Pension fund and disability plan for renovation contractors
Mar 31, 2023
From: Dikla Shani, pension insurance agent
Independent renovation contractors, like many business owners, are unfortunately unaware of all the important nuances related to pension and other insurance.
Experience shows that many of them do not make regular retirement contributions at all, even though it is a legal obligation (as we will expand on immediately), and even when they retire "and fulfill their obligation," they do so on the basis of a salary that is dramatically lower than their real income.
At the Itzick Simon Insurance Agency, which has been supporting the construction and renovation industries for over 35 years , we see great importance in addressing the issue and finding unique solutions in the areas of pension insurance and disability insurance for renovation contractors, according to their needs and in light of the special risk involved in their work.
Recently, after a lengthy review process with a number of leading insurance providers, we have also formulated a comprehensive and attractive package for all the insurance needed to protect the renovation contractor and his family . A package that includes a holistic solution for pension insurance alongside additional insurance products such as disability insurance for renovation contractors, life insurance for renovation workers, critical illness insurance and disability insurance from accidents.
From: Dikla Shani, pension insurance agent
Independent renovation contractors, like many business owners, are unfortunately unaware of all the important nuances related to pension and other insurance.
Experience shows that many of them do not make regular retirement contributions at all, even though it is a legal obligation (as we will expand on immediately), and even when they retire "and fulfill their obligation," they do so on the basis of a salary that is dramatically lower than their real income.
At the Itzick Simon Insurance Agency, which has been supporting the construction and renovation industries for over 35 years , we see great importance in addressing the issue and finding unique solutions in the areas of pension insurance and disability insurance for renovation contractors, according to their needs and in light of the special risk involved in their work.
Recently, after a lengthy review process with a number of leading insurance providers, we have also formulated a comprehensive and attractive package for all the insurance needed to protect the renovation contractor and his family . A package that includes a holistic solution for pension insurance alongside additional insurance products such as disability insurance for renovation contractors, life insurance for renovation workers, critical illness insurance and disability insurance from accidents.
The danger of renovations: 1 in 10 injured, 25% of deaths in work accidents in the construction industry
Whether it's pension insurance or other insurance, renovation contractors must make sure they are properly insured. First, they are often the financial backbone of the family. Second, and even more so, they work in one of the most dangerous industries in the economy.
According to a recent survey conducted by the Renovation Contractors Association among approximately 1,500 renovation contractors, 10% of participants said that a serious accident had occurred at their workplace in the past year. 8% of respondents said that at least one renovation contractor in their area had been injured in an accident.
In about 59% of cases, the accident was caused by work materials or the use of tools, in about 35% of cases by a fall from a height, and in about 6% by electrocution [1] . According to data from the National Insurance Institute , more than a quarter of fatal work accidents (in which a worker was killed) occur during renovation and urban renewal work [2] .
[1] Link to article in the Contractors Association
[2] National Insurance Institute, Report on Work-related Accidents and Occupational Illnesses 2013-2017 (page 22)
Whether it's pension insurance or other insurance, renovation contractors must make sure they are properly insured. First, they are often the financial backbone of the family. Second, and even more so, they work in one of the most dangerous industries in the economy.
According to a recent survey conducted by the Renovation Contractors Association among approximately 1,500 renovation contractors, 10% of participants said that a serious accident had occurred at their workplace in the past year. 8% of respondents said that at least one renovation contractor in their area had been injured in an accident.
In about 59% of cases, the accident was caused by work materials or the use of tools, in about 35% of cases by a fall from a height, and in about 6% by electrocution [1] . According to data from the National Insurance Institute , more than a quarter of fatal work accidents (in which a worker was killed) occur during renovation and urban renewal work [2] .
[1] Link to article in the Contractors Association
[2] National Insurance Institute, Report on Work-related Accidents and Occupational Illnesses 2013-2017 (page 22)
Let's start with a pension for renovation contractors. This is actually a fixed monthly provision made in accordance with the amount determined by the self-employed person and above the minimum set by law (we will immediately clarify the question "how much to set aside for retirement?").
The known goal of the pension fund is to provide the member with a fixed pension after retirement age until the end of his days, depending on the amount of contributions made and the amounts accumulated in the fund, as the funds are invested and generate returns.
Until 2017, self-employed people were not required to set aside funds for their own retirement, and the obligation only applied to provisions for salaried employees (as of 2008). Today, the law also requires self-employed people to make the provisions . Furthermore, the state has increased enforcement on the subject, and many self-employed people receive warning letters to make the deposits, including financial penalties if nothing is settled .
A pension deposit includes both a retirement pension and tax benefits . Some of the pension funds can be withdrawn by the member in the event of the closure of the business and subject to the conditions set forth in the law. There are also additional tax benefits on the subject, such as recognizing the deposit as a recognized expense for tax purposes, both for the deposit to the pension fund and for an additional deposit for loss of work capacity for an additional tax credit.
It is important to know that the state, in order to increase the disposable income of business owners, has established, alongside the pension obligation, a reduction in National Insurance contributions for all self-employed individuals whose monthly income is less than 21,000 shekels (and there are also additional benefits).
What is the minimum amount for the provision? The minimum provision amount is determined by steps and according to the following key: 4.45% of the salary up to the value of half the average salary in the economy, and 12.55% for every shekel beyond that (the average salary in the economy is updated from year to year and is approximately 11,800 shekels).
Pension obligation for the self-employed
It is important to emphasize that the pension fund is not only a retirement savings product but also includes insurance coverage for all purposes . A pension fund in Israel has, in a structured manner, two important insurance products:
· Disability pension.
· Survivors' pension.
It should be noted that during the first five years after joining, the insurance coverage is not valid for an illness that existed before joining the fund . However, after five years, the pension insurance will also cover the worsening of an existing illness.
In the event that the member is injured or becomes ill and is unable to work, he will be entitled to a disability pension that will be paid at 75% of the salary for which he retired (his insured salary). A survivor's pension will be paid to his family members (beneficiaries) in the unlikely event of death before retirement age.
These are extremely important insurance coverages, especially for renovation contractors, who in many cases are, as mentioned, the main and sole breadwinners in the family unit. Their responsibility as the financial support of the household emphasizes even more the importance of the renovation contractor ensuring not only a permanent pension provision but also provisions that match their real income as closely as possible .
TAL: We use general terms in this article, but everything mentioned is of course subject to the uniform regulations of the pension funds.
A pension fund? Not just a retirement pension
The Mandatory Pension Law for the Self-Employed has enshrined a number of benefits for the self-employed population that are very worth knowing about. First, a pension deposit is a recognized expense that allows for the use of tax benefits. In addition, as we mentioned earlier, the National Insurance contributions of self-employed people with a monthly income of up to 21,000 shekels have been progressively reduced. Only 2.87% of the salary for the part that is less than 60% of the average salary in the economy and 12.83% of the salary for the part that is greater than half the average salary.
For example, a renovation contractor whose monthly income is 15,000 shekels benefits from a reduction of approximately 2,000 shekels in National Insurance contributions compared to what he was previously required to pay. In addition, the tax benefit on self-employed contributions to a pension was increased from 16% to 16.5% (to the extent that the separate tax benefit for purchasing disability insurance outside of retirement was not utilized). The law also brought additional tax benefits related to the provision for a further education fund.
Have you closed your business? The law allows you to use 33% of the amount you deposited into your retirement savings as a kind of "unemployment benefit" that is tax-exempt and subject to the provisions set forth in the law.
Special benefits for the self-employed in retirement savings
While a pension fund is a legal obligation for the renovation contractor, there are other important insurance policies that are purchased privately. These policies have dramatic significance, and although there is no legal obligation to purchase them, they can be a very comprehensive solution in the event that the business owner is unable to work for an extended period of time or permanently, and loses his source of income temporarily or permanently.
One of the important instruments in this regard is disability insurance (DWI). Disability insurance for renovation contractors is intended for situations of inability to work as a result of illness or accident for more than 90 days (with extensions beyond this standard). In other words, if the renovation contractor becomes ill or injured in a way that does not allow him to work in accordance with his training, experience, and education, he will be entitled to monthly compensation in the amount of 75% of the insured's salary under disability insurance. Payment will be made for the entire period of disability and/or until retirement.
There are additional extensions that can be purchased as part of disability insurance for rehabilitators. For example, an extension that eliminates the offset of insurance funds against National Insurance and allows coverage from both entities without the amounts being absorbed into each other. Or an extension to receive retroactive payment for two of the first three months.
Please note, disability insurance is one of the most complex and challenging products in the insurance industry in general and for renovation contractors in particular. Insurance companies are reluctant to provide this type of broad and comprehensive insurance to renovation contractors, given the great risk they (seemingly or actually) take on.
Unlike "simple insurance" such as car insurance, which can certainly be easily purchased online after a brief price comparison, disability insurance for renovation contractors must be purchased under professional guidance. If you will, it is a "suit" that must be tailored to the exact measurements of each person, depending on their occupation, age, medical condition, family history, and more.
It is important to find out what the salary level is that must be insured under the policy and to carefully examine the precise definitions of the term "loss of work capacity." This is to avoid situations in which the premium will be paid as usual but the insurance company will reject the claim on various pretexts. Mainly on claims regarding the apparent ability to continue earning a living (i.e., on the grounds that there is no "loss of work capacity" situation).
Disability insurance
Disability insurance is one of the most complex and challenging products in the insurance industry in general and for renovation contractors in particular. Insurance companies are reluctant to provide broad and comprehensive insurance of this type to renovation contractors, given the great risk that they (seemingly or actually) take on.
Unlike "simple insurance" such as car insurance, which can certainly be easily purchased online after a brief price comparison, disability insurance for renovation contractors must be purchased under professional guidance. If you will, it is a "suit" that must be tailored to the exact measurements of each person, depending on their occupation, age, medical condition, family history, and more.
It is important to find out what the salary level is that must be insured under the policy and to carefully examine the precise definitions of the term "loss of work capacity." This is to avoid situations in which the premium will be paid as usual but the insurance company will reject the claim on various pretexts. Mainly on claims regarding the apparent ability to continue earning a living (i.e., on the grounds that there is no "loss of work capacity" situation).
Please note,
In conclusion,
At Itzick Simon Insurance Agency, we specialize in providing unique solutions and solutions for renovation contractors in all different areas of insurance, especially disability insurance. In addition, as we mentioned at the beginning of this article, we offer unique products that are specifically tailored to renovation contractors and provide a very broad insurance package with complementary products such as disability insurance, life insurance, critical illness insurance and disability insurance. Including exclusive benefits and special discounts under unique agreements with insurance companies.
For more information, click on the link: Renovation Contractor Insurance That Protects You 24/7
At Itzick Simon Insurance Agency, we specialize in providing unique solutions and solutions for renovation contractors in all different areas of insurance, especially disability insurance. In addition, as we mentioned at the beginning of this article, we offer unique products that are specifically tailored to renovation contractors and provide a very broad insurance package with complementary products such as disability insurance, life insurance, critical illness insurance and disability insurance. Including exclusive benefits and special discounts under unique agreements with insurance companies.
For more information, click on the link: Renovation Contractor Insurance That Protects You 24/7
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