Do you believe that (public) Health Insurance In Germany is free? Many people living and Working In Germany believe that. Many people also believe that all other parts of the German social security system are free. Unfortunately, that is not true at all. Employees in Germany pay about 20% of their Gross Salary into the German social security system.
When receiving your Payslip from your employer, you can see that basically, 2 big deductions make the difference between your gross salary and your net salary: Taxes & social security. These deductions happen automatically as contributions into the German social security system are mandatory for all Employees In Germany.
And that’s the reason why many people believe the German social security system is one of the most efficient social security systems in the world. Find out in this article what the 5 pillars of social security in Germany are and why you are only paying for 4 of them. And see also what kind of benefits you are getting for your money.
Overview of the German Social Security System
Besides taxes, all Employees in Germany also have to pay social security. Self-employed, freelancers, or business owners can choose themselves (under certain circumstances) if they want to contribute to German social security or not. Non-employees only have to have Health Insurance & long-term care insurance. That is mandatory for everyone living in Germany.
As the German government determines that all employees in Germany depend on their Ability To Work for a living, there is no way for employees to exit the German social security system. The 5 pillars of the German social security system will protect you in case you get Sick, Disabled, lose your job or get Old with certain benefits.
Even though a lot of expats living in Germany think social security in Germany is free, the truth is, that it is built on Solidarity. Every employee contributes to German social security and whoever is in need of that money will be supported by all others. So you pay for everyone else & everyone else will pay for you. You also pay for the generation before you, and the generation after you will pay for your generation.
The good news is that all parts of social security are split 50/50 with your employer. So for every Euro, you have to contribute, you will pay only 50 cents while your employer will pay the other 50 cents. But what are you paying for exactly?
“Employees in Germany are forced by the government to pay into social security.”
Pillar 1: Health Insurance (Public or Private)
Health Insurance in Germany will protect you in case you become sick and need treatment from a doctor or a hospital. Additionally, health insurance is there to prevent diseases, promote health, and Restore Health in case you are already ill. Germany’s health insurance is split into 2 different parts: The public health insurance system and the private health insurance system.
Private Health Insurance: Employees earning more than that or self-employed, freelancers, and business owners are free to choose in which health insurance system they want to be insured.
Please note: You only need one Health Insurance. Either public health insurance OR private health insurance.
In the Public Health Insurance System, you have to pay 14,6% of your gross salary in contributions (maximum gross salary in 2021: 58.050€). On top of that 14,6% every public health insurance is charging an additional contribution that ranges from 0,2% – 2,7% depending on the efficiency of the public health insurance.
Switching from an inefficient public health insurance to an efficient public health insurance can easily Save You Thousands Of Euros every year for basically the same coverage. Coverage of public health insurance is determined by the German government in our Social Code, so it is basically 95% the same for all public health insurances.
All of these numbers & percentages do not matter if you are a member of the Private Health Insurance System. The premium for your private health insurance is not bound to your Salary. You pay according to your age (the younger the cheaper), your health status (the healthier the better), and your coverage (higher benefits = higher Insurance premium).
Pillar 2: German Public Pension (Deutsche Rentenversicherung)
That 18,6% of your Gross Salary will reward you with a maximum of up to 2 pension points per year. With pension points, the German public pension (Deutsche Rentenversicherung) will calculate your monthly pension in retirement. In 2021 each pension point will pay you about 34€ in monthly pension from the moment you retire for the rest of your life.
According to a Statistic from Deutsche Rentenversicherung itself the average monthly pension payment in 2018 was 1.360€ for people that have been paying into the German Public Pension for at least 35 years. The average monthly pension in 2018 was 1.520€ for men and 1.106€ for women, both pensions before deductions (like gross salary).
German unemployment insurance might pay you unemployment benefits (like Arbeitslosengeld or Hartz 4) in case you lose your job. The exact payment you will receive depends on your previous Salary and how long you paid into the German social security system. If you resign from your job on your own, German unemployment insurance will not pay you anything.
Contributions into the German unemployment insurance are deducted straight from your Payslip as well. Employees pay 2,4% of their gross salary – split 50/50 with their employer again.
Pillar 4: Long-term Care Insurance
German long-term care insurance is part of Health Insurance and that’s why you are in the public long-term care insurance if you are a member of the public health insurance system, and if you are in the private health insurance you are in the private long-term care insurance as well. Both long-term care Insurances will pay a certain benefit if you need assistance for daily living.
Contributions to the public long-term care insurance are 3,05% of your Gross Salary for employees with children and 3,3% for employees without children. That is how the government incentivizes people to get more children in order to keep the social security pyramid scheme running. Private long-term care insurance charges about half of what public long-term care Insurance is charging.
Pillar 5: Accident Insurance
The last insurance of the German social security system is not even on your Payslip because it is paid in full by your employer. The accident insurance will pay for accidents that happen on your way to your workplace, at work, and straight back from your workplace to your home (e.g. no coverage from accident insurance in your lunch break).
The social security accident Insurance covers about 25% of all accidents happening in Germany. All other 75% of accidents happen in people’s spare time with no coverage. That is why many people in Germany get a private accident insurance to have complete coverage. Feel free. to book a Free Meeting if you are looking for a private accident insurance as well.
This is basically the perfect summary for the German social security system: You will most likely get some form of financial support from the government, but it is not nearly enough to cover your financial damage or Loss Of Income. So please do not rely on the government and get Private Insurances that pay exactly how much you want or need.
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Can You Exit Out of the German Social Security System?
If the German social security system is so inefficient compared to what they are charging you (about 20% of your Gross Salary) is it possible to quit from German social security?
Not as long as you are an employee. The German government wants to protect employees by forcing them to pay into all 4 pillars of social security (Health Insurance, Public Pension, unemployment insurance, long-term care Insurance). Only freelancers, self-employed, and business owners can exit. They only have to have health insurance and long-term care insurance.