Disability insurance

What it means

Disability insurance, together with old-age insurance, forms part of pension insurance in the social insurance system. It covers the risk that a person loses part or all of their ability to earn because of a long-term adverse health condition.

It pays a disability pension when the ability to work drops by more than 40 percent and the insured person has the required years of insurance for their age. The amount depends on the degree of reduction, the assessment bases and years worked, and the benefit is paid by the Social Insurance Agency.

Contributions are paid by employee and employer on the assessment base, and likewise by compulsorily insured sole traders and voluntarily insured persons. They are part of the monthly contributions and appear as a separate line on the payslip.

How it works in practice

In payroll we watch for cases where disability insurance is not paid. Recipients of an old-age pension do not pay it, nor do disability pensioners once they reach pension age, so when employing pensioners contributions must be set up correctly in the payroll software.

A sole trader becomes liable for disability insurance together with the other branches once compulsory social insurance begins. Those below the threshold can insure voluntarily and so keep their entitlement in case of disability.

A disability pension from social insurance differs from compensation after a workplace accident, which is covered by accident insurance paid by the employer. When an employee has health problems we therefore check whether it is an occupational disease or a work injury, because the entitlements differ significantly.

What to watch out for

Entitlement to a disability pension depends on the period of insurance. Younger people need only a few years, older people more, and a gap without insurance, such as trading below the threshold without voluntary insurance, can defeat the claim. Gaps in insurance are worth tracking as they arise.

A disability pensioner may work and the employer pays contributions for them, although exceptions apply to some work agreements and low incomes. When employing people with disabilities the company may be entitled to subsidies, so the conditions are worth checking before they start.