Life insurance is an essential part of financial planning and in Germany, it is no different. It protects your loved ones from financial hardship in case of your death and helps fund their retirement. It allows you to plan for your own future or provide for a special project, such as buying a new car or getting married.
Life insurance can also be used to pay off debts like mortgages, loans and credit card bills so that nothing falls on your family’s shoulders if something happens to you unexpectedly.
What is German Life Insurance?
Life insurance policy will ensure upon the death of the insured person that a selected sum of money is paid to his or her dependents. This payment amount is determined by the insured person’s age and medical history, as well as other factors.
The life insurance policy can be taken out either in a single sum or in instalments over time. The latter option allows flexibility and helps getting your money back if you need it during the course of your life.
If you have dependents who rely on your financial support or if you have taken out a loan that needs to be paid off, life insurance in Germany assures that the lack of income caused by death will be compensated.
Who Needs Life Insurance in Germany?
Life insurance isn’t just for older people–it’s something everyone should consider having in place before it’s too late!
If you have people who are financially dependent on you, then it is wise to consider purchasing a life insurance policy. Alternatively, if your income allows others to live comfortably without depending on it—e.g., an elderly parent living off of retirement savings or Social Security benefits–then there is no need for at least this form of life insurance in Germany.
Many adults consider purchasing life insurance once they become parents—because a child’s well-being is directly tied to the family’s income. But some couples might not need additional coverage if their savings could comfortably support them in the event of one spouse’s death, or the other can still earn an income.
You should consider life insurance if you fall into one or more of the following groups:
- Parents with children. If you have dependents, it may be necessary to take out a life insurance policy large enough to cover their needs in the event of your death. Coverage will help pay for food, clothing, and other household expenses—such as daycare assistance and tutoring when needed by your kids. If your children are older (or have left the house), you may only need coverage until they enter the labour market/#ENDWRITE
- Primary breadwinners. If you are the main earner in your family, life insurance can provide financial protection for your spouse if you die and they have difficulty making ends meet.
- Self-employed/Businessmen. Life insurance can provide the necessary funds to keep a company running if its owner dies or becomes disabled.
- Old People. In some cases, older adults may not have savings to pay for their funeral expenses. In this case, you will need a life insurance policy large enough to cover the cost of your own burial or cremation in order that family members do not incur these costs themselves.
- Adults with (student) loans. Life insurance can be used to pay off a deceased person’s debt, including student loans.
Financial experts say that life insurance is a valuable type of insurance for anyone who financially supports another person, whether it’s their spouse or children. And even if you do have dependents, life insurance should only be purchased to see out the time that allows you to support your family financially.
What does life insurance provide?
Term life insurance is the most affordable type of life insurance and can be used to pay off debts, such as student loans. It provides a financial safety net for your family or other surviving dependents and can serve as collateral for loans, such as mortgages.
Beneficiaries can be anyone, not just family members. Your dependents will get the insurance payout even if you only started paying premiums a short time before your death. However, the policy will only pay out if the insured event occurs during the term of insurance.
When you take out a life insurance policy, the insurer promises to pay your beneficiaries or estate (the people who will receive the money) if something happens to you. Term life insurance does not build up capital like the policies sold for endowments do.
As a result, premiums are considerably lower than those paid by someone with an endowment policy—though you should still make sure that your monthly payments will not be too high to cover all of your other bills.
If the insured person survives past the agreed-upon term of their policy, they do not receive an insurance benefit. Their premiums are also not reimbursed because the insurer has been bearing all of that risk—the agreement is simply over at that point. It’s like cancelling your gym membership when you start to lose weight: if your goal is accomplished before a specified date then no refunds will be made and there’s nothing more to talk about.
Pleae note that if a person takes out insurance on the life of someone else, that is if the insured and policyholder are not the same person—the insured must give their written consent before policies under certain conditions become effective.
What are my obligations as the policyholder or insured person?
- Paying the premiums on time and in full. If you don’t pay premiums, your policy will lapse and any benefits paid out will not be refunded.
- Notifying your insurer of any changes to your health status (e.g., if you are diagnosed with a terminal illness) so that they can adjust the premium accordingly.
- You might also be subject to additional obligations, so you should carefully read your insurer’s general terms and conditions for term life insurance (Allgemeine Bedingungen für die Risikolebensversicherung).
How Does Life Insurance in Germany Work?
If the person who has a life insurance policy dies, the life insurance company will pay a particular amount of money to the dependents (which are assigned by the insured person the moment they signed the contract).
With this amount, the family will be able to support dependents, maintain their expenses, and pay the insured person’s loan. Apart from helping to support dependents, life insurance will also be of help when it comes to immediate cash or funeral expenses.
How to Get Life Insurance in Germany?
The process of getting life insurance in Germany is not as complicated as it may sound. You can get a quote from a provider online, over the phone or at your local branch office. If you already have an existing policy, all you need to do is make sure that it’s still valid and up-to-date.
The first step before getting life insurance is to figure out what kind of coverage your family would need if something happened to you.
You should consider what the costs will be in a worst-case scenario, such as immediate funeral and medical bills. Taxes can also factor into your planning calculations long before you die; if you don’t take them into account now, it could impact your financial plans for retirement down the road. Moreover, you should take into account long-term expenses like college tuition, debt payments, and retirement funds.
You may purchase life insurance online, by phone, or in person (by visiting a company’s branch). An insurance application will ask you to provide specific documents, personal IDs, bank statements, list the beneficiaries, and ask a set of questions related to your circumstances (spouse, children, debts, mortgage, health, hobbies, etc
How to buy life insurance online in Germany
Tips to buy life insurance online in Germany:
- Finding a life insurance company that suits your needs. You can purchase life insurance from a wide variety of life insurance providers in Germany. You’ll need to choose which one best suits your needs and finances.
- Answer a series of questions. You’ll need to go to the chosen provider’s website and select the type of life insurance you need after selecting your provider. Questions may be regarding your health, whether you are a smoker or not, your family’s health, your job, whether it includes dangerous activities, your lifestyle, and many more.
- Decide how much insurance you require. In the event of death, you should determine how much money your dependents would need. Funeral costs, debts, future costs, etc are taken into account when deciding on your total needs.
- Specify the contract length. Depending on how old and dependent your dependents are (if you have children), how much money they will need to pay for college, and how much you have to lend (the amount of the loan), etc. Life insurance can usually last decades, 1 to 3 decades, depending on who you have dependents.
What factors determine Life Insurance costs in Germany?
Life insurance costs in Germany are largely determined by the amount that you are insuring, the length of the contract, and your age. There is also the death risk of the insured person at the time of the contract which plays a role in the cost of life insurance in Germany.
This means smokers might have to pay more than nonsmokers. People with a risky job may need more money for life insurance, for instance, if the job is physically demanding or the insured person has particularly risky hobbies.
You will have to pay monthly premiums as long as you determine how long your life insurance contract will last. As a rule of thumb, you should stay insured for at least as long as your children are working age (after education) and be financially independent adults or until you pay off any debts that might arise.
In essence, you should also consider staying insured as long as your family members are dependent on financial compensation.
Life insurance premiums won’t be the same as the next person’s since they are calculated according to your needs and circumstances.
The following factors affect how much you pay:
- Your age when applying for a policy;
- Your gender (women tend to live longer than men);
- Whether or not there are other dependents who need financial support after your death;
- What is your annual income;
- Which Policy type (joint/single names) are you seeking;
- What is your required Coverage Amount;
- What is the Length of the policy;
- Your health/lifestyle.
How much insurance should I take in Germany?
Newcomers to the country to work out how much insurance they should take out. Many people end up either underinsured or overinsured.
The amount of life insurance needed depends on various factors, such as how much money you make and how many dependants there are in your household.
If you have an important role in the family business or if someone else relies on their salary from working with or for you then it makes sense to take out more than just basic cover (which usually only covers funeral costs).
The amount of insurance can be determined easily with two simple strategies.
- First and foremost, leave your property debt-free. Insurance would then be measured closely by the size of the outstanding mortgage debt, which decreases with time.
- The second step is to specify the minimum free income you intend for your surviving partner or family to have. After that, you add up the expected income shortfall to determine the amount of insurance needed.
You usually want to cover five to 15 times your after-tax income at a time when your dependents are no longer financially dependent on you. Whether the children earn their income, or if you build up other income.
Additional features to have?
The basic protection is generally sufficient. Nevertheless, many term life insurers in Germany offer you additional features at an extra fee. Here are some examples:
- If you have a serious illness and the life expectancy is less than one year, you will receive an early (full) payment of the insurance.
- The insured term will be extended without a new health check.
- An increase in the insurance amount in certain events, such as the birth of a child.
- An occupational injury exemption from having to pay your monthly payments
Adding these components makes sense but not in all situations. Most commonly, the basic protection suffices to secure your mortgage or protect your surviving partner’s financial standing.
What are the different tariff types available?
Germany offers three different, common options for term life insurance:
- Constant insurance amount
- Linearly decreasing insurance amount
- Annuity decreasing insurance amount
The Constant Insurance Amount can give you peace of mind and is easy to track if your monthly premium fits into your budget. Additionally, insurance is always secured in this approach.
A linearly falling insured sum means that the contributions will decrease over time. You do not need to protect your mortgage as it is decreasing and this method allows you to take this into account.
The annuity falling insurance sum can be calculated individually according to the terms of your mortgage, so the mortgage is always secured and the premium is as low as possible. This solution can also be combined with a constant insurance sum for the first few years and, for example, the insurance sum will decrease in the third year. Savings-minded individuals may be interested in this option.
Difference between tariff premium (Tarifbeitrag) and payment premium (Zahlbeitrag)
The difference between tariff premiums (Tarifbeitrag) and payment premium is that each represents the value of a life insurance contract at any time in time, and is therefore changed as circumstances change or new contracts are signed. On the other hand, the latter is fixed until either party ends it or cancels it-usually when an insured person stops paying premiums altogether or has passed away, so they don’t have any reason to remain with a provider like
What can I do if I no longer want term life insurance?
You are entitled to cancel your policy at any time. Life insurance contracts with regular premiums are normally terminated without notice by policyholders. However, the termination will only take effect after the end of the insurance period.
Usually, the earliest termination date is therefore the end of the first policy year. The insurance period is the period of time for which the premium is determined. Typically, this is one year.
Detailed conditions and consequences after terminating a policy are provided under the general insurance conditions. To avoid any negative consequences, you should read this document before terminating your policy.
Term life insurance policies where insurance premiums are paid in one lump sum are an exception. Such policies do not have a statutory right of termination. However, termination rights may be included in general insurance conditions and therefore form a part of your contract.
You will not receive reimbursements for life insurance premiums when you terminate your policy early.
Life insurance and tax obligation in Germany
As part of the German tax regime, any death penalty payout can be tax-free. A spouse can be saved from inheritance tax by making a contract on their life. It is crucial to consider this for unmarried couples as their allowance is just €20,000.
Who supervises/regulates life insurers?
The BaFin oversees German insurance companies and monitors their daily operations. As part of BaFin’s responsibilities, all insured persons are adequately protected in terms of legal and financial interests.
BaFin accepts and processes complaints about individuals’ insurance companies in order to protect their interests. However, it should be noted that BaFin cannot enforce your rights as an individual. That responsibility lies with the federal and state courts.
The quality and contents of insurance policies are not subject to review by BaFin, and BaFin cannot review insurance terms and conditions. According to the statutory requirements in the life insurance industry, insurers are generally free to decide on the design of their policies, the scope of coverage offered and the calculations that govern their policy products (contractual freedom).
In cases where baFin believes that the terms and conditions of its insurance are in breach of the law (in particular consumer protection laws) or (high) court cases, the insurer can take steps to remedy or prevent such shortcomings.
Conclusion
We hope you enjoyed this guide to the best German life insurance. If you are looking for a life insurance policy, it is important to understand that there are many different types of policies to choose from. With this in mind, we want to provide you with a few tips and pointers so that you can find the best one for yourself.
First off, make sure that you understand what German life insurance is and how it works before you start shopping around for quotes. Secondly, be sure to ask questions about each policy’s terms and conditions so that you know exactly what you’re getting into before signing on the dotted line. Finally, don’t forget about the price! You may find that one company offers better terms than another but charges more overall.