Invalidity: a provident policy to supplement the Health Insurance pension – Accidents of life and illnesses

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In the event of disability, will you still be able to support yourself and those of your loved ones? The disability pension paid, under certain conditions, by health insurance may be insufficient to cope. It may therefore be necessary to take out disability insurance in order to maintain a certain level of income. Explanations.

Take out pension insurance? We don’t always think about it. For most of us, we are convinced that the Health Insurance pension will cover the losses suffered in the event of a partial or complete reduction in the capacity to work. However, it is not the case. This pension exists, of course, but its amount remains relatively low. With some differences depending on whether you are employed or self-employed.

Disability: what coverage by health insurance?

What does health insurance provide for disability cover? With the aim of compensate for the loss of income resulting from the reduction in working capacitythe amount of the disability pension depends on two main criteria:

  • the disability category assigned to you,
  • your income.

The invalidity pension can be granted at the initiative of Social Security or at your request. In the latter case, it is your general practitioner who will be able to determine the category of invalidity to which you are entitled. These categories are determined according to your capacity to exercise a professional activity.. This assessment is communicated to the medical adviser of your health insurance fund. If you are an employee, you will be classified in one of three existing disability categories:

  • 1D category: you are capable of exercising a professional activity
  • 2e category: you can no longer exercise a professional activity
  • 3e category: you can no longer exercise a professional activity and you need the help of a person to assist you in the essential gestures of everyday life.

Revenues: the 10 best years taken into account

Second criterion for determining the amount of the disability pension: the salary. Health insurance takes into account the average annual income of the 10 best years of activity (as long as it is subject to contributions, within the limit of the annual social security ceiling). To this average income is applied a rate defined by the disability category:

  • 30% of the average annual salary if you are in 1D category
  • 50% of the average annual salary if you are in 2e category
  • 50% of the average annual salary + increase for third party if you are in 3e category.

To these rates are added a minimum monthly amount and a maximum monthly amount. The minimum amount is set at €297.20 for 2022, while the maximum does not exceed €1,714 (+ €1,126.41 increase for third party on 1er April 2021). Note that when the disability is preceded by a work stoppage, which is often the case, the employee concerned is generally covered by the work stoppage until 1095e day (corresponding to 3 years) and begins to receive the invalidity pension at the end of the work stoppage compensation. The work stoppage itself is often the result of an incapacity for workwhich is different from a disability.

Independent professions: three categories of disability

For independent professions, the system is of the same nature, but with some differences. The three categories of invalidity are respectively replaced by the following pensions:

  • pension for partial occupational incapacity (PIPM), for people able to carry out a remunerated professional activity
  • pension for total and permanent disability (PITD), for people who can no longer exercise a professional activity
  • PITD + Increase for a third party, for insured persons who can no longer exercise a professional activity and need the help of a person to assist them in the essential gestures of everyday life.

The amount of the pension is also calculated on the basis of the 10 best years of activity. At 1er April 2021, the ceilings are €1,714/month, to which is added, where applicable, the increase for a third party (€1,126.41). These monthly amounts are revalued each year.

Provident insurance to supplement the disability pension

With a maximum of €1,714 gross per month, it is understandable that some people consider the disability pension insufficient to meet current expenses. This is the reason why taking out insurance can be relevant. The main advantage of disability insurance is precisely to compensate for the decrease in income. The person concerned can then receive a disability pension, in addition to the disability pension from the Health Insurance. Paid until the date of retirement, this annuity makes it possible to reach up to 100% of the last earned income received.

It is still necessary, of course, to have contributed. There are two types of possible contracts:

  • the collective contract, signed by the company with an insurer.
  • the individual contract (for employees or self-employed workers).

Benefit from collective disability insurance

Unlike complementary health insurance, the employer has no obligation to set up a provident fund. Today, only the death guarantee is compulsory for executive employees. Such a contract can still be binding if the collective agreement or a branch agreement so stipulates.

Apart from these obligations, some employers take the initiative to offer collective disability insurance, which still enjoys a favorable reception from employees. A significant advantage in the perspective of recruiting or retaining employees. The contributions are then totally or partially paid by the employer. According to the CTIP (Technical Center for Provident Institutions), 13.8 million employees are covered by a disability guarantee (2018 figure), i.e. more than half (54%) of French employees.

Individual disability contribution: what conditions?

What to do when you do not benefit from collective disability insurance? In such a case, it is possible to subscribe individually with a mutual insurance company, a provident institution or an insurer. As with death-funeral guarantees, it is important to choose your individual guarantees carefully. According to this choice, the contract can cost from €10 to €100 monthly.

There is no good or bad pension contract. Coverages simply need to be tailored to your needs. First, take stock of the disability guarantees you may already have, for example through your borrower insurance (linked to your mortgages). This usually includes disability coverage. This is also the case with the insurance you benefit from through your credit card, you have to compare them with each other. In any case, the level of coverage cannot be higher than that of the income received in activity.

Which pension calculation method?

The amount of the pension is determined according to the degree of disability recognized by the insurer. But each organization can apply its own scale for calculating this rate and remains free to define the level of disability according to its own criteria. It generally takes into account the following two levels of disability:

  • functional disability (decreased physical or mental capacity). It determines the impairment of physical and mental functions and measures the rate of impairment in everyday gestures. This rate ranges, for example, from 5% for the loss of a finger (excluding the thumb) to 80% for the occurrence of paraplegia.
  • occupational disability (total or partial loss of the possibility of exercising the profession declared on joining the contract). The determination of the professional invalidity rate appears in the general conditions of the insurance contract. This rate is assessed according to the professional activity carried out.

In most cases, insurers use a cross scale, which takes into account these two categories of disability. However, below a certain degree of disability defined in the contract (33%, most often), no benefit is paid.

PTIA, IPT and IPP guarantees

In detail, the disability insurance is deployed around three guarantees:

  • The PTIA guarantee (Total and irreversible loss of autonomy). It concerns the highest disability and completes the disability pension of the Health Insurance so that the insured person regains his level of income prior to his disability (rate of 100%)
  • IPT guarantee (total permanent disability). His degree of disability must be at least 66%, which means that the insured faces a reduced working capacity of at least two thirds
  • IPP guarantee (Permanent and partial invalidity). It applies from the moment the insured person’s degree of disability is between 33% and 66%.

Before subscribing to a pension contract, it is therefore essential to check what is the guarantee rate offered by the organization, in particular for IPT and IPP guarantees. The future level of disability income of the insured greatly depends on the determination of these rates, which may vary from one insurer to another. The cross table of guarantees appears in the general conditions of the contracts.

  • Felix Marshal
  • Photo credit: Getty Images

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