Understanding insurance coverage for work incapacity: Factors to take into account
Do I necessitate disability insurance (DI), or is it avoidable? "It is advisable to obtain insurance as securing your ability to work is of paramount importance," suggests Kerstin Hußmann-Funk, an insurance expert at the Verbraucherzentrale Hamburg.
It is often beneficial to acquire insurance at a young age. However, the question for many is: Can I afford DI? Particularly, students or young professionals usually have limited funds. On the other hand, premiums are lower if you purchase a policy at a young age.
Broadly speaking, DI provides a previously agreed pension if an insured person is unable to work due to illness or accident for at least 6 months - that is, cannot work at all or only to at least 50 percent.
What factors influence my DI premiums?
The monthly premium varies individually. Critical aspects include:
- Age
- Occupation
- Health status
- Agreed pension amount
- Contract duration
It's also important to consider how much pension you want to receive in case of need and until which age the insurance should apply. The higher both are, the higher the premiums.
Moreover, the degree of risk the insurer considers is significant. "There are even professions that are virtually uninsurable," says Constantin Papaspyratos, chief economist at the Bundesverband der Versicherten. These include, for example, flight attendants or professional firefighters.
High premiums are also paid by individuals who work in professions with high stress potential, such as nurses. "The insurer inquires about your current profession," explains Constantin Papaspyratos. "They want to know exactly which professional activity you are engaging in."
What should I consider in the health questions?
A variety of health and risk questions are asked. "There is a lot of room for error in this section, and many things go wrong here," warns the chief economist. Medical history and leisure activities, such as combat sports or motorcycling, smoking, and sedatives, are all asked.
"You need to read and answer them carefully," advises Constantin Papaspyratos. "Because if you want to apply for DI later, the insurer will check whether you have responded comprehensively and honestly. In the worst-case scenario, the insurance coverage can be retroactively canceled."
How high should my agreed DI pension be?
"DI only makes sense if you insure yourself reasonably," says Kerstin Hußmann-Funk. In this context, if you become disabled, you should be able to maintain your standard of living with DI - and not need to rely on state support systems.
The Verbraucherzentrale Hamburg recommends 80 percent of the monthly net income as a guideline for the DI pension. For young professionals or students, at least 1500 euros are typically recommended as the insurance amount.
However, insurers set limits, which are often between 60 and 70 percent of the last gross salary.
Is a premium dynamics worthwhile?
Both experts recommend a premium dynamics. This means that the monthly contributions increase every year - "usually by three to four, at most five percent," says Kerstin Hußmann-Funk. However, the disability pension received in case of need also increases.
Moreover, there's the option to temporarily suspend it - that is, the insurer does not have to increase the contributions every year. "The dynamics are announced in advance, and you can object," explains Constantin Papaspyratos. "You have to increase them every third time in most contracts, but in newer contracts, you can even object as often as you like and then rejoin."
Can I increase the agreed pension later with a disability insurance?
Yes, the so-called follow-up insurance guarantee is included in all new contracts, according to Constantin Papaspyratos. "You have the opportunity to increase your disability pension in one step by a larger amount, for example by 500 euros, up to a certain age, for example 50 years," says the chief economist.
However, this is usually tied to specific events, such as marriage, divorce, parenthood, or a salary increase. Here, insurers differ in the listed events. Tip: Check what could potentially apply to you.
Within a period of six to twelve months, you can then take out follow-up insurance. In this case, the insurers waive the need to ask health questions again. "However, it can happen that they ask risk questions again, for example, whether you have started riding a motorcycle in the meantime," says Constantin Papaspyratos. And of course, the monthly contributions increase with the increase in the pension.
How do I find the right insurer?
Most significant insurance companies in Germany offer decent disability insurance plans, as suggested by the consumer advocate. However, the details can vary greatly between providers, as stated by the German Financial Supervisory Authority. So it's crucial to scrutinize the specific benefits when comparing policies. You can start by checking potential plans from organizations like Stiftung Warentest, which, unlike several comparison sites, doesn't take a commission for its services.
Kerstin Hußmann-Funk emphasizes that the right provider isn't necessarily the most important factor. Instead, securing a policy is crucial. Sometimes, insurers may deny coverage due to pre-existing conditions. "That's something you definitely want to avoid, because if one company rejects me, I won't find another one willing to insure me against disability," she explains. Therefore, it's crucial: First and foremost, always submit a risk assessment request. This acts like a trial application. Once two or three insurers are in the running, you can make a decision based on price and performance.
Insurance agents, brokers, and advisors can offer their assistance. The main difference is that an insurance agent can only offer policies from their respective company. An insurance broker, on the other hand, provides comprehensive advice without any bias. Both consultations are initially free, but the broker's fee is ultimately reflected in slightly higher premiums.
Insurance advisors, however, are compensated directly by the client, usually in the form of a fee. This ensures that their recommendations are unbiased and purely in the consumer's best interest. Consumer centers also provide unbiased advice by examining offers and aiding in the selection process.
People in certain high-risk professions may pay higher DI premiums. For instance, professional firefighters and flight attendants often have to pay more due to their jobs' inherent dangers.
It's essential for consumers to consider their future financial needs when deciding on a DI pension amount. For example, students or young professionals might only need an insurance amount of at least 1500 euros to maintain their standard of living if they become disabled.
