OREANDA-NEWS. May 13, 2013. According to SEB Life Insurance damage statistics, one of the most common accidents that puts a person on sick leave for three months is a fall resulting in a leg fracture. Staying on sick leave for longer can create a financial gap of more than 30 per cent in monthly income that most families cannot cover with savings.

The Estonian health care system prescribes that for the first three days the person is not paid sickness benefit; from the fourth to the eighth day the employer pays the employee 70% of the employee’s average salary for the last six months and from the ninth sick day, the state pays the employee 70% based on last year’s social tax. This means that staying on sick leave for longer can create a financial loss of more than 30 per cent in monthly income.

According to Indrek Holst, Chairman of the Management Board at SEB Elu- ja Pensionikindlustus, there are two ways to cover the financial gap caused by sick leave. “One option is to collect in advance a financial back-up buffer that is equal to three month’s income. SEB studies show that more than 40% of Estonians live from pay day to pay day and it is difficult to save an amount equal to three month’s income. Another option to protect oneself from falling into financial difficulties because of surprises is to sign a life insurance contract with accident insurance. With the benefits from the insurer, the client can focus on healing and does not have to worry about covering economic obligations,” said Holst.

Holst gave an example of a 43-year-old man who receives the Estonia’s gross wages in 2012 of EUR 899, or net wages of EUR 711 per month. If this man should remain on sick leave for three months because of breaking his leg, his income would decrease to about EUR 471 per month during this time. This is 34% less than his normal income. Considering the possibility that 40% of this family’s budget are loan or leasing payments (for example, EUR 180 home loan payment and EUR 120 leasing payment), then the income decrease for the time of the disease may lead to a significant decline in the financial situation.

If the man from the example had a life insurance contract with extra accident cover, then the insurer would compensate him EUR 360 per month and his income during the sick period would be EUR 831. “The first step of setting financial goals is hedging. In the same way, buffer money should be collected to insure oneself against unexpected costs, so surprises would not take the family’s budget into a long-term minus that would have to be covered with a loan,” said Holst.