How can I protect my income if I become sick or injured in Germany?
It’s a topic we can often be complacent about, but as many as one in four people become unable to work due to an accident or injury at some point during their lives. Many independent insurance advisors therefore recommend taking out some kind of income protection insurance (Berufsunfähigkeitsversicherung). KLforExpats explains what this covers, and why it’s so important.
Have you ever been guilty of passing over a vital insurance policy because you’ve thought, “Oh, that will never happen to me”?
Complacency is the number one reason why young people avoid getting the insurance coverage they really need. But no one is immune from serious injury, being struck by a debilitating illness or being involved in an unexpected accident. In fact, the risk of one of these incidents occurring and causing occupational disability is higher than you might think, with every fourth person becoming unable to work during the course of their life.
That is why it’s incredibly important to seek independent insurance advice and seriously consider incorporating some form of income protection insurance (Berufsunfähigkeitsversicherung or BU) into your health insurance coverage, so the financial worth of your labour can be protected.
Is it really necessary to get income protection insurance in Germany?
Insurance is of course not your only option, but it may be your best one. It’s a common misconception that, in the case of a serious disability or illness, the federal government can be relied on for welfare assistance. It’s true that some support is offered, but the eligibility requirements are complicated and the payments are often nowhere near enough to support the kind of lifestyle you may be used to.
This might leave you relying on support from family and friends and other support networks - in exchange for your independence and perhaps even your loved ones’ financial security.
Government assistance is therefore not always the best option. In comparison, a long-term occupational disability insurance policy will often compensate your entire monthly salary should you be rendered incapable of working.
Which different kinds of income protection insurance are available?
The good news is that there are a variety of different kinds of income protection insurance policies out there. Some of these you might already be entitled to - for instance if you’re working in Germany - while others can be added to your overall coverage to give you extra peace of mind, and for much less than you might think.
An insurance advisor can help you work out the extent to which your income would be covered, should you have an accident or become unwell and be unable to work. They can also help you decide if you should consider taking out an additional income protection insurance policy to give you extra cover. The earlier you start, the cheaper these kinds of policies are.
Here’s a brief overview of the different kinds of income protection insurance available in Germany.
1. State pension (Erwerbsminderungsrente)
Almost everyone working in Germany pays into the state pension scheme, to receive a pension benefit when they retire at the statutory retirement age. If you become unable to work for health reasons before you reach retirement age, you may qualify for what’s known as a “reduced earning capacity pension” (Erwerbsminderungsrente). This includes only very basic coverage.
To be eligible, you need to have first contributed to the state pension scheme for a minimum of five years, so plenty of people may not be eligible and will have to seek a different type of insurance.
2. Comprehensive coverage (Berufsunfähigkeitsversicherung)
Known colloquially in Germany as “BU-Rente”, this is the all-round, worry-free solution for many people. Whatever the reason for your inability to work, whether it be an accident, illness or loss of physical strength, this pension is paid until you reach a predetermined age if you have been unable to work for six months at a time or are not expected to return to work for another six months or more.
If necessary, you may also receive a one-off payment, or payments towards so-called “reintegration aids” if you are able to return to work via rehabilitation programmes. This kind of extra coverage can be expensive, but for certain situations it provides a very good safety net.
3. Critical illness insurance (Schwere-Krankheiten-Vorsorge / Dread-Disease-Versicherung)
Critical illness insurance normally pays a lump sum to anyone who has experienced a serious health issue or disease such as cancer, a heart attack, or stroke. The money is intended to help with the loss of income, as well as expensive medication or treatment.
4. Accident insurance (Unfallversicherung)
Every year, approximately 9 million accidents occur in Germany. Accident insurance is ideal if you cannot afford full comprehensive insurance (which may add up to 100 euros to your base premium each month), as it allows you to insure yourself against injury or illness caused by a sudden accident.
Contributions start from around 20 to 30 euros per month. Should you fall ill or have an accident, your benefit can be paid out as a lump sum or as a regular pension.
5. Basic ability insurance (Grundfähigkeitsversicherung)
This type of insurance focuses on your basic abilities which, if lost or impaired, would cause personal hardship - regardless of whether you were still able to work or not. This includes things like your ability to see, hear, sit, walk and think (in the event that your memory or focus is impacted, for instance.)
The idea behind this type of insurance is to zero in on the specific skills relevant to the work you do. For example, those who work at a desk in the office have very different required skills compared to labourers who work outdoors doing heavy lifting. Different types of employees can create tailored insurance packages suited to the type of work they do.
6. Multi-risk insurance
Finally, this type of insurance allows you to take elements from each of the above options and create a bespoke package that suits both your specific health and work needs.
Peace of mind with income protection insurance
As you can see, there are various options available to suit all different kinds of professions and budgets. Remember, occupational disability or serious illness is not uncommon, so don’t get caught in the trap of thinking that it will never happen to you!
Still unsure as to whether it’s worth investing in long-term income protection insurance? A trusted health insurance broker can help you weigh up your options to make an informed decision. KLforExpats is an independent, English-speaking broker that specialises in working with expats, and all of their advice is completely free. You can get in touch via their website, on Instagram, or even send them a message on WhatsApp!