Social insurance in the event of death – what you need to know

WHEN AN ACCIDENT OR ILLNESS IS THE CAUSE

Suddenly, one person is solely responsible for the family’s income, children and household. This problem is especially acute if the family’s main breadwinner dies. A death in the family also raises many critical questions:

• Where does the income come from now to cover fixed costs?
• Can one person alone pay the rent or the mortgage?
• Who will take care of the children if the surviving parent has to go back to work?
• How will we be able to continue saving for the children’s education?
• Does the children’s share of the inheritance need to be paid out to them?

 

In order to answer these questions, sufficient precautions must be taken and safeguards must be put in place. Another important reason to have adequate insurance is to be able to pay for your children’s education. If the family does not have adequate insurance, it may not be possible to pay for university or other further education.

 

 

WHAT THE STATE AND MANDATORY INSURANCES PAY FOR

If a married person dies, their spouse is entitled to certain benefits:

• Survivors receive survivors’ benefits from the AHV. These include pensions for widows, widowers and orphans. These benefits are intended to prevent the family from having financial difficulties. The amount of these benefits is determined by the deceased person’s insured income.
• If the deceased was covered by accident insurance, a pension will also be paid if death was due to an accident. Employers are required to insure their employees against accidents. Self-employed persons are responsible for insuring this risk themselves.
• A person’s pension fund will also pay a pension if death was due to illness.

 

In the event of death as a result of an accident, the total of these benefits must not exceed 90% of the deceased person’s final income, otherwise the amounts are reduced. 

 

SURVIVOR’S PENSION IN DETAIL

Widow’s and widower’s pension (or spouse’s pension): For widow’s and widower’s pensions in the state and occupational pension schemes, couples living in a registered relationship are treated as married couples. A surviving spouse is entitled to a pension if the following criteria apply:

• The survivor is responsible for supporting a child.
• The survivor is more than 45 years old.
• The survivor was married to the deceased for at least 5 years.

 

Entitlement to the widow’s or widower’s pension ends if the person remarries or dies. If these criteria do not apply, the survivor will receive a lump-sum settlement equivalent to three annual pensions.

 

Orphan’s pension: Children of the deceased person are entitled to an orphan’s pension if they are younger than 18 or still in formal education. The marital status of the parents does not play a role here. An orphan’s pension is no longer paid once a child reaches the age of 25.

 

DIFFERENCES IN PENSION COVER: DEATH DUE TO ACCIDENT OR ILLNESS

Death due to accident: Cover under compulsory insurance is better if death is the result of an accident rather than illness. This is also the case with insurance covering incapacity to work. The reason for this is simple: about 80% of all deaths are due to illness, while 20% are caused by accidents. Therefore, the probability that death will occur due to an illness and the associated risk costs for an insurer are a lot higher. Here’s an example: If a person dies in an accident, his or her spouse and children receive benefits totalling a maximum of 90% of the deceased person’s last salary. These benefits comprise the following:

 

The spouse’s pension from pillar 1 is 80% of the disability or retirement pension that the deceased person would have received. The spouse’s pension from accident insurance is 40% of the deceased person’s insured salary. The orphan’s pension is 40% of the disability or retirement pension, and accident insurance pays 25% of the insured salary per orphan and 15% per half-orphan. The maximum insured annual salary for accident insurance purposes is CHF 148,200. People who earn more than that must cover the difference with supplementary insurance.

 

According to Article 29 of the Accident Insurance Act (UVG), the surviving spouse is entitled to a pension if one of the following four points applies:

• if he has his own children who are entitled to a pension when he is widowed. This means that if the deceased wife leaves joint children who are entitled to a pension as a result of her death, the surviving husband receives a pension.
• if he lives in the same household with other children who are entitled to a pension as a result of the death of his spouse. This is to be understood as follows: if the deceased wife has children entitled to a pension and the surviving husband lives with the children in the same household, he is entitled to a pension. These do not have to be the couple’s children: they can also be children from the deceased wife’s previous relationships.
• if he is at least two-thirds disabled, or
• he becomes at least two-thirds disabled within two years of the spouse’s death. For example: if the wife dies in 2023 and the surviving husband becomes two-thirds disabled within two years, he will receive a pension in accordance with the UVG.

This rule also applies to registered partnerships, regardless of the gender of the two people.

 

 

Death due to illness: In this case, the family of the deceased person receives only about 60% of the deceased person’s previous salary. The gap is therefore larger than if death had resulted by accident. The benefits in this case comprise the following:

 

The spouse’s pension from pillar 1 will be 80% of the disability or retirement pension that the deceased person would have received. From pillar 2, the surviving spouse also only receives a portion of the disability or retirement pension according to the respective pension fund statement, namely 60%. The orphan’s pension is 40% of the disability or retirement pension, and under the Law on Occupational Retirement, Surviving Dependants’ and Disability Pension (BVG), each child receives 20% of the deceased person’s disability or retirement pension. The maximum insured annual salary in the event of illness for benefits from the BVG is much lower than in the case of an accident, and is currently CHF 88,200 for the mandatory part of the BVG.

 

 

CLOSING GAPS IN PENSION COVER THROUGH DEATH BENEFITS INSURANCE

With your pillar 3, you can close the pension gaps that may arise in the event of death. A good solution is a death benefits insurance policy. A lump-sum death benefit is paid to the person named in the policy if the policyholder dies. We also recommend that you draw up a will.

 

Do you want to find out more about death benefits insurance? We will be happy to advise you.

Find out more

To what extent are patchwork families, cohabiting partners or divorcees covered in the event of death? This article will explain the answer to this question.

 

Nadia Abdelli outlines what the five most important questions about death benefit insurance are – and answers them in an interview.

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