Investment & Wealth
Disability Insurance
What is disability insurance
Disability Insurance: What it is and how to secure your livelihood
One in every four employees becomes unable to work for health reasons at some point in their life. An occupational disability insurance (ODI) provides financial support in such cases. Find out here what this important coverage can do for you.
The topic in brief and concise terms
The occupational disability insurance (BU) pays a pension if you can no longer perform your job to at least fifty percent.
Causes like depression or herniated discs often lead to occupational disability.
An early agreement often ensures more favourable rates, as age at entry and health are important factors.
Quick Overview: Understanding the Key Facts About Disability Insurance
A disability insurance (BU) pays an agreed monthly pension if you can no longer perform your most recent occupation by at least fifty percent. This impairment must be expected to last for six months or have already existed for six months. Securing your ability to work is fundamental, as your income forms the basis of your existence and future planning. State disability pensions alone often provide only basic coverage, which is usually significantly below your last net income; this often results in coverage gaps of over forty percent. A BU is therefore one of the most important insurances for almost everyone in employment, whether an employee, self-employed, student, or trainee, to secure their standard of living. You may wonder, do you really need disability insurance? For most, the answer is a clear yes. The BU fills the financial gap that arises when the ability to work is lost for an extended period or permanently.
Practical relevance: Performance scenarios and cost calculation of the occupational disability insurance
Occupational disability insurance provides benefits in the event of disability due to illness, injury, or a decline in strength beyond what is expected for one's age. Common causes include mental illnesses such as depression, musculoskeletal disorders such as a slipped disc, or cancer and the consequences of serious accidents. Ideally, your occupational disability pension should cover seventy to eighty percent of your current net income to continue meeting ongoing costs and savings contributions. An employee earning 2,500 euros net would therefore require approximately 1,750 to 2,000 euros as a disability pension. The cost of this insurance depends on several factors: your age at the time of signing, your profession (risk group one to four), your health condition when applying, the desired pension amount, and the agreed duration – ideally up to the statutory retirement age of 67 years. A 30-year-old office clerk, for example, pays around 50 euros per month for a pension of 1,500 euros. Feel free to use an occupational disability insurance calculator for an initial assessment. There is a distinction between independent occupational disability insurance (SBU) as a standalone contract and the occupational disability supplementary insurance (BUZ), which is linked to a primary insurance such as life or pension insurance. The SBU often offers more flexibility and is more transparent.
Here are typical situations in which occupational disability insurance provides benefits:
A software developer suffers burnout and is unable to perform their complex tasks for over nine months.
A nurse develops chronic spinal disc damage after years of heavy physical work and can only work less than four hours a day.
An architect loses eighty percent of their vision due to a progressive eye disease and can no longer create plans.
A teacher suffers from severe depression, rendering them unfit for service for over twelve months.
These examples illustrate how varied the reasons for occupational disability can be and how important protection is.
Expert Insight: Mastering Legal Foundations and Key Contractual Clauses
The legal basis for private occupational disability insurance is § 172 of the Insurance Contract Act (VVG). It defines: "Occupationally disabled is someone who, due to illness, injury, or more than age-related degradation, can no longer perform their last job, as it was structured without health impairment, wholly or partially permanently." Good contracts specify "permanently" in a customer-friendly way to a forecast period of six months. Pay attention to the waiver of abstract referral. This ensures the insurer cannot refer you to another theoretically possible job as long as you are at least fifty percent occupationally disabled in your last job. The subsequent insurance guarantee allows you to increase your pension on certain occasions (e.g., marriage, a ten percent salary increase) without a new health check. A premium dynamics ensures annual inflation compensation for your pension, usually by three to five percent. The infection clause is especially important for medical professions and provides benefits if an activity ban is imposed due to infection, even without disability in the classical sense. Our expert tip: Answer all health questions in the application absolutely correctly and completely. Even a forgotten doctor consultation in the last five years can jeopardise insurance cover. Also, inform yourself about the difference between occupational disability and incapacity for work to fully understand the necessity of private disability insurance.
Important contract clauses at a glance:
Waiver of abstract referral: Protection against referral to other jobs.
Shortened forecast period: Benefits often already in case of anticipated disability of six months.
Subsequent insurance guarantee: Pension increase without a new health check on certain occasions.
Premium dynamics: Automatic inflation adjustment of pension and contributions.
Benefits dynamics in case of benefits: Increase of ongoing pension.
Retroactive benefits: Payment from the onset of disability, even with later reporting (up to three years).
Worldwide insurance coverage: Validity of cover even when moving abroad.
Waiver of termination for non-faulty breach of duty to notify after five or ten years.
The exact conditions, when a disability insurance pays, are crucial.
Optimise the tax treatment of your disability insurance
You can claim contributions to an independent occupational disability insurance (SBU) as other provident expenses on your tax return. For employees, there is a maximum amount of 1,900 euros per year, and for self-employed individuals, it is 2,800 euros. However, this limit is often already exhausted by contributions to health and long-term care insurance. An exception is the disability insurance as part of a Rürup pension (basic pension); here, significantly higher deductions are possible, up to 29,344 euros for single persons in the year 2025. The paid-out disability pension is taxable, but only with the so-called yield proportion. The later the pension begins, the lower this proportion is. For example, if your pension starts at 55 years of age, the yield proportion is about 26 percent of this amount, which is then taxed at your personal tax rate. If your total taxable income, including the yield proportion of the disability pension, is below the basic allowance (12,096 euros in the year 2025), no taxes are due. Careful planning can reduce your tax burden in the event of benefits.
More useful links
Wikipedia provides a comprehensive overview of disability insurance.
Statista delivers data on the distribution of causes of occupational disability in Germany.
GDV informs about 7 key facts regarding disability insurance.
Statista shows data on the likelihood of becoming occupationally disabled before retirement age.
Die Versicherer offers current news and information on the causes of occupational disability.
Deutsche Rentenversicherung provides comprehensive information on reduced earning capacity pension.
Deutsche Rentenversicherung offers a detailed brochure on the reduced earning capacity pension.
Verbraucherzentrale gives advice on how to protect yourself against income loss due to occupational disability.
Verbraucherzentrale explains the basic capabilities insurance as a possible alternative to occupational disability insurance.
FAQ
What is the difference between occupational and total incapacity?
Occupational incapacity refers to the last profession you practiced. Total incapacity means you can no longer perform any work on the general labour market for at least three hours a day. The state's incapacity pension is usually significantly lower than a private occupational disability pension (BU pension).
What happens if I change jobs during the contract term?
Typically, the insurance cover remains in place. The last occupation practised before the onset of occupational incapacity is decisive. Reporting a job change is often advisable to potentially adjust contributions if the new job falls into a more favourable risk group.
How long does the occupational disability insurance pay out?
The BU pension is paid for as long as the occupational incapacity lasts, but no longer than the contractually agreed retirement age (e.g. 67 years).
Can I take out occupational disability insurance despite pre-existing conditions?
This depends on the type and severity of the pre-existing conditions. Options include acceptance with a risk surcharge, exclusion of benefits for certain conditions, or rejection. An anonymous risk enquiry through an adviser is recommended here.
What does abstract referral mean?
Abstract referral means that the insurer might refer you to another occupation that you could theoretically still perform, even if you cannot find a position. Good BU policies waive this clause.
Are the contributions to occupational disability insurance tax-deductible?
Yes, the contributions can be claimed as other precautionary expenses, although the maximum amount is often already exhausted by health and care insurance contributions. The BU pension is taxable based on the yield proportion.
