Investment & Wealth
Survivor's Pension Supplement
income protection
Income protection: Ensuring financial stability in the event of loss of work capacity
An accident or illness can put your income at risk. Without income protection, financial difficulties can quickly arise. Learn how to secure your financial future.
The topic in brief and concise terms
Every fourth employee in Germany becomes unable to work, and government support is often insufficient.
Mental illnesses are the most common cause of occupational disability, followed by musculoskeletal disorders.
A private disability insurance is the most important component of income protection; supplementary insurances can be beneficial.
Understanding the necessity of income protection
Loss of workforce capability represents a significant financial risk. Approximately one in four employees in Germany become unable to work during their lifetime. The state disability pension often only provides basic coverage. In 2023, the average full disability pension was about 1,059 euros per month.
This amount is often insufficient to cover ongoing expenses like rent, loans, and living costs. A private disability insurance is therefore an important component of income protection. Without adequate protection, financial difficulties can quickly arise, jeopardizing the entire standard of living. Early engagement with the topic of income protection is therefore crucial for every working individual.
Statutory benefits: An often overestimated security
Many rely on state provisions, but these have limits. The statutory disability pension is only paid if one can engage in any activity for less than three hours a day. For those born after 1961, there is no longer statutory protection for pure occupational disability. The statutory health insurance's sick pay usually amounts to only seventy percent of the gross income and is paid for a maximum of 72 weeks.
In the case of unemployment, unemployment benefit I usually amounts to only sixty percent of the previous net salary. These benefits often do not adequately cover the resulting income gap. Especially for young people who have not yet paid into the pension fund for long, state support is often low. Private provision is therefore essential to maintain the accustomed standard of living.
Quick Facts: Income Protection at a Glance
Here are the key facts about income protection summarised:
Around 25 percent of employees become unable to work.
In 2023, the average state disability pension was 1,059 euros.
Mental illnesses, accounting for over 34 percent, are the most common cause of occupational disability.
Sick pay generally covers only 70 percent of the gross salary.
A private occupational disability insurance provides benefits if you are unable to perform your last job.
The basic ability insurance covers fundamental abilities like seeing or walking.
A daily sickness allowance insurance bridges the gap to sick pay.
These figures highlight the necessity of private coverage. Without additional protection, a significant financial imbalance can occur in the event of income loss.
Practical Section: Real Examples and Solutions
Imagine a 35-year-old employee with a net income of 2,500 euros. In the event of occupational disability, the statutory disability pension might amount to only 1,000 euros. This creates a monthly gap of 1,500 euros. A private occupational disability pension of 1,500 euros could fill this gap. The costs for this vary greatly but, if contracted early, can be around 50 to 100 euros per month.
Another example: A 40-year-old self-employed person has an accident and cannot work for six months. Without a daily sickness allowance insurance, she would have no income during this time. With appropriate insurance, she could receive, for example, 100 euros per day. Choosing the right insurance sum is crucial. It should cover about eighty percent of the net income. Consider what monthly expenses you have and how high your coverage needs to be.
Various Pillars of Income Protection in Detail
The income protection relies on various insurance solutions. Each offers specific advantages:
Occupational Disability Insurance (BU): It provides a monthly pension if you are no longer able to perform at least fifty percent of your last job. This is often the most comprehensive coverage.
Incapacity Insurance (EU): It pays if you are unable to engage in any gainful employment for at least three hours daily. The thresholds are higher than for BU.
Basic Abilities Insurance: This covers the loss of certain basic abilities like seeing, speaking, or walking, regardless of your profession. It’s an option if BU is hard to obtain. More information can be found under Basic Abilities Insurance.
Daily Allowance Insurance: This fills the gap between sickness benefit and your net income in case of extended inability to work. Particularly important for the self-employed and high earners.
Accident Insurance: Provides a lump-sum payment or pension in the event of disability after an accident. However, accidents only account for about eight percent of occupational disability cases.
Dread Disease Insurance: Pays a lump sum upon diagnosis of certain serious illnesses.
Combining various components can be beneficial to ensure comprehensive protection. Unemployment insurance is another aspect that can be considered.
Einkommensschutz für spezielle Zielgruppen
Not everyone needs the same kind of income protection. For the self-employed, private insurance is essential, as they often have no entitlement to statutory sick pay or a disability pension at a relevant level. A sickness daily allowance insurance and an occupational disability insurance are usually indispensable here. Career starters benefit from lower premiums by taking out disability insurance early, as they often have few or no pre-existing conditions. For civil servants, there are special occupational disability insurances tailored to their pension situation.
Families should bear in mind that the loss of an income can have serious consequences for all members. In this case, comprehensive family protection can be sensible. Our expert tip: Have your individual situation analysed to find the right protection. There are tariffs available for pupils and students from the age of 15, offering affordable entry contributions.
Recommendations for Action: Actively Shape Your Income Protection
Start with an honest assessment of your financial situation and your risks. Calculate what monthly shortfall would arise in the event of a loss of income. Obtain multiple quotes and compare not just the price but, above all, the terms of the insurance. Pay attention to the waiver of abstract referrals and clear provisions for triggering benefits. A health check is usually unavoidable; answer all questions truthfully and completely. Use independent advice to find the optimal solution for you.
Remember to regularly review and adjust your insurance coverage, especially with changes in your life circumstances such as marriage, children, or a job change. Early and careful planning of your income protection gives you security for the future. This step is crucial to ensuring long-term financial stability.
Your next step towards financial security
Securing your income is one of the most important financial decisions of your life. An unforeseen event can quickly disrupt your plans and, without adequate income protection, lead to significant financial problems. Take control of your financial future. Comprehensive advice will help you identify the right building blocks for your individual needs and close coverage gaps. This way, you can effectively protect yourself and your family from the financial consequences of illness or accident.
Request an individual risk analysis now: Have your insurance situation checked for free and receive concrete suggestions for optimization.
More useful links
The Federal Statistical Office (Destatis) provides detailed information on absenteeism in Germany.
The Techniker Krankenkasse (TK) releases its health report on incapacity for work for the year 2024.
The German Insurance Association (GDV) provides insights into the causes of occupational disability.
The German Pension Insurance offers statistics and reports on disability pensions over time.
The National Association of Statutory Health Insurance Funds provides key figures on statutory health insurance (GKV).
The Federal Institute for Occupational Safety and Health (BAuA) supplies figures, data, and facts on mental health in the workplace.
The Federal Statistical Office (Destatis) interactively visualises income and expenditure of various types of households.
The Consumer Advice Centre offers comprehensive information on protection against loss of income due to occupational disability.
The German Social Accident Insurance (DGUV) provides data and facts on occupational accidents and occupational illness incidents.
FAQ
When does an occupational disability insurance policy pay out?
An occupational disability insurance policy typically pays out if you are likely to be unable to perform your most recently held occupation for at least six months by at least fifty percent.
What is the difference between occupational and total disability?
Occupational disability refers to the inability to perform your most recently held occupation. Total disability means that you cannot engage in any activity on the general labour market for at least three hours a day.
Are mental illnesses covered under income protection?
Yes, in quality occupational disability insurance policies, mental illnesses are covered as a cause of occupational disability. They are indeed the most common cause.
What happens if I have pre-existing conditions?
Pre-existing conditions must be disclosed when applying. Depending on their nature and severity, this can lead to risk surcharges, benefit exclusions, or in rare cases, rejection of the application.
Can I adjust my income protection later on?
Many policies include guaranteed increase options. These allow you to increase your coverage during certain life events (e.g., marriage, birth, salary increase) without another health check.
What role does the abstract referral clause play?
The abstract referral clause means that the insurer could refer you to another occupation that you could theoretically still perform, even if you cannot find a position. Good policies waive this clause.
