Direct insurance: optimise and reduce health insurance contributions
05.06.25
7
Minutes
Katrin Straub
Managing Director at nextsure
The payout of a direct insurance policy in retirement is often associated with unexpected health insurance contributions. Many policyholders only learn about this additional financial burden when they retire. Find out here which rules apply and how you may be able to reduce your contribution burden.
The topic in brief and concise terms
Benefits from direct insurance policies are subject to statutory health and long-term care insurance contributions for people insured under the statutory system, which can reduce the payout by up to twenty per cent.
A monthly allowance of €187.25 (as of 2025) for pensioners with compulsory insurance reduces the assessment basis for health insurance contributions.
Private continuation of the contract as the policyholder or an early transfer may exempt parts of the benefit from the obligation to pay premiums.
Understanding health insurance contributions on direct insurance policies
Benefits from direct insurance policies are generally subject to contributions for people insured under the statutory health insurance scheme. This has applied since a change in the law in 2004 and affects both pensions and lump-sum payments. In the case of a lump-sum payment, the amount is spread over ten years and contributions are levied monthly. This means that one one-hundred-and-twentieth of the capital benefit is treated as the monthly payment amount. For those with private health insurance, this issue does not arise, as their contributions are not income-dependent. The obligation to pay contributions can reduce the net payout by around twenty per cent. This rule came as a surprise to many policyholders, who did not expect these deductions when they took out the contract. It is therefore important to check the exact impact on your private pension.
Use allowances and reliefs
An important relief for recipients of occupational pensions is the allowance on health insurance contributions. Since 1 January 2020, the statutory health insurance occupational pension allowance act has been in force. For 2025, this allowance amounts to €187.25 per month. Only the part of the occupational pension that exceeds this allowance is subject to health insurance contributions. For a monthly occupational pension of, for example, €300, only €112.75 would therefore be liable for contributions. This allowance also applies to lump-sum payments, which are spread over ten years. Important: People voluntarily insured under the statutory health insurance system do not benefit from this allowance. For them, the entire benefit is liable for contributions. A voluntary health insurance policy may have different rules here.
The following points should be noted regarding the allowance:
The allowance applies to pensioners compulsorily insured in the statutory health insurance system.
It amounts to €187.25 per month (as of 2025).
Only the amount exceeding the pension benefits is used to calculate health insurance contributions.
If multiple occupational pensions are received, the allowance is applied only once.
For long-term care insurance, a threshold applies at the same level; if this is exceeded, the full amount is subject to long-term care insurance contributions.
The introduction of the allowance has brought noticeable financial relief for many pensioners. Nevertheless, a thorough review of the individual situation is essential.
Strategies for reducing the burden of contributions
There are several approaches to minimising the burden of health insurance contributions on direct insurance policies. One option is to continue the policy privately if the employer is no longer the policyholder. If you become the policyholder yourself and pay the contributions, the obligation to pay contributions will at least no longer apply later to this privately accumulated portion. Ideally, this should be done before the payout phase. A timely reassignment of the policyholder can be crucial here. For policies under section 40b of the Income Tax Act (EStG), where contributions were already paid during the accumulation phase, the renewed charge is particularly frustrating. In this case, it may be worth checking whether a conversion into a policy under section 3 no. 63 of the EStG is advisable. It is recommended that you find out about the possibilities of tax deductibility. Advice from experts can help here to find the best solution for your individual situation.
Lump-sum payment versus pension: What should be considered regarding contributions?
The decision between a one-off capital payment and a monthly pension has an impact on health insurance contributions. In the case of a lump-sum payment, the amount is notionally spread over one hundred and twenty months. Health insurance and long-term care insurance contributions are then due on this monthly amount, provided the allowance is exceeded. A monthly pension is also subject to contributions if it exceeds the allowance. For very small pensions below the allowance of EUR 187.25 (as of 2025), no health insurance contributions are payable. The choice of payout method should therefore be carefully considered. An example calculation: A lump-sum payment of EUR 60,000 results in a notional monthly amount of EUR 500 (EUR 60,000 / 120 months). After deducting the allowance of EUR 187.25 (as of 2025), EUR 312.75 would be subject to contributions. This illustrates the significant burden. Also consider what happens if a new employer does not take over the direct insurance policy.
Considerations regarding the payout method:
Lump-sum payment: Spread over 120 months for contribution calculation.
Monthly pension: Direct contribution assessment on the part exceeding the allowance.
Allowance: Applies to both payout methods for compulsorily insured persons.
Long-term care insurance: Observe the exemption threshold, otherwise the full contribution applies.
Privately insured persons: No health insurance contributions on the payout.
The long-term financial implications of both options should be carefully compared.
Legal foundations and recent court rulings
The obligation to pay health insurance contributions on direct insurance policies is based on the Act to Modernise Statutory Health Insurance (GMG) of 2004. The key provisions here are in particular Section 229 and Section 248 of Book Five of the Social Code (SGB V). The Federal Constitutional Court and the Federal Social Court have generally upheld the obligation to pay contributions in various rulings, but have also highlighted its limits. For example, it has been decided that privately continued portions of contracts are not subject to contributions. A ruling by the Federal Social Court in 2019 reaffirmed the obligation to pay contributions in the case of lump-sum payments from company life insurance policies. It is important to keep track of current court rulings, as these can affect the legal situation. Affected parties should file an objection in the event of any uncertainties or incorrect notices and, where necessary, bring an action before the Social Court. The termination of occupational pension provision when changing employer can also raise complex questions.
Expert tips for optimising your direct insurance
To minimise the burden of health insurance contributions, there are a few expert tips. Our expert tip: check early on whether it is possible to transfer policyholder status to you as an employee if you continue making contributions privately. This can exempt the privately financed portion from the obligation to pay contributions. For older contracts (taken out before 2005), different rules may apply; a precise review is essential here. Have the profitability of your direct insurance policy critically assessed, especially if it is a contract under Section 40b of the Income Tax Act (EStG). Professional advice can help save up to twenty per cent of the contributions. Also clarify whether you may already be paying the maximum contribution to statutory health insurance; in that case, no additional contributions would be due on the direct insurance policy. Find out about the possibility of taking your occupational pension provision with you. Forward-looking planning is the key to optimisation.
A common mistake is addressing the issue of health insurance contributions too late. Many policyholders are only confronted with the deductions shortly before or at retirement, when there is little room to manoeuvre left. Another mistake is assuming that one-off capital payments are exempt from contributions; this has no longer been the case since 2004. Failing to check health insurer contribution notices can also lead to financial disadvantages. Do not underestimate the complexity of the regulations. It is also a misconception that the allowance applies separately to each occupational pension; it is granted only once against the total of all pension benefits. Confusing the allowance (health insurance) with the exemption threshold (long-term care insurance) can lead to false expectations. Also clarify whether health insurance contributions must be paid on a Riester pension health insurance.
Mistakes to avoid include:
Being informed about contribution obligations too late.
Assuming that capital payments are exempt from contributions.
Not checking health insurer notices.
Misinterpreting the allowance when there are multiple occupational pensions.
Not understanding the difference between an allowance and an exemption threshold.
A proactive approach and good information protect you from unpleasant surprises.
Request your individual risk analysis now
The rules governing health insurance contributions on direct insurance policies are complex and depend on many individual factors. To optimise your personal situation and avoid unnecessary charges, expert advice is essential. At nextsure, we help you gain clarity. Have your insurance situation reviewed free of charge and receive specific optimisation suggestions. Request your personalised risk analysis now and secure a more financially worry-free future. With our expertise in the area of affordable health insurance, we will find the right solution.
More useful links
Wikipedia offers a comprehensive overview of direct insurance in Germany.
The Federal Ministry of Health provides information on the GKV Occupational Pensions Allowance Act and its provisions.
The Techniker Krankenkasse (TK) provides information on contribution-free pension benefits and exemption thresholds.
You can also find details from the Techniker Krankenkasse (TK) on allowances for occupational pensions.
The AOK provides explanations of health insurance contributions on pension benefits.
Destatis (Federal Statistical Office) provides a PDF document on contributions to retirement provision.
Another PDF from Destatis explores the methods and fundamentals of health expenditure accounting.
FAQ
How can I reduce health insurance contributions on my direct insurance policy?
Possible options include using the allowance (€187.25 in 2025 for compulsory insured persons), checking the policyholder status for privately continued contracts, or seeking professional advice to optimise your specific situation.
Does the allowance for health insurance contributions also apply to people who are voluntarily insured under the statutory health insurance scheme?
No, the allowance for health insurance contributions on occupational pensions applies only to pensioners who are compulsorily insured in the statutory health insurance scheme. Voluntarily insured persons must pay contributions on the full amount.
What role does the GMG play in health insurance contributions on direct insurance policies?
The Act to Modernise Statutory Health Insurance (GMG) of 2004 introduced the obligation to pay contributions to health and long-term care insurance on benefits from occupational pensions, including direct insurance policies, for people covered by statutory insurance.
What is the difference between the allowance and the exemption threshold for pension benefits?
The allowance (e.g. EUR 187.25 for health insurance in 2025) reduces the assessment base; only the amount above it is subject to contributions. A lower threshold (e.g. for long-term care insurance) means: if it is exceeded, the entire amount is subject to contributions.
Do I also have to pay health insurance contributions on the privately financed part of a direct insurance policy?
If you continue the policy privately after leaving the company and are yourself the policyholder and pay the contributions, the portion of the payout attributable to these private contributions is generally not subject to compulsory health insurance contributions.
How are lump-sum payments from direct insurance policies treated for health insurance contributions?
A lump-sum payment is spread over ten years (120 months) for the purposes of contribution calculation. One one-hundred-and-twentieth of the sum is regarded as a monthly pension benefit, on which contributions then become due, provided the allowance is exceeded.
