Best Life Insurance in Germany [Detailed Guide 2024] - Live In Germany

Germany is a nation of insurance companies and there is a plethora of insurance options. Some are extremely important, while others are not very important. You should first become accustomed to the insurance topics in Germany if you are still unfamiliar with them.

Life insurance is optional in Germany, unlike auto insurance and health insurance. However, having one is highly recommended for some individuals. You will want to protect your loved ones if they are financially dependent on you. Even though your death will not prevent them from experiencing emotional pain, you can help by alleviating their financial burdens, such as not having to move out of their own home.

Love is more than just looking out for your loved ones right now. Being well-prepared and thoughtful is the key, as is planning for the worst-case scenario. 

What Is Life Insurance in Germany?

A term life insurance (Risikolebensversicherung) strategy in Germany assists with safeguarding your cherished one from the monetary fiasco if you pass away unexpectedly. In case of death, your extra security will pay an amount of cash to the recipient whom you chose in the strategy previously.

This guarantees that your estate will be compensated for your death-related income loss. The money can also be used to pay off any mortgages or loans that are still outstanding. The members of your immediate family, like your spouse or children, are typically the beneficiaries. However, you can also choose anyone else to benefit from.

You won’t benefit from a life insurance policy, but those who rely on you for financial support will. If you have a dependent, you should get life insurance as soon as possible as when you are young, it is not too expensive to buy one.

How Does Life Insurance in Germany Work?

Life insurance premiums are typically paid regularly in Germany. Your insurance will provide a predetermined sum of money to your heirs if you pass away during the specified contract term. When you sign your life insurance policy in Germany, you will have to choose the beneficiary and the contract’s duration.

Term Life Insurance

It is an insurance policy to safeguard your heirs financially in the event of your premature death. Throughout the contract’s term, you are required to pay your premium regularly. If you pass away during this time, your heirs can receive a predetermined sum of money. You will not be reimbursed for any money if you are still alive at the end of the contract.

The purpose of term life insurance is to safeguard your family members that are dependent on you in the event of your untimely death. A sum agreed upon in the contract is distributed to the beneficiaries if the insured person passes away during a specified period. In Germany, term life insurance is not the same as capital-building life insurance, which is a savings product in which you pay an annuity for later pension build-up or payout. 

Term Life Insurance Is Particularly Advisable for These Situations

Family Creation

You should consider the financial consequences of a death as soon as possible, preferably when there are children on the way and increased financial obligations. Do you both have jobs, or do you only have one source of income? Is it possible to eliminate one spouse’s income? Or is the income of the other spouse sufficient to support the family?

Acquiring a property

A property is rarely purchased in cash. Typically, a loan is obtained for it. The loan repayment is a financial obligation that is contingent on the family’s primary income. Term life insurance protects the property from being abandoned by guaranteeing the loan’s repayment.

It makes sense to take care of one another in this situation, even if you are not married and do not have any children.

Benefits of a Term Life Insurance

Additionally, there are unique advantages that may make a difference. Therefore, it is essential to keep an eye on the additional benefits as well as the insured sum and terms when entering a contract. Most of the time, the cheapest tariffs don’t have many or any extra benefits.

Subsequent Insurance Guarantee

If you are in good health, term life insurance is best. Frequently, one is just starting in life and does not yet have children when they start the insurance program. Because of this, the insured sum is still relatively low. When certain life events occur, you have the option of increasing the sum insured with a subsequent insurance guarantee. Without a new medical examination.

An adjustment to the insured sum may be made once or multiple times over a lifetime, depending on the company and the tariff. For instance, when each child is born, or a house is bought.

Dynamics In the Policy

The sum insured is guaranteed to rise annually or over predetermined periods thanks to a dynamic. This keeps the term life insurance’s purchasing power and compensates for inflation. Everyone must decide for themselves whether this is necessary.

Renewal Option for Term Life Insurance

The insurance comes to an end at a predetermined time. You can extend the contract term without having to have a new health check with a renewal option. If life circumstances change and cover is required for a longer period than anticipated, this can be helpful.

The other option is to select a contract term that is longer from the start. It is possible to cancel the insurance at any time if it is no longer required.

Early Death Benefit

A portion of the insured sum can be paid out before your death in the event of a serious illness that results in death. If, for instance, you require extreme care and your children require money, this could be helpful. However, term life insurance should continue to serve the purpose of providing for your surviving loved ones.

Whole Life Insurance (Kapitallebensversicherung)

Whole life insurance, like term life insurance, provides financial protection for your heirs in the event of your death during the policy’s term. The distinction lies in the fact that the premium you pay also serves a saving purpose.

Most of the time, you must make regular payments of your premium for a long time (decades). A portion of the money will be used to cover your lifelong death benefit. The insurance provider will invest another portion of it primarily in bonds issued by corporations or governments.

You will receive a certain percentage of the guaranteed return from your provider. If the investment goes well, you might even get a higher return. You will get your savings as well as the guaranteed (and any additional) return by the contract’s end. This sum will go to your beneficiary if you pass away before your estimated time of death.

Equity-Linked Life Insurance (Fondsgebundene Lebensversicherungen)

Equity-linked life insurance, like whole life insurance, provides both death protection and savings. The difference is that while death protection receives a portion of your premium, you can invest the remaining portion in the investment funds of your choice. As a result, the investment may offer a greater return than whole life insurance.

However, as opposed to whole life insurance, insurance providers will not provide you with a guaranteed return, increasing the risk. You will get back your investment amount and any returns at the end of the term. If you pass away, the money will go to your beneficiary.

The death protection component frequently falls short, which is a drawback. Therefore, it is not recommended that you purchase equity-linked life insurance. Rather than combining both death protection and saving products into a single contract, it makes more sense to separate them.

Indexed Life Insurance (indexgebundene Lebensversicherung)

By purchasing options on a stock index, this type of life insurance puts a portion of your premium into the stock market. For instance, the German stock list, DAX. As a result, the growth of the stock index is directly related to your gain or loss.

Most of the time, contracts of this kind are too complicated for regular people to understand. Another disadvantage is that there is typically a maximum amount you can earn. However, if the investment does not perform well, you must bear all losses. In addition, the contract typically entails high administrative and sales costs.

It is not advised to purchase this kind of life insurance. If you want to invest or save money, there are many better options.

Why Should I Protect Myself?

Term life insurance can be purchased for two reasons:

• It is required by your lender for loan disbursement. This is typically the situation if the loan amount is
• Relatively high,
• You are the sole breadwinner, or

• Nearly all the property’s purchase price is financed.

• You want to ensure the safety of your dependents. Then, your property can be left to your family, say, without incurring debt. Unfortunately, your family cannot avoid the emotional toll that the accident has taken on them. But paying the insurance premium can keep them from having to deal with additional financial concerns or even having to move.

What Is the Cost of Life Insurance in Germany?

In Germany, life insurance costs surprisingly little. Life insurance costs are based on how long you expect to live. So, the younger and healthier you are, the cheaper it will be. However, in Germany, the protection business offers exceptionally cutthroat rates. For example, they charge restricted costs and above. Furthermore, you’re profiting from a for the most part sound populace with low mortality.

How Much Insurance Should I Take in Germany?

The amount of insurance you need can be decided in two easy ways:

1. The first is basically to sell your home without any debt. The amount of insurance would then closely match the size of your mortgage debt, which decreases over time as you pay off your mortgage.

The next step is to specify the minimum amount of free money you want your partner or family to have. The required amount of insurance is then calculated by adding up the anticipated income shortfall.

1. For the second scenario, a straightforward calculator has been created which can be provided upon request. But ultimately, you want to insure anywhere from five to fifteen times your annual after-tax income. You can gradually decrease to zero when your dependents no longer rely on you financially. For example, because of the children earning income or as you accumulate additional savings.

Do Additional Features Make Sense?

The fundamental protection is usually sufficient. However, a lot of term life insurers in Germany will charge you extra for a variety of additional features. Some examples include:

• If you are diagnosed with a serious illness for which the life expectancy is less than one year, an early (full) payment from the insurance company will be made.

• An extension of the duration of coverage without a new health check.

• A guarantee for additional insurance coverage or an increase in the policy’s value in the event of certain occurrences, such as the birth of a second child.

• In case of an occupational disability, you won’t have to pay your monthly bills.

Occasionally, these aspects make sense. However, in most cases, the fundamental protection is sufficient to either safeguard your mortgage or the surviving partner’s financial situation.

Types Of Tariffs

It may be worthwhile to examine the tariff types once more. Term life insurance is available in Germany in three common forms:

1. The same amount of insurance.
2. Linearly increasing in value.
3. Insurance decreases due to annuity.

The constant insurance cost can give you peace of mind and is easy to track if the monthly premium fits into your budget. Also, the loan is always secured in this way.

Protecting your mortgage with an insured sum that decreases linearly is not a good idea. An open mortgage balance and a potential insurer payout are separated by the initial insured amount, which is rapidly declining.

Depending on the terms of your mortgage, the annuity falling insurance sum can be individually calculated to ensure that the mortgage is always secured and that the premium is kept as low as possible. For the first few years, this solution can also be used in conjunction with a fixed insurance amount. For instance, the insurance amount will begin to decrease in the third year. The person who knows a lot about saving money will find this option interesting.

Drawbacks

Most of the time, this kind of contract is too expensive, too opaque, and the return is also way too low. Many insurance companies that previously offered contracts of this kind were unable to pay even the guaranteed return. When the current market interest rate was close to zero, they struggled to turn a profit.

As a result, you won’t find many contracts of this kind in Germany today. Numerous policyholders in the past attempted to terminate their contracts and even lost money in the process. Don’t sign such a contract because it doesn’t make sense.

Falling Or Constant Sum Insured?

The insured amount remains constant throughout the policy with a constant sum insured. If you chose €250,000 at the beginning, this is the fixed amount for the term life insurance policy. Whether the insured person passes away on the first or last day of the insured period is irrelevant.

It is believed that in most cases, this option is more sensible. regardless of whether it is used as a family security measure or when purchasing a property.

The hedging risk indeed decreases over time as assets are saved or the loan is paid back, and you could switch to a lower insured amount. Inflation, on the other hand, reduces the insured sum’s purchasing power simultaneously. As a result, inflation and hedging risk are in balance.

Nevertheless, term life insurance allows you to select a lower maximum amount of coverage. For loan coverage, this form is typically chosen. The loan’s residual debt decreases annually, allowing for a reduction in the insured sum.

Insurance Companies in Germany

There are many different insurance companies in Germany and here are some liability insurances:

One of them is Getsafe which is a good insurance company. It has its own app and provides English customer support. Their coverage in Euros is up to 50 million.

Adam Riese is also a great option. It does not have an app or English customer care but is much cheaper than Getsafe. Their coverage in Euros is up to 7.5 million.

Helden is also an option which starts at 5.50 euros. Helden does not provide an app or English customer support. Their coverage in Euros is up to 50 million.

Feather is an option as well. It starts at just 4.99 euros and provides an app and English customer care. Monthly cancellation is provided by all these companies, so you can cancel your subscription at any time. Their coverage in Euros is up to 30 million.

Conclusion

Everyone can choose their life insurance program according to their own needs and financial situation. But one thing is for sure, and that is that everyone should have life insurance. Nobody knows when they will die which is why you should always have another option available for your loved ones regarding their financial needs.