Private accident insurance: optimising pension and tax for maximum benefits
22.06.25
3
Minutes
Katrin Straub
Managing Director at nextsure
Private accident insurance provides financial security after an accident, but how are the pensions from it taxed? Many policyholders are unsure about the tax treatment of benefits and contributions. This article explains everything you need to know about the taxation of your accident pension and how to claim your contributions optimally.
The topic in brief and concise terms
Annuities from private accident insurance are taxable to the extent of the income portion, the amount of which depends on the age at the start of the annuity.
One-off lump-sum payments from private accident insurance, such as disability benefits, are generally tax-free.
Contributions to private accident insurance can be claimed for tax purposes as provision expenses up to maximum amounts of €1,900 (employees) or €2,800 (self-employed).
Understanding the basics of private accident pension and its tax relevance
A private accident annuity provides financial protection if, after an accident, you suffer permanent disability of, for example, fifty per cent.
It complements statutory accident insurance, which usually only applies to accidents at work and on the commute.
It therefore closes a cover gap for more than seventy per cent of accidents during leisure time.
Benefits can be paid as a lump sum or as a lifelong annuity, which has different tax consequences.
Lump-sum benefits from private accident insurance are often tax-free, whereas annuity payments are subject to taxation.
Under certain conditions, you can claim insurance premiums for tax purposes.
These differences are significant for making an informed decision between a lump sum or an annuity.
A precise understanding of these aspects is crucial to clarifying how private accident insurance annuities and taxes are related.
Correctly tax the taxable portion of your private accident pension
Annuities from private accident insurance are not taxable in full, but only with the so-called earnings portion.
This share is determined in accordance with § 22 No. 1 sentence 3 letter a double letter bb of the Income Tax Act (EStG).
The amount of the earnings portion depends on your age when payments begin.
For example, if your accident annuity begins at the age of 50, the taxable earnings portion is thirty per cent of your annual annuity.
If, on the other hand, you first receive an annuity at 65, the earnings portion falls to eighteen per cent.
The age at the start of the annuity is important for the amount of the taxable portion.
Example: an annuity of €1,000 per month, starting at age 44, has an earnings portion of 35 per cent, i.e. €350.
The exact rules on annuities from private accident insurance are complex.
This regulation illustrates how important the details are for your tax return, which brings us to other types of benefits.
Assess lump-sum benefits and special cases in accident insurance for tax purposes
Unlike pension payments, one-off capital payments, such as a disability lump sum, from a private accident insurance policy are tax-free in most cases.
These payments are considered compensation for bodily impairment and not income.
An exception is death benefits: these can be subject to inheritance tax, depending on the degree of kinship and the allowances.
Special caution is advised with accident insurance policies with guaranteed return of premiums.
For contracts from 2005 onwards, the earnings from these must be taxed in full. This is similar to capital life insurance policies.
Pay attention to the contract details of policies with premium refund to avoid up to thirty per cent tax on earnings.
The tax deductibility of accident insurance does not, however, apply only to benefits. The premiums can also reduce your tax burden.
Claim tax relief on private accident insurance premiums and save
You can claim the contributions to your private accident insurance as other provision expenses in your tax return.
For employees, civil servants and pensioners, the annual maximum amount is EUR 1,900.
Self-employed people who pay their health insurance contributions entirely themselves can deduct up to EUR 2,800.
These maximum amounts are often already used up by contributions to health and long-term care insurance.
As a result, further provision expenses no longer reduce your tax bill.
You enter the contributions for a purely private accident insurance policy in line 50 of the Provision Expenses appendix to your tax return.
Check annually whether you have already reached the maximum amount for provision expenses, so you do not miss out on any potential savings.
You can find more information on the topic of insurance and tax in our portal.
For certain groups of people, there are also further deduction options.
Expert knowledge: making use of deductible work-related expenses, business expenses and tax planning tips
The tax treatment of contributions to private accident insurance depends on whether it covers private or professional risks.
If the policy covers only occupational accident risks, self-employed people can claim the full contributions as business expenses.
Employees can then claim these contributions as income-related expenses.
For mixed policies that cover both private and occupational risks, it is possible to apportion the contributions.
The tax office often accepts a flat-rate split of fifty per cent for the occupational share and fifty per cent for the private share.
This can mean tax savings of over 100 euros a year.
Our expert tip: Ask your insurer for a certificate showing the exact breakdown of the insurance premium.
This allows you to prove the occupational share precisely and optimise your tax burden.
Self-employed people in particular often benefit from higher deduction allowances for their accident insurance.
The regulations on occupational disability and tax present similar complexities.
To make the best use of all aspects, a structured approach is recommended.
Master your way to the optimal tax treatment of your accident insurance
The correct tax treatment of your private accident insurance, particularly the annuity and contributions, can noticeably improve your financial situation.
Annuities are taxed at the favourable income fraction, the amount of which depends on your age when the annuity begins.
Often only eighteen to thirty per cent of the annuity is taxable, which reduces the burden.
Capital payments are usually tax-free, which represents significant relief.
You can deduct contributions as retirement provision expenses, with upper limits of €1,900 or €2,800 applying.
Collect all relevant receipts and enter the values correctly in your tax return.
Careful documentation and knowledge of the rules are the key to annual savings of several hundred euros.
At nextsure, we are happy to support you in analysing your insurance situation and identifying optimisation potential.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific optimisation suggestions.
More useful links
Federal Ministry of Finance provides official guidance on the Income Tax Act here.
Federal Ministry of Finance provides further details on the income tax guidance.
German Pension Insurance offers a specialist publication on the interaction between pension and income.
GDV provides current statistics on business development in private accident insurance.
DGUV offers a relevant publication on topics relating to statutory accident insurance.
FAQ
Where do I enter private accident insurance in the tax return?
Enter contributions for purely private accident insurance in the Vorsorgeaufwand schedule (usually line 50). Purely occupational accident insurance policies or the occupational portion of mixed policies should be entered as employment expenses in Schedule N or as business expenses in Schedule EÜR/GSE.
What is the difference between statutory and private accident pensions for tax purposes?
Pensions from statutory accident insurance are generally tax-free under § 3 No. 1a of the German Income Tax Act (EStG). Private accident pensions, on the other hand, are taxed on the earnings portion, which usually means a lower taxable amount than full taxation.
Does taxation on the income portion also apply to short annuity terms?
For lifelong annuities from private accident insurance, taxation on the income portion applies in accordance with Section 22 of the German Income Tax Act (EStG). For annuities limited in time, Section 55 of the Income Tax Implementation Ordinance (EStDV) may apply, which can lead to different, often higher income portions.
My maximum deduction for retirement provision expenses has already been reached. Is it still worth including the accident insurance?
If the maximum amount for other deductible personal expenses (EUR 1,900 or EUR 2,800) has already been used up by contributions to basic health insurance and long-term care insurance, additional contributions to private accident insurance no longer have any tax effect. Stating them is nevertheless correct, but it does not lead to any further tax saving in this area.
What are the tax implications of accident insurance with premium refund?
For accident insurance policies with premium refund, taken out from 2005 onwards, the returns are taxed in full on payout if the payment is made as a capital benefit and the criteria for a tax-free payout (e.g. term of at least twelve years, payout after the age of 60/62) are not met. The annuity benefit is subject to taxation on the income portion.
Can I deduct the premiums for my children's accident insurance?
Yes, if you have taken out private accident insurance for your children, for whom you are entitled to child benefit or child allowances, and you pay the premiums, you can claim these as your own other precautionary expenses. The same maximum amounts apply.
