The Dutch disability insurance (AOV) is an insurance designed to guarantee an income for self-employed people in case of disability. If you are insured and unable to work due to illness, injury or disability, the AOV provides financial support.

The AOV works through a periodic payout, usually in the form of a monthly payment, designed to compensate for loss of income. 

Self-Employed Safety Net

The purpose of the AOV is to protect entrepreneurs from the financial consequences of long-term disability. It allows entrepreneurs to continue paying fixed expenses and maintain an income even if you are unable to work. It can be an important part of the financial plan as a self-employed person to protect yourself as well as your family from loss of income due to disability.

When you are starting your business, an AOV may not be the first thing you think of. But for self-employed people, there is no social safety net like there is for regular employees. If you become unable to work you risk losing your income. This can have major financial consequences as there is no employer to continue paying a salary in case of illness or disability.

Level of the Premium

Several aspects are considered when you sign up for an AOV. First of all, your profession as a self-employed person is considered. Some professions have a higher risk of disability than others, and this can affect the amount of premium to be paid. Occupations considered physically demanding or high-risk, such as construction workers, may typically have higher premiums than lower-risk occupations.

It also looks at the desired amount insured, which is based on the income you want to protect, similar to the 70% of unemployment benefits. The self-risk period is also determined, which is the period after the start of disability in which no benefits are received yet. Thus, it may take a month or two before your insurance kicks in. The longer the self-risk period, the lower the premium usually is. Furthermore, your age may also affect the premium. In general, the higher the desired insured amount and the more comprehensive the coverage, the higher the premium will be.

Not just Physical

It is important to stress that the AOV is not only for physical disability, but also for long-term illnesses, mental health problems and other limitations that affect the ability to work. Some AOV providers even take into account family expansion, allowing you to get paid out in case of pregnancy. The aim of the AOV is to provide entrepreneurs with the necessary financial stability in times of incapacity, so that as a self-employed person you can focus on your recovery without having to worry about your income.

Additional Services

Some AOVs offer additional services besides the financial benefit. These could include guidance on reintegration or advice on health and prevention to reduce the risk of disability. These additional services can be valuable for the insured as it provides not only financial protection, but also support for recovery and return to work.

Fiscal Benefit

Finally, it is useful to mention that AOV premiums can often be declared as an income tax deduction. This can provide an income tax advantage for self-employed people. Declaring AOV premiums as a deduction reduces taxable income. As a result, less income tax is paid, resulting in lower overall taxes. 

Specifying AOV premiums as a deduction often requires certain conditions to be met. In the Netherlands, for example, the following conditions apply:

1. The AOV must be purely income insurance, aimed at replacing lost income in case of disability. Other insurances, such as accident insurance or health insurance, do not qualify.
2. The AOV must have been taken out to maintain income from a business, profession or activities.
3. Premiums must have actually been paid and can be proven with proof of payment.
4. Premiums must be deducted in the year in which they were paid.

While reporting AOV premiums as a deduction can provide a fiscal benefit, it is important to stress that the benefits of an AOV go beyond tax savings. An AOV provides financial protection and peace of mind in the event of incapacity for work, enabling you, as a self-employed person, to maintain your livelihood and continue paying financial fixed expenses even if you are unable to work.