We are frequently asked to provide information about setting up a business. The entrepreneur to be is making a pros and cons valuation about whether or not to quit the job and jump in the unknown. Two aspects that are very much different from employment and which do not get the attention they deserve are the disability insurance and the liability insurance.
Social insurance employee
An employee earns a gross salary agreed upon. The employer withheld wage tax and some social premiums that are due by the employee. On top of this, outside the view of the salary specification the employer pays additional contributions to the Dutch tax office. Among which the unemployment and disability social premiums.
The disability social premiums due by the employer vary in line with the hazardous of the employment. A save desk job does have risks, but much less than construction work. That is also the reason why you see a lot of ZZP (self employed persons without employees) in the constructions industry, but also among painters doing house maintenance etc. The simple reason is that the social premiums are too high to employ employees, but at the same time understandable.
Disability insurance entrepreneur
Setting up your own BV or starting your one man company have at least two aspects in common. You are in both situations not insured for disability and unemployment.
The unemployment issue you could insure, but doing this basically implies you think you will fail. As you should start with the slogan ‘ failing is not an option’ we skip this insurance.
The disability insurance is a whole different ball game. Or as Louis van Gaal put it, a ‘different cook’. The moment you inquire with an insurance company about the premium for such an insurance you will be shocked. The premiums is massive. This should however not stop you.
Massive insurance premium disability
Even if you start up the company and you do not earn so much you should take out this insurance, just to get used to the premium amount. And if you earn more the premium goes up, so it is never nice to initiate this insurance.
The importance of this insurance justifies the premium amount. The moment you have a skiing accident, or you are hit by tram, fall of your bike and you are not able to work, as you are in hospital. What will pay your rent or your mortgage? You can be out of roulation for 2 months or longer and then you could end up losing your house when it becomes clear there is no money to pay for the rent or mortgage.
The stupid aspect of this situation is that you have no influence in the events. It can happen in the next five minutes or maybe never.
Tax deductible disability premium
A relief is that the premium you pay for the disability insurance is tax deductible in your income tax return. Even the managing director of a BV company can chose to either deduct the premium from the income tax return, or take out the insurance in name of the BV and deduct the premium from the BV result.
If you have a good result with the company, the disability premium is 42% or 52% lower than you actually paid. Due to the tax break.
We work in the situation where we address the topic of disability independently. We are not connected to any insurance company. Our information is only in the interest of the entrepreneur. We experience nearly every time we address the topic that the person was not aware of this insurance being necessary to survive in case of physically failure to perform your job.
The disability insurance if of course not an insurance where you make a claim if you have a cold or when you are not able to work for a short period of time. The more you make use of the insurance, the more a liability you become for the insurance company, and that shows in the premium to be paid.