Entrepreneurs: YEL insurance provides security if you fall ill

Many self-employed persons feel that they cannot afford to be ill. Falling ill is especially hard for those who work alone without any hired employees as there will be nobody to stand in. When the business stands still, no money comes in. Fortunately, entrepreneurs are entitled to apply for sickness allowance paid by Kela in order to cover the loss of earnings during the period of illness.

The many-sided functions of YEL insurance are discussed by Elo’s specialists in a series of articles. In this second article, Kristiina Sandén, Business Affairs Specialist at Elo, explains what advantage entrepreneurs will gain from their YEL insurance in the case of illness or declined work ability.

A self-employed person’s sickness allowance is based on the YEL income

Kela determines the amount of sickness allowance paid to an entrepreneur on the basis of the annual income. The annual income is calculated for a reference period of 12 calendar months prior to the calendar month that precedes the start of the entitlement to the benefit. For entrepreneurs, the income confirmed for the YEL insurance policy serves as the basis for calculating the annual income. If the amount of YEL income has changed during the 12-month-period in question, the average YEL income over the period will be used. If, in addition to the entrepreneurial activities, the self-employed person is engaged in paid work, the annual income will include both the YEL income and the salary/wages from the employment. The annual income does not include the pay actually received from one’s own company, or the amount of earned income from business activities.

Use our YEL calculator to estimate how the YEL income amount will affect your pension, social security and insurance contributions >

“For a self-employed person insured under YEL, the waiting period consists of the day of falling ill. If you work as an employee or are engaged in small-scale entrepreneurial activities without the obligation to take a YEL insurance, the waiting period consists of the day of falling ill plus the following nine working days”, Sandén explains.

Support from vocational rehabilitation in case of declined work ability

Sickness allowance paid by Kela will help an entrepreneur to get over a short-term disability. However, sometimes disability is prolonged, making it impossible for an individual to continue in current work tasks. In such cases, a self-employed person covered by YEL insurance has the opportunity to apply for vocational rehabilitation or, ultimately, disability pension. It is possible to apply for vocational rehabilitation already before the sickness allowance period begins, and it is not too late to submit an application while receiving rehabilitation benefit.

“Sometimes entrepreneurs say that, instead of paying contributions to pension insurance policies, they rather choose to save or invest their money for future retirement. However, it is not possible to forecast how much savings they might have gathered before facing a sudden occurrence of illness or disability. You should not consider the YEL insurance policy simply as a pension scheme but also as the provider of security prior to your retirement”, says Sandén.

Entrepreneurs define their own social security

As compared to wage-earners, entrepreneurs are in a different and unique position: they have both the freedom and responsibility to define the level of their own social security. If an entrepreneur falls seriously ill, the YEL income confirmed for the YEL insurance policy will affect, not only the sickness allowance paid by Kela, but also the amount of rehabilitation benefit and disability pension.

“It’s therefore vital for entrepreneurs to understand the versatile impacts of the YEL income and take them into consideration when determining their own YEL income”, Sandén stresses.

The easiest way to update your YEL income is to use Elo’s Online Service. You can also call Elo’s Customer Service to adjust your YEL income. It is advisable to update the YEL income without delay since no changes can be done retrospectively.

Use our YEL calculator to estimate how the YEL income amount will affect your pension, social security and insurance contributions >

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