Insurance in Germany: Separating the must-haves from the don’t-bothers
Insurance in Germany is a HUGE industry. Germans seem to love their insurance almost as much as the British enjoy talking about the weather. I often joke that given half a chance, a German would insure his shower curtain against water damage. Although this is obviously a bit of an exaggeration, it is important to remember this:
Germans by nature tend to be more risk-averse, and as such may feel more at ease being insured against some of the less probable misfortunes in life than other nationalities do.
If your employer’s HR department or a German colleague, friend, or perhaps that helpful employee at the bank (who earns a meaty commission from selling you insurance), recommends an “essential” list of insurance in Germany, the chances are that most of them are at best useful but not an absolute must have.
“How likely is this to happen to me?”, and “what are the potential consequences for my loved ones?” should always be the best way to evaluate whether or not a specific insurance product is necessary.
So, with that word of caution said and done, let’s take a look at the most common types of insurance out there:
Sozialversicherungen (Social Security)
If you are a salaried or hourly paid employee, i.e. you are paid a regular wage by an employer, then you are liable automatically to pay these insurances and they are deducted directly from your payslip. The 2 main areas of social security this covers are Rentenversicherung (state pension) and Arbeitslosenversicherung (insurance for unemployment benefit).
It also covers longer-term sickness benefit and a basic pension for those who have contributed into the system and are then declared unfit to work. The conditions governing this are beyond the scope of this article and to some extent dependent upon individual circumstances.
For freelancers and the self-employed, social security contributions are voluntary.
NOTE: If you have a part-time mini job on a €450 basis, these automatic deductions are not made from your gross pay.
Krankenversicherung (Health Insurance)
The most important insurance you need to take out in Germany. Everything you need to know about the German healthcare system and the different types of insurance (public vs. private) was already covered in an earlier article. This is a much bigger topic than can be covered in one paragraph here, believe me!
Health insurance is compulsory for everybody legally resident in Germany, regardless of employment status.
The different types of insurance covered below, on the other hand, are all insurance policies which are optional. To a varying extent, these may or may not be considered necessary, depending on your personal situation and your own comfort level when it comes to risk.
Haftpflichtversicherung (Personal Liability Insurance)
This one really is a no-brainer. So I’m not a lawyer, but German law makes it easy for people and companies to claim damages from individuals for financial losses caused by their actions, whether they are deliberate or not.
An example: A friend of mine was in a pool hall after drinking a few beers, and during a game he accidentally tore the green material covering the pool table with his cue. If he didn’t have Haftpflichtversicherung, the owner could have pursued him and ultimately taken him to court to recover the damages.
Bearing in mind that this insurance costs €30-€40 annually for a basic policy, it would be foolish not to consider it, unless you are really that broke that you're living on bread and lentils.
This insurance does not cover more specific instances, such as covering damages caused by your pet, or by your tenants if you are a landlord renting a property.
Hunde-/Pferdehaftpflichtversicherung (Horse / Dog Liability Insurance)
The same concept as the above, but for covering damages caused by your dog or horse. Yes, I kid you not, this is a real insurance product.
Hausratversicherung (Home Contents Insurance)
This is a general home contents insurance policy and, just like in your home country, there are varying degrees of cover that you can take out. I have a fairly basic policy for example, which covers me for theft of most household items, with a ceiling of €5000 for what they will pay out on one individual item.
If you live on the ground floor, or in a large building with lots of comings and goings, or in a shared flat (WG), or in a dodgy area, then you are more at risk to theft or break-ins. My advice would be that this is an absolute must. For anyone else, I would also strongly recommend at least a basic policy. Although, I have to admit that I didn’t bother for the first couple of years I lived here, until I had a few valuables worth insuring.
Many home contents insurance policies will also cover you as a tenant for any damage caused to the landlord’s property (water damage for example) which your landlord may try to claim from you in excess of your security deposit. Definitely check whether this is included!
When you consider the relatively low cost of taking out a contents insurance policy, it should be an obvious decision. It depends on numerous factors but it is possible to obtain a basic policy for less than €50 a year.
KFZ-Versicherung (Car insurance)
Also sometimes referred to as Autoversicherung. This is another topic in itself. All I will say is that if you decide to buy a car here, it is compulsory to take out at least basic car insurance which covers you for your third party liabilities in case you are in an accident in which you are at fault.
For the Brits, if you bring a car over from the UK your insurance will usually only cover you for 90 days, at which point you would either need to officially “import” your car or take it back home and buy a German registered vehicle.
For other European countries, I’m not sure how it works but you do tend to see a quite a lot of cars here registered in Eastern European countries. Maybe if anyone from Poland, Romania or Bulgaria is reading this, they could leave a comment please? 🙂
Rechtsschutzversicherung (Legal Insurance)
Legal insurance covers you for any procedural costs you might have to pay for consultation and advice from lawyers, or even legal costs for having to resolve a dispute in court.
There are all sorts of cover available, the most basic of which covers general legal insurance for everyday situations. This can be purchased for less than €10 per month. It gets gradually more expensive the more you add on. Covering disputes with your employer or for road traffic offences are usually fairly cheap add-ons, whereas disputes with neighbours or your landlord tend to be more expensive extras (usually because they are more complex = more working hours for your lawyer!).
On the one hand, I would suggest this is a “very useful but ultimately nice-to-have” insurance for regular employees. However, I would place it in the “absolutely essential” category for freelancers and small business owners, especially those who do not enjoy limited liability company (GmbH) status.
Sterbegeldversicherung (Death Expenses Insurance)
This covers the cost of a funeral, burial and all associated costs which otherwise would fall to your next of kin, who most likely will be grateful to you in absentia for not having the added stress of needing to pay for all this as well as the trauma of dealing with German bureaucracy at a deeply distressing time. Like most professional services in Germany, undertakers aren’t exactly cheap.
Right, moving swiftly onwards, before you reach for a Radiohead CD…
Pflegeversicherung (Care Insurance)
This is an add-on to most private health insurance policies, covering cases where you require care assistance in old age. If your move to Germany is not likely to be permanent, it’s unlikely that you need to worry much about this.
Something which may be worth considering though is an offshoot of this insurance, which covers care costs associated with being rendered disabled.
Risikolebensversicherung (Life Insurance)
Life insurance in Germany works in a similar way as it does in most developed economies. It’s something that is likely to be of interest if you are leaving behind a partner, dependent children or others who may be financially dependent on you in the case of death. Otherwise it is not something most other people would really need to consider as a must. This is a complex topic which is beyond the scope of this article. Speak to a specialist financial advisor if you are seriously considering taking out life insurance in Germany.
Unfallversicherung (Personal Accident Insurance)
This one is sometimes offered by employers as a staff perk. You should also check with your employer what the policy is for cover when you are on business trips if travelling is a requirement of your job.
Some of the cover offered by this insurance is also covered by insurance against incapacity or long-term sickness (see below). The main difference here is that this insurance protects you in case of an accident, especially in free time or sport activities, as opposed to an illness. There are many different policies and grades of cover and it requires extensive research to identify the correct policy, should this be of interest to you.
Personal accident insurance may be especially relevant if you participate in hobbies which have a higher than average risk of accidents, or if you are reliant on being in good physical health for your job.
Berufsunfähigkeitsversicherung (Incapacity To Work Insurance)
Try saying that one after a few beers!
Berufsunfähigkeitsversicherung (literally translated as incapability to work insurance) is there to cover you in case an illness, disability or accident renders you incapable of working for a significant length of time. This can be anything from covering a small gap when your statutory or employer’s sick pay runs out up until the time you return to work, all the way through to permanent incapacity and a supplementary income to any state pension you would be due. Pensions are not a universal benefit in Germany, and what you would be due depends to a large extent on how much you have contributed into the German social security system over your working life.
If you’re planning on staying in Germany permanently, this one is definitely something to consider. It really depends on how risk-averse you are, your age, general level of physical and mental health, and how physically demanding your job is.
Fahrradversicherung (Bicycle insurance)
Definitely recommended if your bike is worth more than a couple of hundred Euro and you use it as a regular form of transport. Bike theft is unfortunately a major problem in larger German cities and university towns, and the Polizei are usually pretty uninterested in tackling it. The chances of you getting your two-wheeled friend back are very slim indeed.
Most home contents insurance policies will only cover theft of a bicycle from outside your home / cellar between 06:00 and 22:00. In other words, almost useless.
It’s a cost vs. potential benefit calculation: It is possible to get bike insurance cover for around €5 per month, depending on the policy and the value of your bike. If I regularly had to lock up by bike in and around town and used it for anything other than sport & leisure, I would definitely buy this.
Private Rentenversicherung (Private pension insurance)
This one is also another topic within itself, and is far more complex than the scope of this article.
All I will say here is that the current state pension system is based on a social contract of the current working population funding those who are currently in retirement. This raises some serious issues:
- The demographic pyramid and fertility replacement rate in Germany makes for pretty worrying reading.
- It is highly unlikely that large-scale immigration will be able to completely plug this gap, whatever the optimists may say.
- The major political parties do not seem willing to risk political capital by completely and radically reforming the current set-up.
Whether you take out a private pension, or invest in gold, bitcoin or real estate, I would strongly recommend that you don’t depend on your sole source of retirement pension being what “Papa Staat” theoretically promises you. I genuinely believe that anyone under 40 cannot rely on this as a source of future income.
Handyversicherung (Mobile Phone insurance)
No need to say any more on what this one is. Everyone knows somebody who goes through mobile phones faster than toilet paper! The main watch-out here is that mobile phone providers / stores will usually offer you a pretty crappy deal when compared to other policies out there on the market. Buyer beware, and definitely do your homework before taking out insurance with your contract provider.
This is meant to act as a guide and to point you in the right direction in terms of where your priorities may be. You should inform yourself adequately before making decisions which could influence your future financial situation. Speak to an insurance professional if in doubt.