Medical and rehabilitation allowance

Medical and rehabilitation allowance payments are for people who are unable to work or study due to illness, accident or trauma.

We would like to remind you that an application for medical- and rehabilitation allowance must always be filled out, whether it is a first-time application or an application for continued allowance. See what documents need to be submitted to start the process for medical- and rehabilitation allowance.

General

Medical and rehabilitation allowance will replace the rehabilitation pension on 1 September 2025.

A new feature is that it is possible to receive an allowance while an individual is in approved treatment, is waiting for treatment or rehabilitation, is unable to undergo treatment or rehabilitation due to illness, and is looking for a job after rehabilitation is complete.

For whom

You can receive medical- and rehabilitation allowance if you have a long-term or serious health impairment, or a disability that is considered to have a permanent effect on your ability to be active in the labour market and if you:

• are undergoing recognised treatment or rehabilitation for up to 12 months at a time

• are waiting for treatment or rehabilitation to begin for up to six months at a time

• are unable to participate in rehabilitation due to a health impairment for up to six months at a time

• are looking for work after completing rehabilitation for up to three months

• have been legally domiciled in Iceland for 12 consecutive months before starting to receive medical- and rehabilitation allowance, unless international agreements state otherwise

• have fully used your sick leave rights from your employer and payments from your union's sickness fund

The total payment period for medical- and rehabilitation allowance is 60 months, but it can be extended by another 24 months if you are in a vulnerable position, have complex issues, and are in need of continued rehabilitation.

Service Providers

The parties collaborating on services related to individual rehabilitation are:

• Municipal social services

• The Directorate of Labour

• Healthcare institutions

• VIRK Vocational Rehabilitation Fund

Free income limit

The general free-income limit for medical and rehabilitation allowance is 40.000 ISK per month and the special free-income limit for employment income is 160.000 ISK per month.

Age add-on

Those who receive medical and rehabilitation allowance are not entitled to an age supplement.

Home Allowance

Home allowance payments are the same in the new system.

The home allowance is income-related and reduces the total amount of pension, home allowance and, if applicable, an age supplement by 45% of the pensioner's income above the free-income limit, until it is eliminated.

Child pension

Child pension allowance will remain the same in the new system. Child pension is paid if a parent or provider receives a disability pension, partial disability pension, or medical and rehabilitation allowance. Child pension is not income-related.

Employment alongside rehabilitation benefits

Partial participation in the labour market that contributes to increasing an applicant's work capacity can be considered part of rehabilitation or recognised treatment. However, it must always be ensured that participation in the labour market is not so extensive that there is no room to engage in the rehabilitation measures or recognised treatment that addresses the health problem.

Studies alongside rehabilitation benefits

Studies must be likely to increase the chances of returning to the labour market. It is permitted to pursue studies at the upper secondary school level for a maximum of 12 credits or at the university level for a maximum of 12 ECTS credits per semester, provided that the study load is so low that the studies are not considered eligible for a loan from the Student Loan Fund.

However, TR is permitted to assess in special circumstances whether a person pursuing studies at the upper secondary school level for up to 20 credits or at the university level for up to 20 ECTS credits per semester meets the conditions, provided that the study load is so low that the studies are not considered eligible for a loan from the Student Loan Fund.

TR is also permitted to assess the number of credits specifically when an individual has a confirmed disability diagnosis and is in a special education programme or vocational programme, provided that the studies are generally not eligible for a loan from the Student Loan Fund.

TR assesses whether studies are compatible with rehabilitation based on confirmation from the school.