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Disability Insurance
occupational disability insurance payout after expiry
Disability Insurance: Payout After Expiry – What You Need to Know
Many people wonder what happens to their occupational disability insurance (BU) when the contract term ends. Do you receive a payout upon expiration, or are contributions lost? This article answers the most important questions and explains when and how long a BU pension is paid out.
The topic in brief and concise terms
An occupational disability insurance only continues to pay after the insurance period has expired if the occupational disability occurred during this period and the benefit period has not yet been reached.
Premiums are not refunded at the end of the term in a pure risk disability insurance policy if no disability has occurred.
Ideally, the insurance and benefit period should extend until retirement age (e.g., 67 years) to avoid gaps in coverage.
Quick Facts: Key Information on BU Payout After Contract Expiry
Disability insurance is a risk protection in the event that you can no longer practice your profession. A payout is made as a monthly pension, provided certain conditions are met. If no disability occurs during the contract period, there is usually no refund of contributions.
No standard payout at end of contract: If the contract ends without the occurrence of disability, the contributions usually lapse. Unless a rare and more expensive option with a refund of contributions has been chosen.
Insurance Duration vs. Benefit Duration: The insurance duration is the period in which the disability must occur. The benefit duration determines how long the pension will be paid at most.
Ongoing pension after end of insurance: If you became disabled during the insurance period, the pension will continue to be paid after it ends, until the benefit duration expires or until you recover.
Conditions for pension payment: Typically, you must be at least fifty percent disabled, and this is expected to last for at least six months.
Observe age limit: Ideally, both the insurance and benefit durations should extend until the statutory retirement age (currently often 67 years) to avoid supply gaps.
These key points illustrate that a disability insurance primarily pays out in case of entitlement, not as a savings contract. The exact conditions can always be found in your policy.
Practical examples: When does the occupational disability pension continue after the official end of the contract?
To make the payout of occupational disability insurance at the end of the policy term more tangible, we consider two scenarios. The key factors are always when the occupational disability occurs and how long the benefit period was agreed upon. Let's assume your policy term lasts until the age of 60, while the benefit period extends to the age of 67.
Scenario one: Occupational disability occurs before the policy term ends. You become occupationally disabled at the age of 58. Since this is within the policy term up to the age of 60, the insurer reviews your claim. If it is approved, you receive your disability pension. This payment continues beyond the age of 60, up to a maximum of the end of the benefit period at age 67, as long as the disability persists.
Scenario two: Occupational disability occurs after the policy term ends. You only become occupationally disabled at the age of 61. Since the policy term ended at age 60, there is no longer a benefit entitlement. No payout is made from the occupational disability insurance, even if the benefit period theoretically lasted longer. This highlights the importance of having a policy term that is long enough, ideally until retirement. An application for the disability pension is no longer possible.
Expert depth: Optimally designing insurance and benefit periods
The correct determination of insurance and benefit duration is a crucial aspect for comprehensive protection. The insurance duration defines the period within which a disability must occur for a benefit claim to arise. The benefit duration, on the other hand, specifies up to what age the disability pension will be paid, in the event of a claim. In most modern contracts, both periods end simultaneously, ideally upon reaching the statutory retirement age of, for example, 67 years.
Our expert tip: Ensure that both durations – insurance and benefit – extend to your planned retirement age. Shortening the insurance duration to save on premiums can be risky, as the risk of disability increases with age. If the disability occurs after an insurance duration that was chosen too short, you will receive no benefits, even if you become disabled just one year later. The taxation of the disability pension is also an aspect that should be considered in your planning.
There are tariffs where the benefit duration is longer than the insurance duration. An example: insurance duration up to age 62, benefit duration up to age 67. Here, the disability must occur by the age of 62 to receive benefits up to the age of 67. This can be sensible in individual cases, but it carries the risk of a coverage gap after the insurance duration expires. A thorough consultation on disability insurance is essential here.
Special case of old contracts: Case law on contracts from 1995 to 2005
A particular situation arises for holders of occupational disability insurances concluded between 1995 and 2005. Many of these older contracts contained clauses with a fixed expiry date, such as the 60th or 62nd year of life. The Federal Court of Justice (BGH) has ruled in a judgment (Case No. IV ZR 401/14) that certain limitations in such contracts may be invalid.
This can mean that policyholders may still be entitled to benefits even after the supposed contract expiry, provided the occupational disability occurred during the originally insured period and continues beyond it. In some cases, insurers have had to pay substantial amounts due to this case law, sometimes up to 360,000 euros. Therefore, carefully review older contracts from this period.
The following points are relevant here:
The invalidity concerns specific clause designs regarding the limitation.
The prerequisite is usually an occupational disability that occurred and persists during the contract term.
A legal review by specialised lawyers can clarify if your contract is affected.
There may have been an entitlement to contract extension, even if the conditions excluded this.
This legal situation offers an opportunity for those affected whose benefits may have been discontinued too early. It shows how important the exact conditions for the occupational disability payment are.
Tax Treatment of Disability Insurance Pension: What Remains of the Money
If you receive a pension from your occupational disability insurance, it is generally subject to tax. The disability pension is classified as other income. However, you do not have to tax the full pension, only the so-called income portion. The amount of this income portion depends on the expected duration of the pension payments: The shorter the remaining duration of benefits when the disability occurs, the lower the taxable income portion.
For example: If the remaining term of the pension is only one year, the income portion is zero per cent. For a remaining term of ten years, it is twelve per cent, and for twenty years, it is twenty-one per cent (values may vary depending on specific regulations). This income portion is then taxed at your personal income tax rate. If your total taxable income, including the income portion of the disability pension, is below the annual basic allowance (for 2025: 12,096 Euros for individuals), no taxes are incurred. It is advisable to inform yourself about the tax aspects early on.
Recommendations for Action: How to Secure Your Claims Optimally
To be optimally covered in case of emergency and to positively influence the question "Disability insurance payout after expiry", several factors are crucial. Decisions can be made both at the outset and during the policy term. An appropriate disability insurance is invaluable.
Consider the following recommendations:
Duration until retirement age: Choose both the insurance term and benefit period to end at the planned retirement age, usually 67 years.
Adequate pension amount: Calculate the pension amount to cover your standard of living and ongoing expenses, typically eighty percent of your net income.
Truthful health information: Complete health questions absolutely correctly to avoid jeopardising your insurance coverage.
Waive abstract reference: Ensure your contract waives abstract reference.
Regular contract review: Review your contract every few years, especially with career or family changes.
Check old contracts: If you have a contract from 1995 to 2005, a legal review may be advisable.
Utilise professional advice: The matter is complex. Independent advice helps avoid pitfalls.
With these measures, you increase the likelihood that your disability insurance will perform as expected in case of need. Understanding the distinction from incapacity to work is also important.
Conclusion: Long-term planning is crucial for the disability insurance payout
The payout of an occupational disability insurance after the actual term of the contract (insurance duration) primarily depends on whether the disability occurred during the insurance period and how long the benefit duration was agreed upon. A refund of premiums in the event of non-claiming is uncommon, as it is a risk insurance. The key to reliable protection lies in a contract structure that is carefully planned from the beginning, especially regarding the terms up to the retirement age of 67. For certain older contracts (1995-2005), special claims may arise due to court rulings. Comprehensive advice is essential to find the right insurance for your situation and to avoid coverage gaps.
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FAQ
What happens to my occupational disability insurance at the end of the term?
If you have not become occupationally disabled during the contract period, the insurance cover ends, and there is usually no refund of the premiums paid. If you have already been occupationally disabled and are receiving a pension, it will continue until the end of the agreed benefit period, even if the original insurance term (for new cases of occupational disability) has ended.
Is a refund of contributions possible if I cancel the occupational disability insurance?
No, if you cancel a pure risk occupational disability insurance, the contributions paid to date are usually not refunded. The insurance cover then ceases.
What role does the retirement age play in the term of the disability insurance?
It is highly recommended to choose the insurance and benefit period of your disability insurance up to the statutory retirement age (e.g. 67 years). This helps to avoid a coverage gap if you become occupationally disabled shortly before retiring.
Are there exceptions where older contracts pay out beyond the agreed end?
Yes, for occupational disability contracts concluded between 1995 and 2005, there is a BGH ruling that can declare certain final age clauses invalid. Affected individuals might still have benefit claims after the supposed end of the contract if the occupational disability occurred during the term and continues. Legal advice is advisable here.
Do I have to pay tax on the occupational disability pension?
Yes, the occupational disability pension is taxable. However, only the so-called profit portion is taxed, the amount of which depends on the remaining term of the pension when the occupational disability occurs.
Which is more important: a long insurance term or a long benefit term?
Both are important and should ideally be identical and extend to retirement age. The insurance term determines until when the occupational disability must occur; the benefit term determines how long benefits are paid at most. A short insurance term carries the risk of being left without protection after it expires.
