Social Insurance
Social Insurance: 4 technical terms explained – definition, synonyms and legal basis.
Unemployment Insurance (ALV)
Synonyms: ALV, Arbeitslosenversicherung, AVIG
The ALV is the Swiss social insurance scheme that pays daily allowances to insured employees in the event of involuntary unemployment, short-time work, weather-related work stoppages, and employer insolvency.
Concept
Unemployment insurance (Arbeitslosenversicherung, ALV), based on the Unemployment Insurance Act (AVIG), is a mandatory social insurance scheme for employed persons in Switzerland. It is designed to provide reasonable compensation for loss of earnings due to involuntary unemployment and to promote reintegration into the labour market through active labour market measures. In addition to standard unemployment benefits, the ALV also covers loss of earnings due to short-time work, weather-related work stoppages, and employer insolvency (insolvency compensation).
Eligibility and Benefits
Entitlement to unemployment benefits requires a minimum contribution period within a reference period, availability for work, and registration with the Regional Employment Centre (RAV). The daily allowance is calculated based on insured earnings and generally amounts to 70 to 80 percent thereof, with the entitlement period limited depending on contribution history and age.
Relevance for Insurance Practice
Since the ALV does not protect against loss of earnings due to illness or accident and its replacement rate is capped, private continued-salary and loss-of-income insurance regularly supplements ALV benefits within individual financial planning.
Qualifying Salary (Anrechenbarer Lohn)
Synonyms: Anrechenbarer Lohn, AHV-Lohn
The qualifying salary is the gross salary recognised under the AHV Act, on the basis of which contributions to the first and second pillars, as well as the coordinated salary, are calculated.
Concept
The qualifying salary (also called AHV salary) is the gross salary recognised under the Federal Act on Old-Age and Survivors’ Insurance, on the basis of which the obligation to contribute to the first pillar (AHV/IV/EO) is calculated. It generally comprises all salary components arising from an employment relationship, including bonuses, commissions, and benefits in kind, with the exception of certain legally defined exemptions (e.g. expense reimbursements).
Relevance for the Second Pillar
The qualifying salary also serves as the starting figure for calculating the coordinated salary under occupational pension provision: the coordination deduction is subtracted from the qualifying salary to determine the portion of salary to be insured under the second pillar.
Relevance for Insurance Practice
Correctly determining the qualifying salary is fundamental both for employers’ contribution accounting with the compensation office and for calculating all salary-dependent social insurance benefits (pensions, daily allowances).
Loss of Earnings Compensation Scheme (EO)
Synonyms: EO, Erwerbsersatzordnung
The EO is the Swiss social insurance scheme that pays a daily allowance to compensate for lost earnings during military and civil protection service, maternity, and other defined care situations.
Concept
The loss of earnings compensation scheme (Erwerbsersatzordnung, EO) is organisationally and financially closely linked to the AHV and is designed to provide employed persons and trainees with reasonable compensation for income lost during certain legally defined periods of service or care. Originally conceived to cover loss of earnings during military, civil protection, and civilian service, the EO has been progressively expanded in recent decades to include maternity compensation, paternity compensation, and care compensation for parents of severely ill or injured children.
Benefits
EO compensation is paid as a daily allowance, the amount of which is calculated as a percentage of average earned income prior to the service or birth, subject to a maximum amount. The entitlement period varies depending on the type of benefit (e.g. 14 weeks for maternity compensation).
Relevance for Advisory Practice
EO benefits must be taken into account in the needs analysis for loss-of-income and income protection products, as they cushion temporary coverage gaps during military service, maternity, or care situations, but regularly do not fully compensate for the previous loss of earnings.
Military Insurance (MV)
Synonyms: MV, Militärversicherung
Military insurance is the Swiss social insurance scheme that covers members of the armed forces, civil protection, and other persons subject to service obligations against the health and economic consequences of harm suffered during service.
Concept
Military insurance (Militärversicherung, MV) covers members of the Swiss armed forces, civil protection, civilian service, and other groups subject to service obligations against the health and economic consequences of illnesses and accidents that occur during, or are caused by, service. It is administered by Suva on behalf of the federal government and is organisationally distinct from mandatory accident insurance under the UVG, even though both systems provide some similar types of benefits.
Benefits
Military insurance covers medical treatment costs, pays daily allowances for service-related incapacity for work, and provides disability and survivors’ pensions as well as integrity damage pensions for permanent health impairments. A distinctive feature of military insurance is its generally lifelong liability for health damage caused or aggravated during service, even if it only manifests years after the period of service.
Relevance for Insurance Practice
For risk advisory purposes, distinguishing between benefits from military insurance, health insurance, and the loss of earnings compensation scheme (EO) in the case of service-related health damage is relevant, as incorrect classification can lead to double insurance or coverage gaps.