Term life insurance for main earners: protection for your family
20.01.2026
10
Minutes
Katrin Straub
Managing Director at nextsure
If a family’s main source of income suddenly disappears, the emotional shock is often followed by financial hardship. A term life insurance policy closes this gap and ensures that, should the worst happen, your family can keep the house and your children’s education remains secure.
The topic in brief and concise terms
The statutory widow’s pension will barely be enough in 2026 to cover a family’s standard of living or mortgage payments on its own.
Use the cross-over model to avoid high inheritance taxes when the benefit is paid out, especially if you are not married.
Choose a sum insured that covers at least five times your gross annual salary plus all existing debts.
Why statutory protection for families is not enough
Many people in Germany have a false sense of security when it comes to state survivor benefits. The statutory pension insurance does pay widows’ and orphans’ pensions, but these are subject to strict conditions and are usually very low. The so-called small widow’s pension amounts to only 25 per cent of the deceased’s pension entitlement and is also limited to two years. Even the large widow’s pension, which is paid under certain conditions such as raising children, covers only 55 to 60 per cent. For a family that depends on the full salary of the main breadwinner, this creates a massive gap in provision.
Things become particularly critical when property loans are involved. A report from the Federal Statistical Office from 2025 makes clear that housing cost burden for single parents after the death of their partner often rises to over 40 per cent of disposable income. Without private term life insurance, selling the family home is often unavoidable in such scenarios. Term life insurance provides the necessary buffer here, giving surviving dependants time and financial freedom to reorient themselves.
The statutory pension often covers less than half of the need.
The widow’s or widower’s own income is taken into account when calculating the pension.
Childless couples under 47 often receive only the limited small widow’s pension.
At nextsure, we see every day that the digital generation values transparency. Facts help you make the right decision. Term life insurance is not a complex savings product, but pure risk cover. That makes it extremely affordable compared with other types of insurance. For just a few euros a month, you can insure sums that, in an emergency, could secure your family’s future.
The calculation of the optimal sum insured
The right sum insured determines the effectiveness of your protection. If the amount is too low, the money will not last long enough. If it is too high, you pay unnecessarily high premiums. A proven decision framework for main earners is based on three pillars: income replacement, debt clearance and education costs.
Pillar 1: Income replacement. As a rule of thumb, use three to five times your gross annual salary. If you earn 60,000 euros a year, the basic sum should therefore be between 180,000 and 300,000 euros. This ensures that your family can maintain its usual standard of living for several years without immediately relying on state support.
Pillar 2: Existing liabilities. Have you taken out a loan for a flat or house? Add the remaining debt to the basic sum. If there is still 400,000 euros outstanding with the bank, your sum insured should cover this amount in addition. This means the property will be debt-free immediately in the event of death.
Pillar 3: Children’s future. Are you planning for your children to go to university? Per child, you should budget an additional 50,000 to 70,000 euros to cover education costs and living expenses during the period of study. In total, this often results in a protection requirement of 600,000 euros or more for a young family with a house.
For example: a 35-year-old software developer in Hamburg with two children and an ongoing loan of 350,000 euros chooses a sum insured of 750,000 euros. In good health, he often pays less than 20 euros per month for this with a modern provider such as nextsure. This small amount is no match for the risk of a complete collapse of the family’s finances.
The cross model: cleverly avoiding inheritance tax
A common mistake when taking out term life insurance is choosing the wrong policy structure. If you insure yourself and name your partner as beneficiary, the payout forms part of your estate. This can be especially expensive for unmarried couples. While spouses have an inheritance tax allowance of €500,000, for unmarried couples it is just €20,000. Anything above that is taxed at up to 30%.
The solution is the so-called cross-insurance arrangement. Here, Partner A is the policyholder and premium payer, but the life of Partner B is insured. In the event of Partner B's death, Partner A receives the insurance sum tax-free, as legally it is not an inheritance but a benefit from their own contract. You have paid the premium for the other person's risk and now receive the compensation.
Partner A takes out insurance on Partner B's life.
Partner B takes out insurance on Partner A's life.
Both contracts are legally separate.
This model is also important for business partners in start-ups or small companies. If a key person is no longer available, the company can use the tax-free payout to buy back shares or finance the search for a successor. At nextsure, you can set up this structure digitally and with ease, so your money reaches where it is needed: your loved ones, without deductions by the tax authorities.
Special considerations for self-employed people and freelancers
For self-employed people, term life insurance is often the most important insurance of all. Unlike employees, they usually are not entitled to statutory disability or survivor's pension, unless they voluntarily pay into the statutory pension insurance scheme. If the head of the business dies, not only is the private income lost, but often also the basis for the business's continued existence.
Freelancers should make sure that the sum insured also covers the costs of winding up the business or the salaries of employees for a transitional period. Flexibility is crucial here. As income for self-employed people can fluctuate, nextsure offers plans that include guaranteed insurability options. This means that if you get married, have a child or finance a property, you can increase the sum insured without a new medical examination.
Do not underestimate the health questions. Anyone who works long hours and is under stress tends to ignore minor complaints. For the insurer, however, pre-existing conditions such as high blood pressure or back problems are relevant. We recommend answering the health questions absolutely truthfully. Thanks to digital processes at nextsure, many details can now be validated quickly and easily, which speeds up the underwriting process. False statements jeopardise the entire insurance cover in the event of a claim.
Constant or decreasing sum insured?
Not every life situation requires the same level of cover for the full term. There are two options: the fixed sum insured remains the same throughout the entire term. This is ideal if you want to provide general cover for your family and the children are still young. The advantage is planning certainty: you know exactly that the amount paid out in year 1 will be the same as in year 20.
The decreasing sum insured, on the other hand, is specifically intended to cover loans. Since the outstanding balance of your property loan decreases with each instalment, the sum insured can also reduce in parallel. This has one decisive advantage: the premiums are significantly cheaper than for a fixed sum. This is often referred to as decreasing balance cover or annuity-decreasing cover.
Which model is right for you depends on your goals. Many customers at nextsure choose a combination: a fixed sum for the family’s core needs and a decreasing sum to cover the property financing. This means the cover is precisely tailored to the actual financial burden.
Digital sign-up with nextsure
In the past, taking out life insurance meant piles of paperwork and weeks of waiting. nextsure is modernising these processes. Our process is designed to save you time and provide maximum transparency. You can assess your needs online, run through different scenarios and complete the application directly on screen.
Our simplified risk assessment enables an immediate decision in many cases. Thanks to intelligent algorithms, we can often make an immediate decision without you having to laboriously request medical reports. This is modern insurance cover that fits your digital everyday life. We combine the speed of a tech start-up with the expertise of experienced insurance specialists.
The ideal time to take out cover is now. The younger and healthier you are when you take out the policy, the lower the premiums will be for the entire term. Putting it off costs real money. Get covered now and enjoy the reassuring feeling that your family is prepared for every eventuality. nextsure makes insurance simple, understandable and digital.
FAQ
Do both partners need term life insurance?
Yes, that is absolutely recommended. Even if one partner earns less or takes care of the children, in the event of death there is a significant financial need, for example for childcare or domestic help, so that the main earner can continue working.
What happens to the insurance at the end of the term?
Term life insurance is pure risk cover without capital accumulation. If the insured person survives to the end of the term, the contract ends and no payout is made. In return, the premiums are very affordable compared with endowment life insurance.
Do I need to see a doctor for the completion?
In most cases, answering health questions in the online application is sufficient. Only for very high sums insured (often from EUR 500,000) or for certain pre-existing conditions may a medical examination or a recent report from the GP be required.
How long should the term be?
The term should be based on your financial obligations. Ideally, the contract runs until the children have completed their education or the property loan has been fully repaid. An age of 60 to 67 is usually chosen as the end point.
What is the difference between term life insurance and funeral expenses insurance?
Term life insurance serves to protect the financial livelihood of surviving dependants with high sums (e.g. €300,000). Funeral expense insurance is only intended to cover funeral costs (usually €5,000 to €10,000) and usually does not require a medical examination.
Can I adjust the insured sum later?
Many modern policies with nextsure include a guaranteed right to increase cover. This allows you to increase the sum insured without another health check when important life events such as marriage, the birth of a child or buying property occur.
