Cancer, an accident, a mental illness or a physical disability – most people are afraid of risks that threaten their very existence. The desire to protect oneself and one’s loved ones at least from the material consequences of such a crisis is widespread. Insurance companies have adapted to this. But finding the right protection is not easy. Because the market is very confusing. Some policies are essential, many are superfluous, and others don’t provide the protection hoped for. An overview of the most important insurances for existential risks.
disability insurance
#geldnewsletter Insurance: When life is at stake Serious illnesses such as cancer scare many people, as do accidents and disabilities. Insurers promise protection against the financial consequences. But not all policies are good.
(Photo: Jessy Asmus)
If the workforce is absent, this has drastic financial consequences. To protect yourself against the risk, disability insurance (BU) is the first choice. The BU applies to people who, due to an illness, an accident or a decline in physical or mental performance, are at least 50 percent unable to work in their profession in the long term. Disability can affect anyone, not just physically active people such as craftsmen, but also office workers. More than 40 percent of all BI cases are now due to mental illness.
“The BU is one of the most important insurances and is the best way to secure your own workforce,” says Bianca Boss from the board of the consumer organization Bund der Versicherungen (BdV). Because there has been little support from the state for a long time. Since 2001, anyone born after January 1, 1961 has only received a meager disability pension from the statutory pension insurance system in the event of occupational disability.
When asked whether a BU case exists, the degree of occupational disability is determined. If this is at least 50 percent, the insurer pays the full agreed monthly pension. “The best monthly pension should be 75 percent of net income,” says Philipp Wolf from the consumer advice center in Rhineland-Palatinate. The higher the pension should be, the more the contract will cost. In any case, the BU is quite expensive: even people with an office job often pay a higher double-digit euro amount per month, for craftsmen and people with dangerous or physically demanding jobs, monthly contributions of 200 euros and more are not uncommon. That is why many do not even take out these policies.
It is worth taking care of a BU early on, advises consumer advocate Wolf. Younger customers tend to be healthier than older customers, and the less there is on the medical record that the insurer analyses, the greater the chance of an affordable policy with no price premiums and no disease exclusions.
disability insurance
Policies that also pay a monthly annuity include disability insurance. “It’s sometimes significantly cheaper than a BU, but there are high hurdles before the insurer pays,” says Marc Jacobs, an insurance broker from Aachen.
Because disability insurance only pays if the insured person can work less than three hours a day – in any profession. A scaffolder who can no longer work as a scaffolder because of a severe joint condition would receive no benefit from a disability policy while he was theoretically able to sit at a desk. It’s different with the BU, it always refers to the last job you did. Whether or not you could do another job is irrelevant.
basic ability insurance
However, this protection is not linked to the ability to work. The insurance applies if the insured has lost certain physical or mental abilities, such as the use of hands or vision. In contrast to the BU, mental illnesses are not included by default. Some providers now also insure certain mental illnesses, but mostly only individual, serious illnesses. “This policy is not really suitable for securing workers,” says Bianca Boss from the Federation of Insureds.
Even with basic ability policies, there are high hurdles for the insured event. As a rule, the insured ability must have been completely lost for money to flow. If the ability is only severely restricted, it can happen that the insured person is unable to work as a result, but still does not receive a pension from his or her basic ability policy.
accident insurance
It is one of the policies that German citizens particularly like to buy. According to the insurance association GDV, there are around 25 million contracts in Germany. After an accident – by definition, this is an event that suddenly affects the body from the outside and as a result of which the insured person involuntarily suffers damage to his or her health – the policy pays out an agreed sum in one fell swoop.
However, consumer advocates consider the policy to be less important than many customers. While statistically every fourth person becomes unable to work at some point in their life, only one percent of all severe disabilities are caused by an accident. This is shown by figures from the DAV Association of Actuaries and the Federal Statistical Office. And according to the analysis company Morgen & Morgen, less than eight percent of all long-term disability cases are due to accidents.
A traveler with a leg in a cast and crutches: After an accident, the agreed sum is often paid out in one fell swoop.
(Photo: Christoph Hardt/imago images)
In the event of accidents at work and on the way to work and home, employees are covered by statutory accident insurance, the same applies to students. Private accident insurance therefore primarily covers the risk of accidents in the home, during sport and during leisure time.
Accident insurance policies can also include an accident annuity, which the insurer pays out each month after a serious accident, similar to a BU annuity. But that doesn’t happen very often, reports consumer advocate Wolf. “Policies that offer an annuity will only pay if the degree of disability is 50 percent or more,” he explains. “But most accidents are more in the range of 20 percent.”
Dread Disease
To protect against the risk of a serious illness such as cancer or a stroke, more and more insurers are offering so-called dread disease policies, which are insurance policies against the consequences of serious illnesses. Big brands like Allianz, Nürnberger and Zurich have also entered the business. The policy does not provide for a monthly pension like the BU, but a one-off payment. The dread disease insurance is only a so-called partial cover. Major triggers for the loss of work are not secured, says expert Bianca Boss. These include mental illnesses such as burnout.
risk life
Term life insurance is important for people with a family or ongoing real estate financing. If the policyholder dies, a fixed sum is paid out to the surviving dependents. Relatives who are dependent on the income of the deceased or who have to pay off loan debts do not also face financial ruin as a result.
A sufficiently high sum insured is important for term life insurance. “When financing your own home, it should correspond to the loan amount,” explains Wolf. “With one child in the family, it should be three years net income, with two or three children about three to five times as much to help the family through the first few years.”
Being badly insured is fatal – throwing away a lot of money every month for unnecessary insurance, but also. “I recommend a combination of a BU and cheap accident insurance to protect the workforce,” says the broker Jacobs. The accident policy should have an insured sum of half a million euros in the event of total disability. “You can get a policy like this for 100 to 150 euros a year,” he says. Even if the accident insurance cannot fully replace the BU, it still offers something that the BU does not provide: a high one-off payment. “This can be used, for example, to finance renovation work in the house after a serious accident,” he explains. “You need a lot of money for that in one go, a BU with a monthly pension of 2,000 or 3,000 euros doesn’t help at first.”
Some intermediaries tend to prefer to sell customers an accident policy with many additional benefits than an BI. For the intermediary, the BU means a greater consulting effort, and with the cheaper accident policy, the probability is higher that the customer will access it. However: “The assumption that with a fluffy accident policy for half the money you have a policy that offers almost as much as a BU is wrong,” says Jacobs.
The broker recommends taking out insurance individually and adapting it to the respective life situation. “A career starter only needs a BU, but no term life insurance,” he says. “It only becomes important when you start a family.” When a couple is in good financial shape, the property is paid off, the children have moved out and maybe even an inheritance has flown into the house, BI and term life insurance may no longer be necessary. “As a rule of thumb, you can say that such a policy is important until the children are 25 years old or the property is paid off,” says Jacobs.
If the BI is too expensive, rather than not taking out a policy at all, consider getting a contract that lasts until age 60 rather than 67. “A policy that lasts until the age of 60 costs about half as much per month as a contract until the age of 67,” explains Jacobs. “And then you are well secured, at least in middle age.”
The bad news for consumers: More and more providers are offering mixed forms of the insurance policies shown. This makes it more difficult to see exactly what is insured and what is not, and where the differences to other offers lie. There are also big differences in costs and benefits. Good advice is therefore indispensable. The representative of the insurer is extremely unsuitable for this; as the name suggests, he represents the interests of the insurer.
An insurance consultant who calculates a fee for his time independently of a deal and is therefore always on the side of the customer is a better fit. If the customer does not want to pay a fee, a broker, who by law is also the customer’s guardian and not the insurer’s, is a good alternative to the agent.