Basic ability insurance tax return: make the most of contributions and save on tax
10.05.25
7
Minutes
Katrin Straub
Managing Director at nextsure
Can you deduct premiums for basic disability insurance from tax? Yes, that is possible, but there are important details to bear in mind. This article shows you how to declare your basic disability insurance in your tax return and what you need to consider.
The topic in brief and concise terms
Contributions to basic disability insurance are tax-deductible as other retirement provision expenses, but are often limited by maximum amounts that have already been reached by health and care insurance contributions.
The entry is made in the "Vorsorgeaufwand" appendix to your tax return.
Annuity benefits from basic ability insurance are generally taxed on the earnings portion. [§22]
Basic ability insurance in the tax return: The key points at a glance
Contributions to basic disability insurance count as other provision expenses. You can enter these in the Vorsorgeaufwand section of your tax return. For employees, there is often an annual maximum amount of €1,900. Self-employed people can claim up to €2,800. However, these amounts are often already reached through contributions to health and long-term care insurance. An additional tax saving through basic disability insurance is therefore not always available. Nevertheless, providing the correct information is important for a complete tax return.
Claiming tax deductions for basic ability insurance contributions: Here’s how it works
Contributions to basic ability insurance are treated as special expenses in the tax return. Specifically, they fall under the "other precautionary expenses" pursuant to Section 10 of the Income Tax Act. You enter the contributions paid in the precautionary expenses appendix, usually in the lines for other precautionary expenses. Many insurers list the deductible contributions separately, which makes entering them easier. It is advisable to use your insurer’s annual contribution statement for the exact figures. An overview of deductible insurance policies will help you further. The tax effect depends on whether your personal maximum amount for precautionary expenses has already been used up.
Maximum amounts for retirement provision expenses: A crucial factor
The tax deductibility of pension-related expenses is limited. For employees, civil servants and retirees, the maximum amount for other insurance expenses is 1,900 euros per year. Self-employed people and freelancers can claim up to 2,800 euros per year. However, this allowance is primarily filled by contributions to basic health insurance and statutory long-term care insurance. As these mandatory contributions often already use up the full maximum amount, there is often no scope for additional tax savings for other insurance policies such as basic ability insurance. A careful review of your individual situation is therefore essential. Information on where insurance policies are entered is helpful here.
Here is an example list of which insurance policies may count towards the maximum amount:
Private personal liability insurance
Motor vehicle liability insurance
Accident insurance
Term life insurance (under certain conditions)
Occupational disability insurance
Basic ability insurance
A precise understanding of these rules is important for your financial planning.
Practical example: When is it worth stating that you have basic ability insurance?
Let us assume that an employee pays €2,000 a year for his health and long-term care insurance. This already exceeds the maximum amount of €1,900. Additional contributions to an occupational disability insurance policy, for example €500 a year, would not bring any further tax saving in this case. The situation is different if the contributions to health and long-term care insurance are lower, for example only €1,500. Then a further €400 in other retirement provision expenses, such as contributions to occupational disability insurance, could be claimed for tax purposes. So an individual assessment is always necessary. A look at the general tax rules for insurance policies can provide clarity. Nevertheless, the correct declaration is important for a complete tax return, even if it does not result in any direct saving.
Expert insight: Recent judgments and legal analysis
A ruling by the Federal Court of Justice (BGH) of 11 December 2024 (case no. IV ZR 498/21) has caused a stir. According to this ruling, basic ability insurance (GFV) is not a classic form of earnings protection in the narrower sense. This is because it covers specific abilities and not general earning capacity. This legal classification can affect whether insurers categorise the GFV as life insurance or non-life insurance. However, for tax deductibility as a retirement provision expense under Section 10 of the Income Tax Act (EStG), this currently usually has no direct consequences, as it continues to be treated as other provision expenses. Our expert tip: keep all proof of contributions carefully and review your situation annually. The definition of basic ability insurance is fundamental here. It remains to be seen whether such rulings will lead to long-term changes in tax treatment.
Basic ability insurance versus occupational disability insurance for tax purposes
Both basic ability insurance and occupational disability insurance (BU) can be claimed as other precautionary expenses in your tax return. The same maximum amount applies to both: EUR 1,900 (employees) or EUR 2,800 (self-employed) for other precautionary expenses. In practice, this amount is often already used up by health and long-term care insurance contributions. The tax benefit is therefore similarly limited for both types of insurance once the maximum amounts have already been reached. The choice between basic ability insurance or BU should therefore primarily be based on the individual need for cover and the respective benefit triggers, not solely on tax considerations. For the self-employed, basic ability insurance can be an important form of cover. The question of whether BU or basic ability insurance is the better fit must be assessed individually.
If an insured event occurs and you receive a pension from your basic ability insurance, the question arises as to how it is taxed. As a rule, pensions from private personal insurance policies taken out against ongoing contributions are taxed on the taxable portion of the earnings. The amount of this earnings portion depends on the age at the start of the pension and is regulated in Section 22, number 1, sentence 3, letter a, double letter bb of the Income Tax Act (EStG). For example, if a pension starts at the age of 50, the earnings portion amounts to 30 per cent of the pension. Only this portion is then subject to income tax. If the taxable portion is below the basic allowance, no taxes are due. It is advisable to seek tax advice at an early stage in this regard. The benefits of our basic ability insurance are also designed transparently.
Design tips and recommendations for your tax return
To make the most of your disability insurance tax return, please note the following points:
Collect all insurance contribution certificates carefully throughout the year.
Check whether your contributions to health and long-term care insurance already make full use of the maximum amount for pension-related expenses. This is often over 1,500 euros.
Always enter the contributions to disability insurance in the pension expenses appendix, even if no direct tax saving is expected. It serves completeness.
Use tax software or consult a tax adviser to avoid mistakes. Many programs guide you through the relevant forms.
Keep up to date with changes in tax law, as rules on pension-related expenses can change. There are small adjustments every year.
Careful preparation of your disability insurance tax return can be worthwhile. Even if private liability insurance is tax-deductible, similar maximum limits apply.
At nextsure, we are happy to support you with information on all aspects of your cover. Although we are not allowed to provide tax advice, we can help you put together the necessary documents for the contracts you have taken out with us.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Wikipedia provides a comprehensive overview of basic ability insurance.
The Federal Ministry of Justice provides the full text of section ten of the Income Tax Act (EStG) on special expenses.
The German Pension Insurance provides detailed information on the taxation of pensions and other tax aspects of retirement provision.
FAQ
Can I always claim basic ability insurance as a tax deduction?
Yes, you can declare the contributions as provision expenses. However, any actual tax savings depend on whether the maximum amounts (EUR 1,900 for employees, EUR 2,800 for self-employed people) have already been used up by other insurance policies, in particular health and long-term care insurance.
Which supplementary form do I need for basic disability insurance on my tax return?
You need the "Vorsorgeaufwand" annex to claim your contributions to basic ability insurance.
What are the tax implications if I receive a benefit from basic ability insurance?
If you receive an annuity from basic ability insurance, this is generally taxed using the so-called investment income portion. The amount of this portion depends on your age when the annuity starts. [§22]
Is basic disability insurance only worthwhile for tax reasons?
No, taking out a basic ability insurance policy should primarily be based on your individual protection needs. Tax advantages are often limited, as the maximum amounts for pension-related expenses are usually already reached by health and long-term care insurance contributions.
Is there a difference in the tax treatment of income protection insurance?
In terms of the deductibility of contributions as other precautionary expenses and the applicable maximum limits, there is no significant difference compared with income protection insurance.
Where can I find the exact amounts for my tax return?
The exact amounts of your contributions paid towards your basic ability insurance can usually be found in the annual statement from your insurance provider.
