Navigating German Insurances
Unsure about German insurance? We reveal the essential policies every expat needs and what to avoid to save thousands. Don't get caught out! 💰
Key Takeaways
- Many expats waste money on useless German insurances; understanding essential vs. unnecessary policies is crucial.
- Protect yourself from financial ruin due to accidental harm or property damage; highly recommended for minimal cost.
- Glass insurance is often redundant, expensive; most glass damage covered elsewhere, so save your money.
- All German residents must have health insurance, whether public or private plans.
- Accident insurance covers only specific accidents, not illness; insufficient for comprehensive income protection.
- Disability insurance protects your income from any inability to work due to accident or illness.
- Avoid costly, restrictive loan insurance; prefer term life or disability for real protection.
- German state pension is insufficient; private plans with tax benefits are crucial for retirement.
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More InformationThe PerFinEx Guide to Smart Insurance Choices
Living in Germany means navigating a maze of paperwork – and nothing is more confusing than German insurances. That’s why many expats unknowingly waste hundreds – or even THOUSANDS of Euros on insurances that are absolutely useless. And that’s the tricky part, isn’t it? Figuring out which insurance is a must-have – and what’s just clever marketing. Are you 100% sure you’re not wasting money on the wrong ones? We’ve helped thousands of expats manage their finances in Germany – and trust us – we’ve seen every insurance trap in the book. So stick around – because by the end of this article – you’ll know EXACTLY which German insurances are must-haves – and which ones are just a waste of money.
Our mission is to ensure you’re financially protected without falling into unnecessary spending traps. We understand the unique challenges expats face and are here to provide clear, actionable advice that cuts through the complexity. With our guidance, you can build a robust financial safety net, allowing you to focus on thriving in your new German life rather than worrying about obscure policy clauses. This guide is designed to empower you with the knowledge needed to make informed decisions, ensuring every Euro you spend on insurance genuinely contributes to your financial security.
The Golden Rule of German Insurance: Can You Afford the Damage?
It all comes down to one simple question when considering any German insurance policy: If something bad happens – CAN you afford to pay for it? And more importantly: Do you WANT to pay for it? Let’s consider a trivial example: knocking over a cup and it shatters. Annoying? Yes. Expensive? No. We’ll be fine – financially speaking – so no insurance needed for that small mishap. However, now imagine a far more serious scenario: you get seriously injured and can’t work anymore for the rest of your life, or your house tragically burns down. Annoying? Absolutely. Expensive? Oh, yes. In those catastrophic cases, we would be in dire straits financially, meaning we absolutely need insurance to protect ourselves from ruin.
This fundamental principle guides all our recommendations; insurance isn’t about covering minor inconveniences, but about safeguarding your financial future from events that could otherwise devastate your life savings or earning potential. This “affordability rule” is your first and most critical filter when evaluating any insurance product in Germany, helping you distinguish between minor risks you can absorb and major risks that demand professional protection.
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More InformationMust-Have #1: The Indispensable Private Liability Insurance (Haftpflichtversicherung)
And that’s why the number one insurance every expat in Germany must have is private liability insurance – Haftpflichtversicherung in German. And here’s why it’s non-negotiable for anyone living here. If you accidentally hurt someone or damage their property, you are legally required to pay for it. And that’s not a “maybe” – it’s clearly written into §823 of the German Civil Code. Imagine you’re riding your bike and, through no fault of your own, you crash into someone. They break their arm, can’t work for at least a while, so they want compensation. And if they don’t come after you directly, their health insurance will, seeking reimbursement for medical costs. You could be on the hook for substantial medical bills, lost income, and potentially even a lifetime pension.
Without liability insurance, you’re paying all of that out of your own pocket, potentially facing financial ruin. With a solid liability insurance policy, your insurer handles the claims, pays valid ones, and even defends you against unfair or exaggerated demands. And the best part? It typically costs around €5-€7 per month and protects you from financial devastation for a surprisingly low premium. It’s not legally required to purchase, but trust us, this is the very first insurance you should secure upon arriving in Germany.
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More InformationUseless Insurance #1: The Pointless Glass Break Insurance (Glasbruchversicherung)
From the first insurance you absolutely should get, let’s move to the first one you should absolutely avoid: glass break insurance, or Glasbruchversicherung in German. We know a lot of you might encounter this one, sometimes through various financial advisors or as an add-on. But let’s be honest – for the vast majority of expats, it’s completely unnecessary. Why? First, it’s incredibly specific: it usually only covers shattered glass. Scratches, chips, or cracks? Often not covered at all. This narrow scope means it offers very limited protection for a separate premium. Second, and this is crucial, most glass-related damage is already covered by other, more comprehensive insurances you likely already have – or should have.
Think about it: if you accidentally break a neighbor’s window, your private liability insurance would cover it. If a storm shatters your apartment window, a solid household insurance (Hausratversicherung) often includes glass damage as part of its broader coverage. If you own a property, your building insurance (Wohngebäudeversicherung) would typically cover such incidents. So, you might be paying twice for the same coverage, receiving no additional benefit. And even if something does break and it’s not covered elsewhere, we’re not talking about a financial disaster. A broken window might cost a few hundred Euros. Annoying? Sure. But it’s not going to bankrupt you. So save your money; this one’s simply not worth the premium.
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More InformationMust-Have #2: Health Insurance – Your Legal Obligation (Krankenversicherung)
Now, let’s discuss another must-have insurance – well, you have to, because this one’s required by law: health insurance, or Krankenversicherung in German. If you live in Germany, even as an expat, you must have health insurance, either public (statutory) or private. For employees earning less than the annual income threshold (currently €73,800/year for 2025), public insurance is mandatory. And even if you earn more, public might still be the better choice, especially if you’re a family of four or five with only one income earner. Why? Because contributions to public health insurance are based on your income (up to a certain cap), and children can often be covered for free through family insurance (Familienversicherung), offering significant savings for families.
Private health insurance, on the other hand, might be a smarter move if you’re self-employed or earn above the €73,800 threshold. Unlike in public health insurance, contributions to private plans are not income-based; they depend on factors like your age, health status upon application, and the specific benefits you choose. That means if you’re young and healthy when you first apply, private plans can offer premium coverage – often with perks like shorter waiting times for specialist appointments or private hospital rooms – at a significantly lower cost than public insurance. With the right private plan and careful long-term planning, it can even remain cheaper than public insurance for the rest of your life. So, if you have the freedom to choose between public and private, the decision can have long-term financial implications. We strongly recommend booking a free meeting with us, and we’ll help you find the health insurance that actually makes sense for your individual situation and future plans.
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More InformationUseless Insurance #2: The Misleading Accident Insurance (Unfallversicherung)
Useless insurance number two: the accident insurance, or Unfallversicherung in German. It sounds really important, right? The name itself suggests critical protection, which is why so many people are drawn to it. But for most individuals, especially expats relying on their income, it’s simply not worth the investment – and here’s why this policy is often misleading. If you’re employed in Germany, work-related accidents are already covered by the government through mandatory statutory accident insurance (gesetzliche Unfallversicherung), which is paid for by your employer.
A private accident insurance only fills a tiny gap in your free time, covering accidents that occur outside of work. Crucially, and this is the biggest limitation, it only pays out if you’re injured in a real accident – not if you get sick. To legally count as an accident in Germany, it has to meet the stringent acronym PAUKE: “Plötzlich, von Außen, Unfreiwillig, auf den Körper wirkendes Ereignis” which translates to: “a sudden, external, involuntary event that impacts your body.” So, if a car hits you while you’re walking, that’s clearly an accident – sudden, external, involuntary, impacting your body. Clear cut. But what about conditions like chronic back pain, a severe cancer diagnosis, or debilitating depression? None of those count as an “accident” under this definition. Yet, these are precisely the kinds of health issues that cause most people to lose their ability to work long-term. Accident insurance offers no protection against these far more common scenarios that impact your earning potential.
Must-Have #3: The Income Protector – Disability Insurance (Berufsunfähigkeitsversicherung)
So, if you truly want to protect your income – which, let’s be honest, is the foundation of your financial stability in Germany – accident insurance is simply not the right tool. Disability insurance, or Berufsunfähigkeitsversicherung (BU) in German, is. Because that one covers both accidents and illness. It kicks in if you can’t work anymore – for whatever reason, be it physical injury, mental health issues, or chronic illness – and pays you a pre-agreed monthly income to cover your living expenses. This income replaces your lost salary, allowing you to maintain your lifestyle and financial commitments without the stress of being unable to earn. Statistically, your risk of becoming disabled at least once in your life is substantial, with estimates around 1 in 4.
Men often have a slightly higher risk than women. And considering that most of you will likely retire closer to 67, not the typical 65 often cited in older statistics, your real risk of temporary or permanent disability is probably closer to 1 in 3 during your working life. And the scary part? You’re not going to get anything substantial from the government. The government’s Erwerbsminderungsrente (reduced earning capacity pension) will only provide a payout if you can’t do any job – not just your specific profession – for at least three hours a day. Only a private disability insurance policy protects YOUR job, your specific profession and earning capacity – that’s a huge and critical difference. And the earlier you get it, the cheaper it is, as premiums are based on your age and health at the time of application. So, if you rely on your income to live and thrive in Germany – and let’s be honest, who doesn’t – this is an absolute must-have insurance. Let us know with the link in the comments if we can help you find the best one tailored to your needs.
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More InformationUseless Insurance #3: The Sneaky Credit Default Insurance (Restschuldversicherung)
Before we delve into the last must-have “insurance” – which might actually be the most important one for your long-term financial freedom – let’s talk about the last genuinely useless insurance: credit default insurance, or Restschuldversicherung / Kreditausfallversicherung in German. This one usually gets pitched by the sleazy bank salesman when you’re taking out a loan, often bundled as a seemingly convenient add-on. The pitch sounds fantastic: “If you die, get sick, or lose your job, we’ll pay off your loan.” It sounds like a safety net, right? But in reality, these policies are plagued by multiple issues. First, the costs are insanely high, often adding a significant hidden premium to your loan’s total interest rate, making your debt far more expensive than it needs to be. Second, there’s frequently a waiting period before the coverage kicks in, meaning if something happens shortly after signing, you might not be protected. And third, the payout rules are notoriously full of exclusions and fine print, making it difficult to actually claim when you need it most.
Many people feel pressured to sign up during the intense loan application process, even though linking it to loan approval is legally not allowed in Germany. Plus, this insurance doesn’t protect your income; it only protects your loan, meaning your overall financial stability isn’t addressed. So, if you’re genuinely worried about dying with debt, the proper solution is to get a term life insurance (Risikolebensversicherung). And if you’re concerned about being unable to work and thus unable to repay your loan, a comprehensive disability insurance policy is the superior choice.
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More InformationThe Ultimate "Insurance": Your Private Pension for Financial Freedom
And the last must-have “insurance” is the one that will help you celebrate true financial freedom, which makes it arguably the most important long-term “insurance” of all. We’re talking about private pension planning. Because let’s be honest – the average government pension in Germany pays just around €1,099 per month before taxes and health insurance. That’s simply not going to cut it for a comfortable retirement, is it? Especially for expats who might not accumulate a full German state pension over their working life here. That’s where private pensions come in – an excellent way to strategically invest in ETFs with significant tax benefits on top, ensuring you have sufficient funds to maintain your desired lifestyle in retirement.
Germany uses a comprehensive 3-level pension system that you can learn more about in our dedicated video on the topic, which provides a deeper dive into how public, occupational, and private pensions interact. However, you must watch out when choosing your private pension plan. One of our clients recently did a free PerFinEx contract check and discovered that he was paying over 3% in annual fees on his existing pension plan – which is absolutely insane and significantly erodes returns over decades. So, we helped him cut costs by more than 77%, bringing his annual fees all the way down to a very efficient 0.69%. Nice! This drastic reduction in fees means significantly more of his money is working for him, compounding over time to build a much larger retirement nest egg. And if you want similar results and unbiased advice to ensure your private pension plan is efficient and effective, you can book a free meeting with us right here.
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