Pause disability insurance: Options and consequences for your financial security
7 May 2025
6
Minutes
Katrin Straub
CEO at nextsure
Financial difficulties or changed life circumstances may necessitate a pause in your occupational disability insurance (BU). Discover what options such as premium exemption or deferral are available and what you need to consider to optimally adjust your insurance coverage.
The topic in brief and concise terms
Pausing a disability insurance policy is possible through options like premium waiver or deferment to bridge financial gaps without completely losing coverage.
With a contribution exemption, the pension is reduced, and with a deferral, contributions must be repaid, but the protection often remains fully in place.
Resuming the contract after a pause may require a new health check and adherence to deadlines.
Pausing Disability Insurance: The Key Facts
Pausing a disability insurance policy can be necessary at certain stages in life. It provides financial relief without immediately losing complete coverage. The most common options are premium exemption and premium deferral.
With a premium exemption, you no longer pay premiums, but coverage continues in a reduced form. The level of future pension decreases according to contributions already paid. A minimum insurance sum, often six hundred euros annually, usually must be met.
Premium deferral allows for temporarily suspending payments, typically for up to 24 months. Full coverage is maintained during this period, but deferred premiums must be repaid later. Cancellation should always be the last resort, as it results in total loss of coverage and rejoining later can often be more expensive or involve health checks.
Understanding the reasons for taking a break from disability insurance
Various life events can lead insured individuals to consider taking a break from their disability insurance. Often, these are financial constraints, for example, due to a job change, reduced working hours, or during parental leave. In such periods, a temporary reduction in the monthly burden by up to one hundred percent can be helpful.
A career change or a longer break like a sabbatical may also prompt an adjustment of premium payments. It is important not to make this decision hastily, but to consider the long-term effects on the amount of the disability pension. Early communication with the insurer is crucial here to find the best possible solution for the individual situation.
Sometimes, an initially set low pension is also a reason to reconsider the contract, but this should lead to an adjustment or a change rather than merely a pause. The goal should always be to maintain important protection of the ability to work as much as possible. This is an important aspect that you should consider when thinking about pausing your disability insurance.
Options for Pausing Your Occupational Disability Insurance: A Practical Comparison
If you wish to pause your occupational disability insurance, you essentially have three options available. Each has specific implications for your policy and future coverage. Therefore, careful consideration is essential.
Here are the most common options:
Premium exemption: You stop paying premiums permanently or for a specific period. Your insurance cover is reduced to a non-contributory pension, which is based on the premiums paid so far. Often, a minimum pension of, for example, six hundred euros annually is required.
Premium deferral: You suspend premium payments for a limited period (e.g., six to 24 months). During this time, the insurance cover is usually fully retained. The deferred premiums must be paid later, often with interest or by reducing the pension.
Premium reduction: You permanently lower your monthly premiums. This results in a correspondingly lower occupational disability pension in the event of a claim. This option is useful if you need to plan with reduced financial resources in the long term.
Our expert tip: Carefully check your insurance policy for the options offered and their conditions. Not every insurance company offers all possibilities under the same conditions. A sensible occupational disability insurance should offer flexible adjustment options.
Contribution Exemption: When is it advisable and what are the consequences?
The suspension of premium payments for your disability insurance means that you will no longer need to pay any further premiums. The policy continues with a reduced insured sum, known as the paid-up pension. This option can be sensible if you can no longer afford or wish to make your payments in the long term, but do not want to completely lose the protection you have built up so far. The paid-up pension often needs to reach a minimum amount of, for example, six hundred euros per year.
The amount of the paid-up pension depends on how long and how much you have already paid in. Keep in mind that this pension will be significantly lower than initially agreed. Resuming full premium payments is often possible, but usually involves a new medical examination if the break was longer than six months. In addition, there is often an age limit for reinstatement, such as the age of 55. Therefore, carefully consider whether the reduced coverage is sufficient in an emergency. The cancellation of disability insurance should always be the last resort.
Contribution Deferral: Short-term Relief with Full Protection?
Contribution deferral offers temporary financial relief by allowing you to postpone your premium payments for an agreed period, often between six and 24 months. A major advantage is that your insurance coverage typically remains fully intact during the deferral period. This is particularly helpful for bridging short-term financial gaps, such as those that may occur during unemployment or parental leave.
However, the deferred contributions must be paid later. There are various models for this: lump sum payment, installment payments, or offsetting against future benefits, which may lead to a reduced pension. Some insurers charge interest on deferred contributions. Carefully review the terms of your contract, as not all providers offer interest-free deferrals. The opportunity for deferral may be subject to certain conditions, such as a minimum contract duration of one year. A premium dynamic may potentially be suspended during the deferral.
Resumption of the contract after a break: What you need to consider
After a period of contribution suspension or deferment, many policyholders wish to resume their contract in full. The conditions for this are contractually regulated and can vary depending on the provider. Generally, reinstatement is possible but often subject to deadlines and conditions.
The following points are particularly important when reactivating your occupational disability insurance:
Health check: After a longer break (often more than six months), a renewed health check may be necessary. Should your health condition worsen during the pause, this could lead to higher premiums or even benefit exclusions.
Age limits: Many insurers set an age limit for resumption, for instance, the age of 55.
Payment of deferred contributions: In the case of deferment, the postponed contributions must be repaid. Clarify the modalities (lump sum, instalments) in advance.
Adjustment of pension amount: After a contribution suspension, the insured pension is lower. An increase to the original amount may be associated with higher premiums.
Our expert tip: Contact your insurer early, at least three months before the planned resumption, to clarify all details and avoid unpleasant surprises. Also, inform yourself about the impact on any agreed combination with sick pay.
Expert Tips: Avoid Pitfalls and Act Correctly
Pausing a disability insurance policy is an important decision with financial implications. To avoid pitfalls, there are a few points you should consider. Cancellation is almost always the worst solution, as protection is lost and starting a new policy is often more expensive or even impossible due to new health risks. Even with a pause of just twelve months, a new health assessment may be required.
Always check the alternatives first, such as waiving premiums or deferring payments. With a deferral, you usually remain fully insured, but you may have to pay back premiums, sometimes up to 24 months' worth. With premium waiver, your future pension decreases, and often a minimum pension of six hundred euros per year is required. Document every agreement with your insurer in writing. Clarify whether and how a pause affects additional components or tax deductibility. Seek independent advice if in doubt, to make the best decision for your circumstances.
nextsure: Your partner for flexible disability insurance
More useful links
Verbraucherzentrale offers comprehensive information on how to protect yourself against loss of income due to incapacity for work.
Deutsche Rentenversicherung explains the conditions and benefits of reduced earning capacity pensions.
Destatis provides current figures and facts on the health status in Germany.
Bundesagentur für Arbeit informs about offers and opportunities for vocational rehabilitation for people with disabilities.
Gesetze im Internet contains the full text of §240 SGB VI regarding incapacity pensions for certain birth cohorts.
Bundesministerium für Arbeit und Soziales (BMAS) provides an official definition of the term incapacity for work in the pension glossary.
Bundesanstalt für Arbeitsschutz und Arbeitsmedizin (BAuA) highlights the costs that can arise from incapacity for work.
FAQ
What are the reasons for pausing a disability insurance policy?
Common reasons include financial bottlenecks due to job changes, short-time work, parental leave, or unemployment. Professional reorientations or longer breaks can also make adjusting contribution payments worthwhile.
What is the difference between contribution exemption and contribution deferral?
With premium waiver, you no longer pay contributions, and your disability pension is permanently reduced. With premium deferral, you only temporarily pause the payments (e.g., up to 24 months), the protection generally remains fully in place, and the contributions must be paid later.
How long can I pause my occupational disability insurance?
A contribution deferral is often possible for up to 24 months. A contribution exemption can be agreed upon indefinitely or for a specific period, often with a minimum pension of, for example, 600 euros annually as a requirement.
Do I completely lose my insurance coverage if I stop paying the premiums?
Not necessarily. Instead of cancellation, which leads to a complete loss of coverage, options like contribution suspension or deferral offer the possibility to maintain coverage at least partially or temporarily.
What happens if I become unable to work during the break in my occupational disability insurance?
With contribution deferral and full protection, you will receive the agreed pension. If contributions are waived, you will receive the reduced, non-contributory pension. If the contract has been terminated, there is no longer any entitlement to benefits.
Is it better to pause or cancel the BU?
Pausing (through deferment or contribution exemption) is usually better than cancellation. Cancellation leads to a complete loss of insurance coverage and all contributions paid for risk protection. A new policy is often more expensive and requires a new health examination.
