Education insurance for children: Laying the financial foundations for the future
2 Apr 2025
Katrin Straub
Managing Director at nextsure
The education of children is one of the biggest financial challenges for families. An education insurance policy for children promises to provide early financial preparation. But what does it really offer, and which aspects are crucial for meaningful protection?
The topic in brief and concise terms
An educational insurance policy combines saving for the child's education with death protection for the contributor.
The returns on traditional policies are often low; alternatives like ETF savings plans can be more advantageous.
Before making a decision, costs, flexibility, and actual needs should be carefully reviewed and compared with available offers.
Understanding Child Education Insurance: The Basics
An educational insurance policy is essentially a capital life insurance policy specifically designed to finance a child's education. It combines long-term saving with insurance coverage. It is typically taken out by parents or grandparents, with the child being the beneficiary.
The concept is simple: over many years, often from the birth of the child, regular contributions are made. At the agreed-upon time, typically on the 18th or 25th birthday, the accumulated amount, including any potential surpluses, is paid out. This capital can then be used for tuition fees, the first apartment, or other education-related costs. A key feature is often the integrated death protection for the contributor. Should the insured parent pass away, the insurance takes over further premium payments, ensuring the savings goal is still reached. For comprehensive family protection, this is an important aspect.
This form of provision aims to create financial security for an important stage in the child's life. The terms often span 15 to 25 years. Thus, even with smaller monthly amounts, starting from around 25 euros, a significant sum can accumulate over the years. Early planning allows for the optimal use of compound interest. Therefore, educational insurance is a component of educational provision for children.
Functionality in Detail: Contributions, Duration and Protection Mechanisms
Premiums for a children's endowment insurance can be paid monthly, annually, or as a lump sum. Many providers allow contributions starting from 25 or 50 euros per month. The term is generally chosen so that the payout coincides with the beginning of vocational training or university, often at the age of 18 or 19. Longer terms up to the age of 25 are also common, for instance to cover a master's degree.
A central component of many policies is the already mentioned death benefit. If the person paying the premiums (usually a parent) passes away, the insurance takes over and continues the contract without premium payments. This ensures that the child receives the agreed sum at the end of the term. Some tariffs even offer coverage in the event of the contributor's incapacity to work. The payout is made either as a lump sum or in the form of a monthly annuity. The accumulated capital is not earmarked; the child has free access to it. Considerations for child protection in the event of death play a major role here.
Additional modules can expand the coverage; here are some examples:
Accident insurance add-on for the child.
Option for a future occupational disability insurance without a new health examination.
Long-term care insurance components.
This flexibility allows adaptation to individual needs and financial capabilities. However, it is important to review the exact conditions and costs of these additional benefits.
Realistically assess costs and return opportunities
The cost of an education insurance policy for children is comprised of various components. These include acquisition and distribution costs, administrative expenses, and the cost of risk coverage (e.g., death benefit protection). These expenses reduce the returns. The guaranteed interest rate for traditional policies has significantly decreased in recent years due to the low-interest environment, often falling below one percent.
An example calculation illustrates this: With a monthly saving rate of 100 euros over 20 years, a total of 24,000 euros is saved. A traditional education insurance policy might pay out between 29,000 and 32,000 euros after costs and before taxes, depending on the surplus. Fund policies offer potentially higher returns, but also carry market risks. The actual return depends heavily on the chosen product and the development of the capital markets. It is therefore advisable to compare various savings options for children.
Insurance experts and consumer advocates point out that returns are often not attractive after deducting all costs. The lack of transparency in cost structures is frequently criticized. Before deciding on an education insurance policy, you should always obtain multiple offers and closely examine the effective costs. A term life insurance can often be more affordable when taken out separately to provide death benefit protection while savings are managed through other investment forms.
Consider sensible alternatives to traditional education planning
In view of the often high costs and low returns of traditional education insurance, many parents are looking for alternatives. A popular option is ETF savings plans. These invest in exchange-traded index funds and generally offer higher return opportunities in the long term with lower ongoing costs of often under 0.5 percent per year. Over a period of 18 years or more, attractive sums can be accumulated, although they are subject to market fluctuations.
Other alternatives include:
Savings plans from banks: Safe, but currently usually offer low interest rates. Suitable for risk-averse savers.
Fixed-term or instant-access savings accounts: Flexible and secure, but interest often barely covers inflation. Currently, there are offers of over three percent again.
Building savings contracts: Can be sensible if planning real estate financing later, but often offer low returns as pure money investment.
Child investment accounts: Enable direct saving in stocks or funds in the child's name.
The choice of the right alternative depends on individual risk tolerance and financial goals. Many experts recommend separating risk protection and capital investment. A separate term life insurance for parents and a flexible, higher-return plan for the child can often be the better solution. A disability insurance for children can also set important early milestones. The decision for the right educational provision should be well considered.
Making Optimal Decisions: Important Tips Before Signing a Contract
Before taking out an education insurance for your child, careful examination is essential. Compare at least three to five different offers. Pay attention not only to the projected final amount but above all to the guaranteed benefits and the stated effective costs. These provide insight into how much of your contributions are actually used for saving and how much for costs.
You should particularly consider the following points:
Flexibility: Check if additional payments or contributions breaks are possible and under which conditions.
Risk coverage: Is the death cover sufficient? Are there options if the payer becomes disabled?
Return opportunities: How high is the guaranteed interest rate? What opportunities and risks exist with fund-linked variants?
Transparency: Are all costs clearly and comprehensibly itemized?
Our expert tip: Consider whether separating the saving process and risk protection is more advantageous for your situation. A combination of an affordable term life insurance and a flexible ETF savings plan can often offer higher returns with more transparency. Also consider additional protections such as supplementary dental insurance for children. Seek comprehensive advice to find the best solution for your child's future.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete suggestions for optimisation.
More useful links
Deutsches Institut für Wirtschaftsforschung (DIW) offers comprehensive information and analyses on education and the labour market.
FAQ
Wann sollte man eine Ausbildungsversicherung abschließen?
Idealerweise wird eine Ausbildungsversicherung so früh wie möglich abgeschlossen, am besten kurz nach der Geburt des Kindes. Dies ermöglicht eine lange Ansparphase und nutzt den Zinseszinseffekt optimal.
Wer ist der Begünstigte bei einer Ausbildungsversicherung?
Der Begünstigte ist in der Regel das Kind, für dessen Ausbildung gespart wird. Die Eltern oder Großeltern sind meist die Versicherungsnehmer und Beitragszahler.
Was passiert, wenn der Beitragszahler stirbt?
Die meisten Ausbildungsversicherungen beinhalten einen Todesfallschutz. Verstirbt der Beitragszahler (z.B. ein Elternteil), übernimmt die Versicherung die weiteren Beitragszahlungen, sodass das Sparziel für das Kind erreicht wird.
Ist das Geld aus der Ausbildungsversicherung zweckgebunden?
Nein, das ausgezahlte Kapital ist in der Regel nicht zweckgebunden. Das Kind kann frei über die Summe verfügen, auch wenn sie ursprünglich für die Ausbildung gedacht war.
Kann man eine Ausbildungsversicherung kündigen?
Ja, eine Kündigung ist meist möglich, aber oft mit finanziellen Nachteilen verbunden, da der Rückkaufswert insbesondere in den ersten Jahren gering sein kann. Eine Kündigung sollte daher gut überlegt sein.
Sind die Beiträge zur Ausbildungsversicherung steuerlich absetzbar?
Für Verträge, die vor 2005 abgeschlossen wurden, können Beiträge unter Umständen als Sonderausgaben geltend gemacht werden. Bei neueren Verträgen ist dies meist nicht mehr der Fall. Erträge können steuerpflichtig sein. Eine Klärung mit dem Steuerberater ist empfehlenswert.
