Disability Insurance: Must-Have Insurance

Key Takeaways

The health insurance pays for 72 weeks, but the public health insurance will not continue to pay you if you get disabled status.
Anyone who depends on an earned income, and especially those who have dependents, should take out disability insurance.
For the sum insured, you should look at your consumption and aim for a level to not adjust your living expenses too much.

Introduction: Disability insurance: Must-have insurance

Disability insurance (Berufsunfähigkeitsversicherung BU) isn’t a particularly sexy topic, and we all like to think it won’t happen to us. Statistically, however, one in four people will be disabled at some point in their life. And disability often means serious financial trouble.

So, what is disability insurance? Why is it important? And are you eligible for it?

Why is disability insurance a must-have in Germany?

Well – In Germany, if you were to get sick, the employer would continue paying you your full net salary for 6 weeks. After that, health insurance will step in for the next 72 weeks. Public health insurance will compare two numbers – 90% of your net salary and 70% of your gross salary, and pay the lower of the two. This could be a pretty big drop in pay. Private health insurance will pay whatever is contractually obligated. Of course, it’s important to note here that having good health insurance also means you can access the best medical care and may be able to prevent you from becoming disabled in the first place.

This makes a total of 78 weeks or 18 months. While this is quite a long time, it may not be pleasant. Public health insurance will require you to be assessed regularly to understand when you may be able to return to work. If you could return to do 3h of work per day in the foreseeable future, your status would remain as sick. However, if there is no possibility of this, you may be classified as disabled by the public health officer. Once you are classified as disabled, your health insurance will stop paying.

At this point, either after 18 months or before, your health insurance will stop paying, and you will need disability income insurance (BU). This insurance will pay every month if you are no longer able to do at least 50 percent of your job. It is important to understand that this relates to your specific job – what you were doing to earn a living before you were injured. Not an abstract hypothetical job, or an average job.

Who needs Disability Income Insurance

The short answer is that everyone who relies on earned income to support themselves should really have disability insurance. This is especially true if you have dependents and your whole family relies on your income. It is important to understand that mental illnesses such as depression account and musculoskeletal injuries like neck, back, or joint pain account for almost half of the disabilities. You shouldn’t think that because you aren’t in a factory wrestling steel all day you are safe from disabilities. It can happen to anyone (If you have dependencies you might also consider life insurance).

If you become disabled and you do not have disability income insurance, you will have to deplete all your savings, and then you will receive decreased occupation payments from the government – with an average payout of 776€ per month. But this only applies if you cannot do any job for at least 3h per day – not your job, but any job. And almost half of the applications for this payment are denied entirely.

How much disability income insurance do you need?

Well, unsurprisingly, it depends! A disability pension below 1.000€ per month is certainly not worth it, because, in Germany, Bürgergeld applies up to that level, and so your BU payments will simply replace your Bürgergeld. The official recommendation is to aim to replace 80% of your net income, but this is often not true. A better recommendation would be to look at your consumption and target a level that you would not have to adjust your living costs too much.

There are four factors that influence the premiums of the must-have insurance: disability insurance.

The first of course is the level of benefits – the higher the pension, the higher the premium.
The second is your job – being a lion tamer is a higher risk of disability than an office worker
Third is your age – people tend to become disabled as they get older, so the younger you are, the longer you would expect to be paying the premium before making a claim, and the cheaper it will be.
And finally, your health status. If you are in good health with little medical history, your premiums will be lower. Existing conditions may not be covered. So it pays to get disability insurance while you are still young and healthy.

But disability income insurance premiums can be expensive. So how do you afford it? Well, happily you have a partner to help us… the government! Because you will save the government money by paying for disability income insurance, they will offer you tax benefits.

Finding the best disability insurance in Germany for you can be difficult. Secure a free meeting with us & our insurance experts will make choosing the best disability insurance as easy as possible.

Conclusion: How to choose a disability insurance

Finally, Perfinex’s 5 critical tips for choosing a disability income insurance provider:

Choose a German insurer that is governed under German law
Choose a financially stable insurer
Choose high-quality insurance – this may not be the cheapest.
Choose a tariff with no abstract reference – this means your insurer cannot refuse your claim if you can do another job, even if you can’t do your job
Choose a tariff that offers dynamic increase – this means you can increase the level of your provision if you need to – because your consumption will increase as you age, due to the natural process of buying a bigger house or having children

If you would like help determining what level of disability pension would be right for you, you can contact us and book a free consultation.

Disability Insurance: Must-have insurance