Mandatory disability insurance won't have much benefit for freelancers: CPB

Disability insurance for freelancers offers little additional protection against being unable to continue paying fixed costs if their income suddenly disappears due to job loss or illness, according to the Netherlands Bureau for Economic Policy Analysis (CPB). The agency found that insurance will only make a small percentage of freelancers more financially stable in the event of sudden and extended income loss, and there is a significant percentage of freelancers who won’t be helped by insurance.

In 2030, it will likely be mandatory for freelancers, classified as self-employed people without employees, to take out disability insurance. The insurance will pay them a benefit after two years of illness or disability.

According to the agency, about 70 percent of freelancers can continue to cover their fixed costs for two years after having to stop working. With insurance that has a one-year waiting period, the percentage increases slightly to 75 percent.

But CPB stressed that this also means that a quarter of the self-employed won’t be able to make ends meet, even with insurance. There is also a significant number of Dutch freelancers (15.4%) who can only manage for a few months if their income suddenly disappears.

“Most people can manage for a while, but a significant number cannot,” CPB researcher Jonneke Bolhaar said. “If you run into problems within a year, insurance you get after two years won’t help much.”

People employed by a company have more financial stability in the event of sudden illness or disability. 82 percent of employees can cover costs for two years in the event of job loss, and 91 percent can do so in the event of disability or illness. This is mainly because employees pay welfare premiums and are entitled to benefits like the WIA benefit for occupational disabilities and the WW benefit for unemployment.

Self-employed workers don’t have this and typically have to fall back on their own buffers for things like rent, mortgage, and energy bills.

CPB stressed that freelancers are not the only group that’s financially vulnerable if their income disappears due to job loss or illness. Young people, tenants, and single-income earners also have limited savings, often combined with a lower income. At the same time, these groups often spend a relatively large portion of their income on fixed expenses like rent.