Germany pays a lot of attention to insurance, and most insurance policies are comprehensive. Health insurance in Germany is mandatory, while other types of insurances are mainly optional, but oftentimes necessary nonetheless. Insurance policies, such as the health insurance, vehicle insurance, liability insurance, or home insurance, are important in the sense that they help with expenses in any unexpected incident related to either vehicle, home, or health. Among important insurance policies is also disability insurance. Maybe you have heard about it, maybe not – however, it is a crucial insurance policy, the importance of which is often underestimated.

Here is everything you need to know about disability insurance in Germany:

What Is Disability Insurance?

Disability insurance in Germany serves as a type of coverage that replaces a part of your monthly income in case some type of disability prevents you from working. Disability insurance is oftentimes referred to as disability income insurance, however, there are different types that differ slightly in coverage, cost, and policies. A disability insurance ensures your loved ones will be safe when it comes to financial security if they depend on your income. Overall, the importance of disability insurance is often underestimated.

There are numerous types of disability insurance in Germany that cover individuals depending on the circumstances. Some are covered under the German Social Security System while there are also private insurance policies, for those who would like to have more comprehensive coverage and those who are self-employed and not covered by Social Security. It is always important to examine the fine print on the insurance policy and, ideally, discuss with an insurance broker before purchasing a specific policy.

How Does Disability Insurance Work?

Basically, a disability policy is a contract between yourself and the insurance company to be paid a certain monthly amount for the period of time you are unable to work or are disabled. Despite there being numerous types of disability insurance (elaborated below), all of them have a few things in common – they protect your financial stability.

Regardless of what disability insurance policy you plan on purchasing, you will have to deal with the main basic features of every insurance policy, listed below:

  1. The Premium: This is the amount you, or your employer, pay for the disability insurance policy. No premiums are the same for everyone because they vary largely on the type of coverage, benefit amount, and other personal circumstances.
  2. The Benefit & Benefit Period: The benefit is the amount you receive every month during the time you cannot work while the benefit period is the length of time you will receive benefits (something that depends on the coverage level of disability insurance policies in Germany).
  3. Disability Definition: Last but not least, each policy has its own definition of ‘disability’. Some disabilities only prevent you from working in your own occupation, while others in any type of occupation. Details, whether you are eligible for benefits, should be specified in the contract.

Which Are the Different Types of Disability Insurance in Germany?

Although all types of disability insurance basically play the same role, they differ in a few important aspects. Some of the different types of disability insurance (in terms of benefits and coverage) in Germany are explained in the below sections.

Occupational Disability Insurance

Occupational disability insurance is usually paid out if the doctor decides that the insured individual can no longer practice his profession in the foreseeable future. This is one of the most expensive types of disability insurance and many people might not purchase it due to the cost. Statistics show that approximately one in every four employees will become, either entirely or partially, unable to work during their lifetime as a result of health problems.

Disability Pension Insurance

Purchasing disability pension insurance will be a tad cheaper than occupational disability insurance, but the level of coverage and benefits will also be limited. Specifically, this insurance pays a pension if long-term health restrictions prevent the insured individual from working up to three hours per day. Differently from occupational disability insurance which protects the insured party when they cannot work in their profession, disability pension insurance only protects the insured party if they cannot work in any profession.

Basic Capacities Insurance

Basic capacity disability insurance is useful when basic human capacities like sight, speech, or the ability to use the hands or feet are lost. The insured party is eligible to receive this pension even if they find employment they are fit for, despite any physical restrictions. For example, if a person who is unable to walk, and due to this, unable to fulfil his profession as a, let’s say, driver – finds employment in a field that does not require driving, will still be able to receive the pension if insured through a basic capacities insurance.

Dread Disease Insurance

This insurance generally pays out a lump sum, in contrast to other types of disability insurances which pay on a monthly basis. A dread disease insurance will still pay out, even if the insured person is able to work, despite being affected by one out of at least 30 serious illnesses, including heart attack, stroke, or cancer.

Who Needs Disability Insurance?

Not everyone needs to obtain disability insurance in Germany, however, if your (and your family’s) financial stability depends on a steady paycheck in order to pay bills, debts, or future plans, disability insurance is likely a useful purchase, regardless of where you work or what your occupation is. Disability insurance will pay out a portion of your salary in the event of a disabling condition, in exchange for regular premium payments (which are typically paid out monthly).

How Much Does Disability Insurance in Germany Cost?

The cost of a disability insurance policy in Germany can depend on a wide range of personal factors and circumstances. A few factors that contribute to the cost of disability insurance in Germany include the benefit length and amount, the insured party’s age, occupation, and gender. However, you should expect to pay somewhere between 1% to 3% of your annual salary. The cost of disability insurance is typically larger if you have individual insurance rather than group insurance through work or any association. This is because the company will be purchasing insurance for a large group of people, meaning the premium will be lower than if you purchased disability insurance individually.

The thing with group insurance is that you will typically not be able to tailor the insurance/coverage to your needs, as you would with an individual insurance policy. While typically, the cost of disability pension insurance is up to 30-50€ per month, and sometimes more, depending on certain aforementioned factors and type of coverage you require. In case you become unable to work, you will receive a pension of approximately 1,000€ per month. The cost of occupational disability insurance, on the other hand, will cost more than 30-50€ per month. Exact amounts cannot be provided, considering that insurances in Germany, and not only, should be personalized and tailored to personal needs.