You should consider getting income protection insurance if you live and work in Germany. This type of insurance is designed to provide financial support if you are unable to perform your job for longer than six months due to illness or injury.
Next to liability insurance and health insurance, income protection insurance is among the most important insurances for Germans. However, not everyone who wants such insurance can actually get it. It depends a lot on your age, profession and health status.
Understanding the different options available for income protection insurance in Germany is important. Depending on your needs and budget, you may choose a policy with a shorter or longer waiting period, a higher or lower benefit amount, and other features that can impact your coverage and premiums.
In this guide, we will explain in detail what income protection insurance in Germany is and why you should consider getting it. We also introduce you to reliable insurance service providers who can guide you through the process.
What is income protection insurance in Germany?
Income protection insurance (Berufsunfähigkeitsversicherung – short BU) provides financial support if you cannot work due to a long-term illness or injury. This insurance policy is designed to pay you a monthly pension so you are still able to cover your living expenses.
Income protection insurance is also known as occupational disability insurance or income replacement insurance. It differs from other types of insurance policies, such as term life insurance, critical illness insurance, or accident insurance, which pay out a lump sum if you die or are diagnosed with a serious illness or disability due to an accident.
The government defines occupational disability in the Insurance Contract Act (§ 172 VVG) as:
‘Anyone who is unable to work is a person who, as a result of illness, physical injury or more than age-related loss of strength, will probably no longer be able to practice their last occupation, as it was without health impairments, in whole or in part in the long term.’
Most insurance policies list a minimum 50% loss of capacity to work for longer than six months as an additional definition to get considered for an occupational disability.
What is the difference to health insurance and pension insurance?
You might be thinking, but don’t I pay monthly health and pension insurance to cover any illnesses? I thought Germany is a social country with a great social benefits net that will catch anyone who falls?
Well, you are right, but only to a certain extent. Let’s break down which social benefit pays for what at what time. This is a rough overview, and you will need to fulfill the requirements for each case:
Social benefits for employees in Germany
With your monthly salary, you are already contributing to all the benefits below.
Your Employer: pays your salary up to 6 weeks while you are sick
Health Insurance: covers the treatment costs for your disease and pays you sick pay after 6 weeks of being sick for a maximum of 72 weeks.
Unemployment Insurance: pays you around 60% of your net salary if you lose your job for a maximum of 24 months. You must be fit to work and be looking for a new job.
Care Insurance: pays for care if your independence and abilities are impaired and you rely on others.
Pension Insurance: will pay you a monthly pension once you reach the pension age in Germany.
To answer your question: yes, the German social benefits will kick in and support you when you need it most, but they do not replace your salary long-term. The government support will always be lower than your salary and therefore will not be enough to uphold your lifestyle.
If you are self-employed, you are even more at risk of losing your lifestyle, as you will get a lot less support from the government and need to create a private insurance coverage, income protection insurance being part of it.
Why do you need income protection insurance in Germany?
Your ability to perform your job to earn a salary is your biggest resource. Unless you have other income sources, such as a big inheritance, you build your life standards based on your salary.
Have you ever considered what happens to your life if you suddenly have a life-impacting accident or suffer from burnout and you are unable to perform your job?
Example: Let’s say you are 35 years old and you earn 2.500 euros net a month. You still have 32 years to work until you reach the German retirement age. In that time, you would earn 960.000 euros without considering inflation or salary increases through promotions.
There is no other alternative to your salary to make up for such an amount of money. So income protection insurance can save you from financial ruin. It is especially important if you have family relying on your salary or a mortgage to pay.
The German Social Security provides some support in form of a disability pension (Erwerbsminderungsrente) if you have contributed to the German pension fund for at least 36 months in the past five years.
However, the social benefit in Germany for disability will not be enough to cover all of your expenses, as the average monthly payout was only 917 euros. Additionally, the full disability pension only kicks in if you can’t perform ANY profession for more than 3 hours. So a highly trained doctor who could still work as a bus driver would not receive any governmental disability pension payout.
Without occupational disability insurance, you may be forced to lower your lifestyle and rely on savings or government benefits if you are unable to work due to an illness or injury. Having income protection insurance is a valuable safety net if you rely on your income to pay your bills and support your family.
Most common causes for job disability in Germany
Current statistics show that every fourth person will suffer from occupational disability at least once during their work life. That is a very high percentage. Especially when considering that the likelihood of becoming unfit to work is independent of your profession.
A ‘safe’ office job is no longer safer than a job that requires physical work. This is underlined by the fact that mental illnesses are the number one cause for job disability. Around 30% of all occupational disabilities in 2021 in Germany relate back to mental illnesses such as burnout and depression.
Cancer and diseases related to skeletal apparatus, such as back pain, arthrosis or joint problems each make 19% of all disabilities. Accidents on the other hand are the cause for disabilities in only 8% of the time.
How does income protection insurance in Germany work?
Income protection insurance policies in Germany are highly individual and should be adjusted to your life situation and standards.
You can choose the amount of coverage you want, and the premiums you pay will depend on your age, occupation, and health status. If you become unable to work, you will need to provide medical documentation to your insurer to prove your disability.
Typically, income protection insurance kicks in if your ability to perform your job is reduced by at least 50% and is forecasted to last for longer than six months.
Once your claim is approved, you will receive a monthly pension payment as long as you are seen unfit to work in your last profession. The amount of the payment will depend on the coverage you have chosen. Some policies may have a waiting period before benefits begin, and others may have a maximum benefit period.
The benefit of most private occupational disability insurance over the governmental disability pension is that it protects your ability to perform your specific profession, and it won’t force you to work in a different field or lower-income occupation even if you would be able to.
How to choose the right income protection insurance in Germany
Since occupational disability insurance is highly individual, we won’t be able to suggest you a few different standard policies to choose from, like we do for private liability insurance, for example.
Instead, you need to seek an individual consultation with an independent insurance broker.
Getsafe and Feather are our trusted insurance service providers in Germany that focus on the needs of internationals and offer free consultations. Both focus on your individual circumstance and life situation to scout for the best matching policies on the German market.
Book your free consultation call:
When choosing income protection insurance in Germany, consider the following:
- Choose a policy that covers the length of time you may be out of work
→ ideally, you choose a policy that pays until your retirement age. - Make sure the policy covers your specific and last performed occupation
→ it’s natural that you will change roles and sometimes even industries during your work life. You want your last role to be insured and not the one you held when you signed the insurance contract. - Don’t accept an abstract referral clause (abstrakte Verweisung)
→ it means that the insurance can refuse the payment if you are theoretically still able to work in another equivalent profession, regardless of whether you are able to find such a job. - Check the waiting period before benefits kick in and the percentage of income covered
→ you should aim for a payout of around 80% of your net salary to be able to cover your bills and still save/invest money for your pension. Remember that you (and your employer) will stop paying into the public pension insurance once you are on an occupational disability pension and thus need to put money aside yourself as well. - Make sure the policy doesn’t exclude any pre-existing health conditions (if possible).
- Compare premiums and benefits from different providers to find the best value.
- Check the international cover of the policy so that it is still valid should you decide to move back home or elsewhere.
- Always answer all questions in the health questionnaire honestly.
→ if you lie (even unintentionally), your insurance may deny payment in case of an occupational disability.
It’s important to read the fine print and understand the policy’s terms and conditions. Don’t be afraid to ask questions and seek clarification if needed. Additionally, consider the financial stability and reputation of the insurance provider. Look for a company with a strong track record and good customer reviews. Remember that income protection insurance is an investment in your financial security. Take the time to research and choose the right policy for your needs.
Example of our own experience with an occupational insurance policy in Germany
When we were looking into getting a Berufsunfähigkeitsversicherung (BU) for Jen, my wife from Guatemala, the policy we chose was initially limited to cover only the EU. At the time of signing the contract, we had no intention of moving outside the EU. However, it was very important to us that we had the option to waive that clause in the future (because you never know if someday we do decide to live and work elsewhere).
We were able to remove the limited EU cover a few years later after Jen got her German citizenship. She now has worldwide coverage from her German income protection insurance. This is super cool because, in Guatemala, such insurance doesn’t even exist. But she was able to use the strong German insurance market to her advantage to get this very important financial cover for wherever she chooses to live and work in the future.
Conclusion
Income protection insurance in Germany is a wise investment for anyone who relies on their salary. It provides financial security in case of long-term illness, injury, or disability.
With occupational disability insurance, you can rest easy knowing that you will still receive a portion of your income if you are unable to work due to a covered event. This can help you pay your bills and maintain your lifestyle while focusing on your recovery.
Remember, occupational disability insurance is not just for those who work in high-risk jobs. Anyone can become ill or injured and be unable to work. Seek the opportunity Germany provides by taking out occupational disability insurance.
Book your free consultation call with Getsafe or Feather to start comparing quotes.
Disclaimer: Neither myself, as the author of this article, nor Simple Germany as a business are qualified to provide insurance and financial advice under German law. We cannot provide specialist insurance services beyond any of the general tips contained herein. For insurance advice, we strongly recommend you consult a licensed insurance advisor.
