BIOMETRIC RISK INSURANCE
Occupational disability, unexpected death or invalidity following an accident – even if none of these things really have to happen, the question arises: what happens if they do? How can I protect myself if one day I am no longer able to work and earn money? Who will support me if I suddenly need daily assistance after an accident? How is my family going to keep up with mortgage installments on our property and could they risk losing their home if I happen to unexpectedly pass away?
This is where biometric risk insurances come in handy and give you peace of mind.
Risks that can influence life expectancy or that can drastically change the course of your life are called biometric risks. Though it is not possible to predict when they will occur or whether they will occur at all, it is possible and recommended to insure yourself against those risks by subscribing to a biometric risk insurance. These come in many different types, the most common of which I briefly describe below.
I can broker the following types of insurance contracts for you:
Term Life Insurance
Term life insurance (Risikolebensversicherung) is one of the most simple, basic and pure life insurance products. It provides compensation to the family or nominee only at the demise of the person insured. There is no saving component present in the term plan (as opposed to a classic life insurance plan, in which premiums are divided into two categories, where one part is allocated towards providing death benefit to the nominees, and the other part is allocated to the investment and saving component). Thus, term life insurance is only designed to offer death benefits and no survival benefits and can therefore be suscribed to at a relatively low premium, which is dependant on the insured sum.
It is particularly useful for young families who only have small savings or are still paying off loans or a mortgage and where the main earner wishes to make provisions for bereaved dependents after his or her demise.
For non-married couples or unregistered civil partners, taking out term life insurance also offers a tremendous advantage with regards to estate taxation (Erbschaftssteuer). Let me explain:
A death benefit from a term life insurance policy is generally subject to estate tax and is therefore taxable when it is paid out. While spouses or registered civil partners, in Germany, enjoy a very high tax allowance of 500.000 €, partners in a non-marital partnership, have only a very low tax-free amount, which is currently 20.000 €.
There is a way, however, for couples who are neither married nor have a registered civil partnership, not to pay any estate tax in the event of death of either of the partners. However, this only works if the partners “cross-insure” each other.
In the crossover model, the partners, using two contracts, do not insure their own lives, but that of the respective partner. In the first contract, partner A is the premium payer, policyholder and beneficiary, while partner B is the insured person. In the second contract, it is the other way around.
Since the policyholder and beneficiary are identical, the receipt of the insured amount in the event of the death of a partner is not considered an inheritance, and, in consequence, no estate tax is due. Inheritance tax is only incurred with the crossover model if both partners die at the same time (e.g. in the event of a car accident). In this case, both life insurance policies are paid out to the respective heirs, e.g. the children, and the usual tax-free amounts apply (e.g. 400.000 € for children).
Get in touch with me if you require more information on the topic of term life insurance or to receive a personalized quotation.
Occupational Disability Insurance
Did you know that mental illness is by far the most common reason why people become unable to work according to german statitics (https://de.statista.com/statistik/daten/studie/536354/umfrage/verteilung-der-ursachen-von-berufsunfaehigkeit-in-deutschland/)? Every third person who becomes unable to work suffers from depression, burnout or other mental health issues. Protecting your working capacity, for example by subscribing to occupational disability insurance, is therefore not only recommended for people who work physically and are at higher risk of losing their working capacity. More specifically: not only blue collar workers, but also white collar workers and people holding high-responsability managerial positions should be aware of the risk of occupational disability and its consequences.
Think of it in the following terms: What is your most valuable possession? Is it your car, your house or maybe even your boat? Your working ability can only smile wearily at the value of these things. On average, skilled workers (Fachkräfte) earn a little more that 1.8 million €uros over the course of their working life, while managerial staff (Führungskräfte) even earn a stunning average of nearly 3.7 million €uros over the course of their working life (https://www.dia-vorsorge.de/einkommen-vermoegen/das-lebenseinkommen-der-deutschen/). Although the probability of you losing your ability to work depends on many fators (check your individual risk here), it remains postive and should therefore not be neglected.
Although in Germany, a statutory invalidity pension (Erwerbsminderungsrente) exists in case any disability you may suffer from affects your general working capacity either completely or partially, it is not guaranteed that you get such a pension granted if you have been classified as unfit to work in your specific profession (berufsunfähig).
One becomes eligible for a full disability pension when he or she can generally work less than three hours a day; if one can generally work between three and six hours a day, he or she receives half of the full reduced earning capacity pension (Rente wegen teilweiser Erwebsminderung). The amounts of the full and reduced statutory disability pension you would receive, should you be eligible for it, is mentioned in the pension information you receive every year from the Deutsche Rentenversicherung. Have a look at this document. You will soon realize that even in the case you would be entitled to a state invalidity pension, you will hardly be able to maintain your current standard of living without supplemental occupational disability coverage.
Also note that only those contributing for at least five years to the statutory pension insurance in Germany may be considered for eligibility to receive statutory invalidity pensions. Since a lot of self-employed and freelancers do not contribute to the statutory pension insurance, it is highly recommended such individuals subscribe to an occupational disability insurance.
Now that you are aware of the risk of occupational disability and understand the limitations of the statutory invalidity pension mechanism, don’t delay the decision to subscribe to an occupational disability insurance. Such an insurance comes into play once you are only able to work less than 50% of your previous working hours in your current occupation for a period of at least 6 months. Its premium depends on the contractually agreed monthly pension that you get paid out in the event of occupational disability, which can be up to 80% of your current net income. Note that the successful conclusion of an occupational disability insurance policy is preceeded by a stringent health check, which may lead to the its coverage being limited due to your individual health status.
Get in touch with me for more information about the topic of occupational disability insurance or to receive a personalized quotation.
Private Accident Insurance
Accidents can happen in the blink of an eye and may leave you with more than just an unpleasant memory. Statutory accident insurance, while also being very limited in its scope of coverage, only provides coverage for accidents that happen at school, at your place of work or vocational training, or on the way to these places. But did you know that most accidents actually happen during one’s free time and at home, and that a surprisingly high number of them even end fatally?
Victims of accidents often have to bear considerable short-term or long-term financial burdens, for example as a result of long-term physical or mental impairment, or due to rescue operations, which can be very costly. Private accident insurance provides protection for such financial losses by paying the contractually agreed benefits in the event of an accident.
A common misconception is that your health insurance comes into play in the event of an accident and that a private accident insurance is therefore unnecessary. This is partly true, as your health insurance covers the cost of medical treatment, even in the event of an accident. But while health insurance only covers the costs of treating acute injuries, private accident insurance provides cover for any long-term physical or mental impairments resulting from an accident.
More specifically, the most important benefits that one may choose to include in a private accident insurance policy are set out below:
- Invalidity benefit: invalidity describes the state in which a person’s physical or mental capacity is permanently impaired. The insurance benefit is usually based on the degree of invalidity or permanent impairment, which is assessed by a doctor and calculated as a percentage, and on the agreed sum insured.
- Benefit in the event of death resulting from an accident
- Accident pension (Unfallrente)
- Daily accident allowance, daily hospital allowance, convalescence allowance
- Transitional allowance: before the accident insurer pays out any benefits, the degree of invalidity must be determined, which usually takes some time. A transitional allowance can be agreed so that the insured does not encounter any financial hardship during this time. In the event of an accident, this is then paid out immediately, before the degree of invalidity is determined.
- Costs of search & rescue or recovery operations
- Necessary plastic surgery in the aftermath of an accident
Get in touch with me to find out more about the topic of private accident insurance or to receive a personalized quotation.
