How to arrange incapacity to work insurance

How does incapacity for work insurance work?

Incapacity for work insurance is designed for employees or self-employed persons (osoba samostatně výdělečně činná, OSVČ) aged between 18 and 65. Based on their salary, policyholders choose a daily benefit to make up for lost earnings from business or employment (from 100 to 1,000 CZK (about 4.6 to 46 USD)) in the event of illness.

When taking out a policy, you can consult a financial adviser, or use an online comparison tool. This will give you an estimate of the sick pay amount. Do not underestimate the situation, especially if you have not built up a sufficient emergency fund. Long-term illness can easily push you into a financial trap.

It is also strictly necessary to choose when benefit payments begin. You can draw the insurance benefit from the 15th, 29th, or 43rd day of illness. The price of the insurance also depends on the waiting period you select. If you choose a shorter waiting period, expect a higher premium. In the case of long-term illness or treatment for a serious injury, you can receive daily benefits for up to 365 days over a two-year period.  

While an employee working under a main employment contract (hlavní pracovní poměr, HPP) is automatically entitled to sick pay when making regular contributions, the situation for a self-employed person (osoba samostatně výdělečně činná, OSVČ) is somewhat different. Their participation in sickness insurance is entirely voluntary.

When the set conditions are met, the following benefits can be drawn from the sickness insurance of a self-employed person (OSVČ):

• sick pay during illness or injury
• maternity benefit (peněžitá pomoc v mateřství, PPM)
• paternity benefit
• carer’s allowance for a household member

It is possible to pay sickness insurance advance payments together with social security. Its rate is 2.1% of the monthly base. For 2021, the minimum assessment base was set at 7,000 CZK (about 320 USD), so the minimum monthly amount for paying the insurance is 147 CZK (about 6.7 USD). If the self-employed person (OSVČ) does not pay the insurance for at least three months, entitlement to sick pay does not arise.

Business owners must carefully consider their situation and decide how they will address an income shortfall. It can be tackled by paying advance payments for sickness insurance, or by taking out suitable insurance for illness or injury.

The situation is similar for expectant mothers who are self-employed (OSVČ). To qualify for maternity benefit (peněžitá pomoc v mateřství), it is essential to have participated in sickness insurance for at least 270 calendar days in the last two years.

Sickness insurance taken out with a commercial insurer allows you to draw benefits after just 14 days of incapacity for work. Another advantage is the option to choose the daily benefit, which you set yourself (up to a maximum of 3,000 CZK (about 140 USD)), thereby deciding on your income during illness. However, you must expect the insurer to verify your income.

💡 Tip: Also read the article: Financial literacy: what is it and how to get started?

Flexi incapacity for work insurance from Kooperativa

Incapacity for work insurance can also be arranged online from the comfort of your home. You can use the web application to submit the documents needed to arrange cover or report an insurance claim. Ideally, an insurance claim must be reported immediately after treatment ends or after rehabilitation from an injury.

To receive an insurance payout, you must provide the following documents:

• Policy number.
• Insured person’s details.
• Description of the insured event, medical documentation.
• For incapacity for work, you must provide Part V of the medical certificate of incapacity for work confirmed by your employer with the date of return to work, or Part II of the certificate (temporary incapacity for work slip).
• Self-employed persons (OSVČ): proof of registration and payments to the district social security administration (okresní správa sociálního zabezpečení, OSSZ), confirmation of receipt of sickness benefits, or confirmation of non-payment of voluntary sickness insurance advances.

How to avoid a reduced insurance payout?

When properly configured, incapacity for work insurance is an effective tool to help you overcome a newly arisen difficult life situation. However, it also has its own rules and limitations that must be respected. When might you run into trouble with policy exclusions? 

Issues may arise in the following cases:

• If the 3-month qualifying period for insurance payments has not been met, or in the event of an injury sustained before the policy is formally taken out or within 7 days of its conclusion.
• If you are on sick leave due to medical complications during pregnancy. Most insurers list this among their exclusions.
• In the case of workplace accidents or occupational diseases. Each insurance company assesses these cases individually and, in some instances, may grant compensation. When arranging your policy, it is worth asking about this issue. Keep in mind that in the case of a proven workplace accident, you are entitled to 100% sick pay.
• For diagnoses related to mental disorders, alcoholism, substance abuse, as well as back problems. Before issuing a policy, the insurer requires an honestly completed medical questionnaire.
• If you report the insured event after the specified deadline or following a change of employment and income.
• In the event of a proven suicide attempt by the insured person.
• If the insured person actively participates in sports at a professional level, or under extreme conditions.
• You cannot claim benefits under this insurance during a stay in a spa or convalescent facility unless it directly constitutes rehabilitation for the treatment of a serious illness or injury.

Before deciding to take out the optimal incapacity for work insurance, carefully consider what problem it solves for you. If you can effectively fund this from your own resources, opt for an alternative investment instead.

If you decide on a sensible combination of life insurance with supplementary cover, you may be able to negotiate an attractive discount. A financial adviser will outline your options, but the cover must always be based on the client’s current financial and health situation. This ensures that the policy covers the areas that genuinely need protecting. Comparing policies from different insurers or using a comparison site can be helpful.

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