Disability and Death: A comprehensive guide on your provision

Did you know that one in four people in Switzerland becomes disabled before retirement age? This alarming statistic is relevant to all of us.

Disability due to illness or accident can strike anyone – often unexpectedly. The financial consequences are usually severe. Many people underestimate the importance of comprehensive disability insurance and the necessity of well-thought-out coverage for the event of death.

At smzh, we understand how crucial tailored protection is for you and your family. We will show you step by step how to ensure optimal coverage against the financial impacts of disability and death.

Let’s work together to develop your personal coverage strategy and secure your financial future.

Understanding basic coverage

Let’s take a closer look at the fundamental structures of disability and death coverage in Switzerland. As your financial experts, we want to provide you with a clear understanding of these important aspects of financial protection.

The three pillars of Swiss pension planning

The Swiss pension system is based on a proven three-pillar concept, which has been enshrined in the Federal Constitution since 1972. The pillars are:

• 1st pillar (AHV/IV): Federal basic provision to cover basic living needs
• 2nd pillar (BVG): Occupational pension to maintain accustomed living standards
• 3rd pillar: Private, voluntary supplementation

Difference between accident and illness

A particularly important aspect in coverage planning is the difference in insurance protection for accidents versus illness. In the case of death due to an accident, the safety nets of the AHV and accident insurance combined cover approximately 80% of the deceased’s lost income.

It’s different in cases of illness-related death. Here, surviving dependents generally receive insurance benefits covering only around 40% of previous income.

Statutory minimum benefits

The statutory minimum benefits consist of several components:

In the case of disability:

• A disability pension if you have at least a 40% degree of disability 
• Child pensions equal to 20% of the disability pension

In the event of death:

• Survivor’s pensions for the surviving spouse amounting to 60% of the retirement or full disability pension
• Orphan’s pensions, amounting to 20% of the full disability or retirement pension

We always recommend that our clients view these statutory benefits as a foundation and supplement them with individual coverage planning. As the differing coverage levels for accidents and illness demonstrate, there can be significant gaps in protection.

Planning financial coverage

Financial coverage planning is about more than just numbers – it’s about your future and your family’s security. Here’s how you can structure your protection optimally.

Conducting a requirement analysis

A thorough requirement analysis is the cornerstone of every successful coverage plan. Our experience shows that more than half of households with a primary earner must reduce their standard of living if that primary earner becomes disabled.

Together with you, we analyze the following aspects:

• Current financial situation and obligations
• Family situation and support needs
• Existing insurance coverage
• Long-term financial goals

Identifying gaps in insurance

The reality is that many people are underinsured. In the event of death due to illness, survivors often receive only around 40% of prior income. Especially critical are:

1. Unmarried couples: More than 50% of couples with children have significant insurance gaps – sometimes up to CHF 73,000 a year .
2. Self-employed individuals: One in six self-employed people is only insured through AHV/IV.
3. High earners: One in four people with a higher income is inadequately insured for accidents, as mandatory accident insurance only covers salaries up to CHF 148,200.

Choosing the optimal insurance combination

Based on our analysis, we develop a tailored insurance strategy, considering:

• Disability income insurance: Secures your standard of living in case of disability
• Life insurance: Provides financial security for survivors
• Supplementary insurance: Closes specific coverage gaps

With our 360° Check-Up, we conduct a comprehensive coverage analysis examining not only retirement but also protection against risks such as illness, death, and accidents. This enables us to precisely cover and provide security for your individual situation.

Optimizing disability protection

Optimal coverage in the event of disability requires a deliberate combination of various insurance benefits. We help you structure your disability protection effectively.

Benefits from IV and occupational pension funds

The Disability Insurance (IV) forms the foundation of disability protection in Switzerland. As the first pillar of social security, it provides basic benefits to individuals with health impairments. IV benefits apply in cases of disability due to accident, illness, or birth defects.

Key benefits include:

• Medical treatment for birth defects up to age 20
• Integration measures for professional reintegration
• Disability pensions with a degree of disability of at least 40%
• Aids such as wheelchairs or hearing aids

The occupational pension fund as the second pillar supplements IV benefits. With a disability degree of at least 40%, you are entitled to a disability pension from the occupational pension (BVG).

Private disability insurance

We strongly recommend that our clients supplement federal benefits with private disability insurance, as statutory benefits often only cover 60–70% of one's previous income.

Private disability insurance offers:

• Increased financial security: Closes the gap between federal benefits and your customary standard of living
• More flexible benefits: Customizable to your needs

• Faster support: Often fewer bureaucratic barriers than in the case of federal benefits

Occupational reintegration

Work reintegration is at the heart of modern disability insurance. According to the principle of "integration before pension," disability insurance supports various measures to help you return to work.

The most important steps for reintegration:

1. Early detection: Prompt notification at the IV office
2. Integration measures: Preparation for occupational measures
3. Retraining: Qualification for new roles, if needed
4. Job placement: Help in finding employment
5. Work trial: Up to 180 days of trial employment with an employer

Integration measures are most effective when initiated early. IV covers not only the costs for these actions but also pays daily allowances during the reintegration period so you can maintain your livelihood.

Planning for death benefits

Financial security for your survivors is a core aspect of comprehensive financial planning. At smzh, we understand that this is a sensitive topic, which is why it’s important to approach it on time and professionally.

Understanding survivors' benefits

AHV survivors' pensions provide basic financial security for your dependents. The following benefits are available:

• Widow's pensions: Women are eligible if they have children or were at least 45 years old and married for at least five years at the time of widowhood
• Widower's pensions: Men are eligible as long as they have children under 18 years of age
• Orphans’ pensions: Paid until the child’s 18th birthday, or up to age 25 if still in education

The amount of the pension is determined by the period of contributions and average income. In the event of death before the age of 45, a career supplement is granted.

Utilizing death benefit capital effectively

Death benefit capital is an important form of support for dependents. We particularly recommend this coverage for:

• Families with high financial obligations
• Self-employed individuals lacking comprehensive occupational pension solutions
• Individuals with mortgages or other debts

This capital is paid out as a lump sum to enable dependents to cope with immediate financial challenges.

Optimizing beneficiary designation

The beneficiary designation determines who is entitled to pension assets and in what order. We help you structure this optimally:

Statutory order:

1. Spouse/registered partner
2. Direct descendants and supported persons
3. Parents
4. Siblings
5. Other heirs

Of special importance is the rule for cohabiting partners: They can benefit each other, even if they haven’t been together for five years yet – but this must be communicated in writing to the pension fund.

We recommend a regular review of beneficiary designations, especially upon:

• Marriage or divorce
• Birth of children
• Changes in life partnership
• Asset accumulations or losses

Statutory mandatory portions must always be respected. Since the inheritance law reform of 2023, death benefit capital is no longer part of the estate, but it is included in calculating mandatory portions.

With our expertise, we help you find a legally sound and fair solution that meets your wishes and complies with legal requirements.

Preparing legal documents

Legal protection is a key building block of your personal coverage. At smzh, we support you in preparing all necessary documents professionally and securely.

Creating a power of attorney for incapacity

A power of attorney allows you to determine who will represent you in the event you become incapacitated. We strongly recommend drafting this important document as early as possible, since it can only be created while you are capable of judgment.

Key elements of a power of attorney:

• Personal care (welfare and medical decisions)
• Asset management (administration of income and assets)
• Legal representation (dealing with authorities and private counterparts)

The power of attorney must be either entirely handwritten or notarized. We recommend storing the document in an easily accessible place and informing the designated person where it is kept.

Drafting an advance care directive

With an advance care directive, you specify which medical treatments you wish to receive or refuse in certain situations. This ensures your will is respected even if you can no longer express yourself.

Key aspects of an advance care directive.

• Specify desired and refused treatments

• Appoint a representative for healthcare-related decisions
• Review regularly (recommended every two years)

The advance care directive should be dated and handwritten or signed. We recommend consulting healthcare professionals to ensure that all relevant aspects are fully addressed.

Updating your will

A will is not a static document – it should be reviewed regularly and updated as needed. This is especially important since 2023, when the inheritance law reform introduced new rules for statutory portions.

Options for updating your will:

• Minor amendments: Handwritten margin notes with date and signature
• Major amendments: Separate supplement or new will
• Revocation: Destroying the old will or creating a new one

When preparing and updating your will, we apply the following formal requirements:

1. Handwritten or notarized documentation
2. Date and signature
3. Clear phrasing of instructions
4. Precise designation of beneficiaries

We recommend regularly reviewing your will, especially upon key life events such as:

• Marriage or divorce
• Birth of children
• Acquisition of real estate
• Significant changes in assets

With our expertise, we ensure that your legal documents remain up-to-date and secure. We support you throughout the entire process, ensuring your wishes and intentions are implemented clearly and effectively.

Checklists for emergencies

In today’s digital world, systematic organization of your emergency documents is more important than ever. At smzh, we help you organize your critical documents professionally and keep them readily accessible at all times.

Organizing important documents

We recommend the following steps for optimal document organization:

• Gather all necessary records
• Digitize important documents
• Store securely
• Set access permissions
• Update documents regularly

Creating an emergency folder

A well-structured emergency folder is vital, especially for people with existing health conditions or disabilities. The folder should include:

• Personal documents and IDs
• Medical information and details on potential allergies
• List of current medications
• Contact details of doctors and relatives
• Insurance policies and contracts
• Powers of attorney and advance care directives
• Bank account details and asset overviews

Accessibility is particularly important in emergencies. Store the folder in a known place and ensure at least one trusted person is informed of its location.

Securing access credentials

For digital emergency access, you can appoint a trusted person who can access your essential documents when necessary. Access can be provided to individual documents or entire folders depending on your preferences.

We recommend checking and updating all stored information regularly, especially after any changes in personal or health circumstances. This is especially crucial for individuals with chronic illnesses or disability due to illness, as current medical details are particularly important.

Taxes and wealth planning

Tax optimization is a key component of financial planning for disability. As your financial experts, we help you optimize your tax situation and transfer your assets efficiently.

Tax optimization in case of disability

Disability opens unique tax-planning opportunities. Illness- and accident-related expenses that are not covered by insurance and exceed 5% of net income can be deducted from taxable income.

Especially important: Disability-related expenses can be wholly deducted from taxable income. These include:

• Costs of assistance and care
• Transportation costs related to medical treatments
• Costs of aids and their maintenance
• Costs of disability-related renovations
• Costs of therapy and medical treatment

Recipients of helplessness allowance are entitled to the following standard deductions:

• CHF 7,500 for severe helplessness
• CHF 5,000 for moderate helplessness
• CHF 2,500 for minor helplessness

Planning your estate

Well-planned estate planning is especially important for those affected by disability, or their loved ones. We recommend starting the process early to ensure that all desired recipients are adequately taken care of.

Key steps in estate planning:

1. Inventory: Identify all assets and liabilities
2. Family situation: Analyze the needs of all parties
3. Marital property division: Clarify asset allocation for married couples
4. Beneficiary designation: Define heirs and their portions
5. Tax optimization: Utilize tax allowances and planning options

Regulating wealth transfer

When transferring assets during your lifetime or upon death, various tax considerations must be observed. Capital payments from redeemable private life insurance are generally tax-free, except for vested benefits policies.

Special considerations include:

• Tax-free capital payments in case of death and permanent disability
• Taxation of back payments of pensions at a reduced rate
• Withholding tax considerations for foreign nationals

For lifetime transfers we can use various instruments:

• Gifts: Tax-efficient transfer of assets
• Advance inheritances: Directed distribution of assets with accounting
• Usufruct rights: Transfer with reserved use

For optimum tax planning, ensure all wealth transfers are properly documented. We recommend a written inheritance contract or will to legally ensure your intended distribution.

In estate planning for pensioner populations, special rules apply. Transferring a population due to the termination of an affiliation contract covering actively insured individuals and pensioners is governed by affiliation change provisions.

Our expertise helps you navigate the complex tax and legal aspects of asset transfers. We always take your unique situation into account and develop tailor-made solutions that fit your needs and goals.

Regular review

A regular review of your coverage is essential for lasting financial security. As your financial experts, we help you ensure your coverage is always aligned with your current circumstances.

Annual coverage check

We recommend a structured annual coverage check that includes:

1. Review of insurance coverage
• Analyze current sums insured
• Compare with actual needs
• Identify coverage gaps
• Adjust benefits as needed
2. Review occupational pension documents
• Check your pension statement
• Review contributions
• Analyze expected benefits
• Calculate potential buy-in opportunities
3. Evaluate private coverage
• Review pillar 3a contributions
• Analyze investment strategy
• Optimize your tax situation
• Adjust savings rates

It is especially important to consider current price developments. As of January 1, 2025, survivor and disability pensions in the mandatory second pillar were adjusted. Pensions in payment since 2021 were increased for the first time by 5.8%.

Adjustments in the event of life changes

Certain life events require an immediate review and adjustment of your coverage:

Family changes:

• Marriage or divorce
• Birth or adoption of a child
• Death in the family
• A partner reaching retirement age

Professional changes:

• Job change
• Self-employment
• Part-time work
• Unemployment

Financial changes:

• Purchase of real estate
• Inheritance
• Gifts
• Asset growth or loss

Together with you, we review how these changes impact your coverage. This is particularly important in the case of disability due to illness, as additional coverages are often needed.

Keeping documentation up to date

Regularly updating your protection documentation is essential. We recommend reviewing the following at least once a year:

Insurance policies:

• Review coverage amounts
• Update beneficiaries
• Update personal information
• Document any changes

Powers of attorney and directives:

• Check for up-to-date status
• Adapt to new life circumstances
• Ensure documents are accessible
• Inform the authorized persons

Financial records:

• Update your asset overview
• Document investments
• Review your tax return
• Archive important records

Very few people in Switzerland know how they and their families are protected in the event of disability or death. Individuals between the ages of 25 and 50, in particular, should regularly analyze their coverage situation and determine what protection is in place for emergencies.

With our expertise, we support you in the regular review and update of your coverage, ensuring that your protection is always optimally aligned with your current circumstances and that you and your family are well protected.

Conclusion

Financial security in the event of disability or death requires careful and comprehensive planning. Our experience shows that a well-crafted coverage strategy makes a decisive difference for you and your family.

The right combination of federal benefits, occupational pensions, and private coverage protects you from financial hardship. A regular review of your risk coverage and timely adjustments to life changes are of utmost importance in this regard.

With professional advice and the right coverage solutions, you create the necessary security for yourself and your loved ones. Let us work together to develop your personal protection strategy and optimally secure your financial future.