People coming to live in Germany usually quickly find out that people here often have a fat file full of insurance contracts... newcomers normally don't know which ones are mandatory, which ones are essential, useful or useless to have!
Some of these insurances are ones which people have never heard of in their home countries. Of course, this often boils down to a different legal and social system and a different "attitude" to life…. so what is obligatory? HEALTH INSURANCE is the best example. Germany has by far the most complex health insurance system in the world. In most other European countries, for example, but also in Latin America, Australia, New Zealand, parts of Asia, etc. - health insurance is set up nationally with public insurance for all and with the right for individuals to take out supplementary private policies if they want better or faster treatment, for instance.
Germany? Well, to start with, there is NO equivalent of, for example, the NHS in the UK – e.g. everyone in the same system. There are around 110 so-called gesetzliche Krankenkassen (public insurance funds) and around 43 private ones! Health insurance is a legal obligation for everyone residing and registered in Germany, including foreigners. Minimum requirements for a health insurance contract to be valid include: the right to hospital treatment, GP treatment, check-ups and (compulsory) long-term nursing care (Pflegepflichtversicherung ), introduced in 1995 when it was broadly agreed Germany had a demographic problem which could lead to severe underfunding for care for the elderly (e.g. in nursing care homes) in the future. Even babies must have this extra social insurance in their health insurance!
Whether you should go for public or fully comprehensive private insurance depends on many factors, including legal ones and is a topic mentioned elsewhere on this website. SOME people must have public insurance, SOME must have private insurance, and SOME can choose. SOME cannot get into any of the parts of the German system and need alternative solutions!
USEFUL supplementary private insurances IF you are publicly insured:
- For a private or semi-private room (including rooming-in options for a parent of a small child)
- For specialist dental treatment and to reduce costs later of expensive dental work such as crowns, in-lays
- For sick pay benefits: as a self-employed person, you depend on your income to pay your bills but if you have an accident or get very ill for a few months, you may lose your ability to generate income. In this case, a sick pay supplementary insurance MAY be useful – though other alternatives explained later MAY be more useful
Term life insurance (Risikolebensversicherung)
Absolutely ESSENTIAL if you have a mortgage and don´t want to leave your family in debt if you die. Or even if you don´t have a mortgage but are the major breadwinner in the family and don't want them without financial resources in the event of your death. This kind of insurance is pretty inexpensive and can even include a tax-free death benefit up to one year before you are medically expected to die. I know... morbid, but reality.
Occupational disability insurance (Berufsunfähigkeitsversicherung)
ESSENTIAL for anyone working for a living who may fall seriously ill or have a terrible accident at some as yet unknown stage and then become unable to earn a living. Some people may be unable to take out such an insurance for health or cost reasons, or even because their profession is not listed as one which can be properly classified - certain types of artists, for example.
An alternative can sometimes be a "mini version" to include cover for the main parts of your body which enable you to work - hands, feet, organs, eyes, and so on.
Critical illness insurance (schwere Krankheiten Absicherung)
A VERY USEFUL supplementary insurance for many, critical illness insurance covers you in case you get diagnosed with a terrible illness/disease such as a heart attack/stroke/cancer, or over 40 more dreaded ailments. This is very useful for self-employed people who need a cash pay-out (tax free) in the event they are medically diagnosed with one of these illnesses and who may not necessarily even have to stop work but who may need a cash injection to reorganize their life, home, etc.
Personal accident insurance (private Unfallversicherung)
This is VERY USEFUL in case of permanent damage to a part or parts of your body, which again can restrict your ability to earn money.
This is equally important for children and young people in general and it is possible to include some "dreaded diseases" in a package for them. Please note that holders of restricted work/residence permits may find it difficult to acquire such insurance in the German system.
Preparing for retirement
There is a myriad of choices here in Germany. Employees can choose a company pension scheme (sometimes directly connected to the employer´s choice of provider/tariff agreement etc.).
A popular model is a so-called Direktversicherung (deferred payment) whereby you can deduct payments from your gross salary and enjoy some reductions in social insurance/tax contributions. An employer MUST allow you to take out such a contract. The employer must (in 2019) also contribute a part, too.
In some cases, employers will also agree to share the costs or even pay for the full contribution as a perk and thus also save themselves some social insurance/tax contributions.
HIGHLY RECOMMENDED, but not possible for self-employed/freelancers – for whom a so-called Rürup Rente is highly recommended instead. You pay into an insurance with your choice of, for example, equity funds. This is a great way of saving for the future with high tax benefits. There are, however, pros and cons. As an example, the pension cannot be paid out in a lump sum upon retirement, instead it is paid out as a guaranteed lifelong pension. This may not suit everyone.
Another model traditionally VERY POPULAR with Germans is the so-called private Kapitallebensversicherung. With this, you pay into a "black hole run by the insurance provider" with very low guaranteed interest, no choice in how your money is invested, and will lose your money because it is not inflation-proof. ABSOLUTELY USELESS!
House contents insurance
Covers you in case of fire, water damage, vandalism, theft from your home – whether as a tenant or owner. VERY USEFUL if you have acquired possessions over the years – furniture, clothing, jewellery – you name it. If you have stuff which you would find it hard to replace financially e.g. in case of a fire destroying everything – a MUST HAVE.
If you have only a room with two books, a bed and a tube of toothpaste – SUPERFLUOUS.
INTERESTING: German household insurance is not based on how many bedrooms you have but on how many square metres your place has, and the exact address. Note: you are underinsured if the insurance is for less than 650 euros per square metre! The technical term is Unterversicherungsverzichtsklausel. If you can pronounce that word, you are good enough to deal with German insurances on your own!
Legal insurance (Rechtsschutzversicherung)
To cover lawyer´s and court costs. VERY USEFUL if you are an employee or tenant (though you might find it useful to opt for membership of a Mietverein or tenant´s association instead in some cases). Also very useful for disputes with neighbours who don´t like your choice of garden gnome or if your tree is hanging over into their garden... such disputes are not uncommon!
Cover for traffic disputes or for compensation claims for public transport users can also be included in a package… just note there are waiting times for most aspects of legal insurance (except for traffic insurance) and NO COVER is available for pre-existing disputes!
Personal and professional liability insuranceOwners of a house or building - absolutely mandatory to have cover for at least fire damage. In many cases, extra cover is also required.Private liability insurance (private Haftpflichtversicherung ) is ESSENTIAL in Germany because under German law YOU are liable for damage to another person´s health or wealth or property (eg the fittings and fixtures of the owner of your rented flat/house ) through an act of negligence.
Unmarried couples can also be co-insured under one policy (and including and children )
Even a top class, modern and comprehensive contract for a family can cost as low as 80-100 euros a year
The policy should cover you worldwide on any street and in any building 24 hours a day!
It is NOT a legal obligation to have such an insurance but 100% essential.
MANY professions require you to have an insurance in place to cover against negligence in your professional activities. In some cases, such a contract is MANDATORY and in others simply highly recommended.
Animal owners: dog owners MUST have dog owner liability insurance in some parts of Germany to be able to legally register their dog with the authorities. In other parts of Germany, it is just recommended.
Very important to have even if not a legal requirement where you live.
Your home cat doesn´t require its own contract… that is included in your human personal liability insurance!
Horse owners? Highly recommended.
Vehicle drivers: a no-brainer. Compulsory motor vehicle insurance
Owners of a house or building - absolutely mandatory to have cover for at least fire damage. In many cases, extra cover is also required.