policies apply up to pensionable age (65). People who are no longer able to work after an accident or illness can be assured of receiving a guaranteed income for the remainder of their working career.

Why do I need to take out a guaranteed income insurance policy?

For employees, the benefits are obvious. When someone is struggling with health problems, they have enough on their plate to deal with. Good work incapacity insurance takes away any financial worries. But employers also have an interest in taking out a collective policy for their staff. As this type of insurance has increasingly become the norm, not offering it as part of the remuneration package is seen as a disadvantage. Work incapacity insurance offers a clear and objective benefit in cases of employees who are on long-term sick leave.

Foto evelyne
Evelyne Lauwers
Deputy Director Health Care Consultancy

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