Financial security in the event of serious illness: A comprehensive guide to dread disease insurance
1 May 2025
6
Minutes
Katrin Straub
Managing Director at nextsure
A serious illness can change life overnight and bring financial worries. The critical illness insurance provides a lump sum payment to alleviate financial difficulties following a diagnosis. Learn how this protection works and for whom it is particularly beneficial.
The topic in brief and concise terms
The dread disease insurance pays a lump sum upon diagnosis of a covered serious illness, regardless of the ability to work.
It is a supplement, not a replacement for disability insurance, but it can be an important alternative for certain individuals.
The exact definition of the illnesses, the severity, and the contractual conditions are crucial and must be carefully examined.
Understanding Critical Illness Insurance: The Basics
The critical illness insurance is a personal insurance that provides a one-off capital payment upon the diagnosis of a severe illness as defined in the contract. Originally developed in South Africa in 1983, it has been available in Germany since 1993. The number of illnesses covered varies greatly, often exceeding fifty. It is important to have a precise definition of the illnesses and the required severity in the contract. The payment is made regardless of whether you can continue to work in your profession. This fundamentally differentiates it from a critical illness cover, which is often confused with a disability insurance. The sum paid out can be used freely, for example, for alternative treatments or to repay loans. Thus, it offers financial flexibility during a challenging phase of life.
Precisely define the scope of services: What is covered?
The core of critical illness insurance is the catalogue of covered diseases. Typically, the 'big three' – cancer, heart attack, and stroke – are always included. However, many policies cover significantly more, often over fifty specific conditions. These can include multiple sclerosis, Parkinson's disease, severe burns, or the loss of basic abilities such as seeing or speaking. The crucial elements are the precise medical definitions and the required severity level for a claim. For example, an early stage of cancer is often insufficient. Some providers offer partial benefits for certain conditions in a less severe stage. A cancer insurance is often a component or a specific form of critical illness insurance. Thorough examination of the insurance terms is essential here.
Typically insured conditions often include:
Invasive cancer
Heart attack with typical evidence
Stroke with permanent neurological deficits
Multiple sclerosis with documented relapses
Kidney failure requiring dialysis
Organ transplants (heart, lung, liver, kidney, pancreas)
Coronary artery bypass grafting
Blindness or deafness (complete and irreversible)
This list is exemplary, and the exact conditions vary depending on the provider and policy. Pay attention to waiting periods and possible exclusions.
Assess the distinction and benefits: Critical Illness vs. Disability Insurance
The dread disease insurance pays a lump sum upon the diagnosis of a covered illness, regardless of occupational ability. However, an occupational disability insurance (DI) provides a monthly pension if the last practiced occupation can no longer be performed by at least fifty percent. DI covers disability due to any illness or accident consequences, including mental illnesses, which are often excluded by dread disease insurance. Dread disease insurance can be a sensible addition to DI, but not a complete replacement. For individuals who struggle to obtain DI (e.g. due to pre-existing conditions or high-risk professions), it can represent an important alternative. The benefit of dread disease is tax-free. Contributions to dread disease insurance have not been deductible as special expenses since 2005. The decision for or against such a policy should be made after careful analysis of one's own needs and risks.
Leverage practical use cases and specific benefits
The payout from a dread disease insurance can be used in a variety of ways. A common use is to finance treatment costs that are not fully covered by health insurance, such as special therapies or medications. It can also finance modifications to the house or car for accessible living and mobility. Many affected individuals use the capital to take a career break or to bridge financial constraints due to income losses. For self-employed persons, the sum can help to keep the business running by, for example, paying for a substitute. The financial assistance for cancer is a central aspect of many policies. The flexibility in how the money is used is a major advantage.
Potential uses for the insurance sum include:
Payment for non-standard treatment methods.
Costs for rehabilitation and care.
Compensation for income losses.
Repayment of loans, e.g., for a property.
Funding of modifications for accessibility.
Allowing for a career break to recover.
Securing the family and dependents.
The amount of the insurance sum should be chosen to cover individual needs for a period of two to five years.
Consider important aspects in contribution design and duration
The premium amount for a dread disease insurance depends on several factors. These include the age at entry, health status, profession, sum insured, and duration of the contract. Smokers typically pay higher premiums. Our expert tip: A change in smoking habits must be reported to the insurer, as this can affect the premium. There are tariffs with conventional calculation and unit-linked variants. The duration should be chosen so that coverage lasts as long as possible, ideally until retirement age or even lifelong, if offered and financially feasible. Some plans offer the option to cover children at no additional cost. Also, check if there are options for premium dynamics to adjust insurance coverage for inflation. A waiting period for cancer insurance is a common aspect to review. The decision on the right premium amount and duration is very individual.
Who is dread disease insurance particularly recommended for?
A critical illness insurance policy can be a meaningful protection for various groups of people. Especially for primary earners in families, it can help to secure financial stability in the event of illness. Self-employed individuals and freelancers, whose income directly depends on their ability to work, also benefit from the one-off capital payment. People in high-risk professions or with pre-existing conditions, who have difficulties securing disability insurance, often find this a viable alternative. It can also serve as coverage for loans, for example, for a property, using the insurance sum in a critical situation. Our expert tip: Use critical illness insurance as part of a comprehensive care strategy. It can also be interesting as a keyman policy for companies to financially cushion the absence of a key employee. A top cancer insurance is often included in a good critical illness tariff. The individual life situation and risk tolerance are crucial for the recommendation.
In summary, the insurance is particularly worth considering for:
Individuals without or with incomplete disability insurance.
Self-employed individuals and freelancers to ensure their livelihood or business expenses.
Borrowers to secure loan obligations.
Families to provide financial security in the event of a serious illness of the main earner.
Individuals who want flexible capital provision for individual needs in the event of illness.
Careful advice helps to determine personal needs. This is an important step before completion.
Request your personalised risk analysis at nextsure
Deciding on a critical illness insurance requires thorough consideration and should be based on solid information. Given the complexity of the products and individual needs, professional advice is recommended. At nextsure, we assist you in analyzing your personal situation and finding the right coverage. A retrospective cancer insurance is often difficult, so early precaution is important. Use our expertise to identify your coverage gaps and develop tailored solutions. Request your free risk analysis now. We will review your existing insurance situation and provide specific optimization suggestions. This way, you can be assured of being best protected in case of an emergency. Contact us for a non-binding consultation.
More useful links
Wikipedia provides a comprehensive overview of Dread-Disease insurance.
Statistisches Bundesamt (Destatis) provides official statistics on causes of death in Germany.
Statista offers statistics on the prevalence of chronic illnesses in Germany.
Bundesgesundheitsministerium is the official website of the German Federal Ministry of Health.
Stiftung Gesundheitswissen provides information on the increase in chronic diseases and their impact.
Gabler Wirtschaftslexikon offers a detailed definition of the term Dread Disease in the context of economics.
FAQ
Wie hoch sollte die Versicherungssumme bei einer Dread-Disease-Versicherung sein?
Die ideale Höhe hängt von Ihrer individuellen finanziellen Situation und Ihren Bedürfnissen ab. Sie sollte ausreichen, um finanzielle Engpässe für zwei bis fünf Jahre zu überbrücken oder spezifische Kosten (z.B. Kredit, Therapie) zu decken.
Gibt es Wartezeiten bei der Dread-Disease-Versicherung?
Ja, viele Tarife sehen Wartezeiten vor, oft drei bis sechs Monate nach Vertragsabschluss, bevor für bestimmte Krankheiten ein Leistungsanspruch entsteht. Bei einigen Krankheiten können spezifische, längere Wartezeiten gelten.
Sind psychische Erkrankungen bei einer Dread-Disease-Versicherung mitversichert?
In der Regel sind psychische Erkrankungen wie Depressionen oder Burnout vom Leistungsumfang einer Dread-Disease-Versicherung ausgeschlossen. Der Fokus liegt auf klar diagnostizierbaren, schweren körperlichen Erkrankungen.
Kann ich eine Dread-Disease-Versicherung abschließen, wenn ich bereits Vorerkrankungen habe?
Das hängt von der Art und Schwere der Vorerkrankungen ab. Es kann zu Risikozuschlägen, Leistungsausschlüssen oder einer Ablehnung des Antrags kommen. Eine ehrliche Angabe im Gesundheitsfragebogen ist entscheidend.
Was passiert mit dem Vertrag nach Auszahlung der Leistung?
Nach Auszahlung der vollen Versicherungssumme endet der Vertrag in der Regel. Einige Tarife bieten Optionen für eine Weiterführung mit reduziertem Schutz oder für eine zweite Leistung bei einer anderen schweren Erkrankung.
Ist die Dread-Disease-Versicherung eine Alternative zur Risikolebensversicherung?
Nein, sie dient einem anderen Zweck. Die Risikolebensversicherung sichert Hinterbliebene im Todesfall finanziell ab. Die Dread-Disease-Versicherung leistet zu Lebzeiten bei Diagnose einer schweren Krankheit. Einige Tarife beinhalten eine Todesfallleistung.
