Understanding the insurance period: Your key to optimised contract durations and premiums
18.05.25
9
Minutes
Katrin Straub
Managing Director at nextsure
Do you know the difference between a policy year and a policy period? Many policyholders overlook important details here that can be worth real money. This article explains clearly and concisely what you need to know about the policy period to manage your contracts optimally.
The topic in brief and concise terms
The insurance period is the assessment period for your premium, usually one year, and is decisive for notice periods (§ 12 VVG).
The payment method (e.g. monthly) does not change the length of the insurance period.
Cancellations are generally possible at the end of the insurance period; notice periods are often one to three months (§ 11 VVG).
Insurance period: The basics explained briefly
The insurance period is the period for which your insurance premium is calculated. As a rule, this period is one year, unless your premium is calculated for shorter periods, for example three months. This provision can be found in section 12 of the Insurance Contract Act (VVG). Important: The way your premiums are paid, whether annually or monthly, does not change the defined insurance period. A correct understanding of this period is crucial, as, among other things, your cancellation rights depend on it. The exact details on cancellation are governed by section 11 VVG.
Practical check: Insurance period in everyday contract management
Imagine you take out a new motor insurance policy on 1 October and agree to pay €300 every six months. If your contract uses the calendar year as the insurance period (i.e. from 1 January to 31 December), your first premium would be calculated pro rata for three months, i.e. €150. From 1 January of the following year, you would then pay the regular €300 every six months. In this example, cancellation would be possible at the end of the insurance period, i.e. on 31 December, provided the notice period is observed. Always pay attention to the insurance period stated in the insurance certificate, as this can vary from provider to provider; it often lasts twelve months. Contract changes are often also effective at the start of a new insurance period.
Here are the typical effects of the insurance period on your contract:
Determines the period used to calculate the premium (e.g. one year).
Forms the basis for notice periods and cancellation dates (often one to three months before the end of the period).
Is decisive for the automatic renewal of the contract (usually for another year).
Reference point for when contract adjustments take effect.
Differs from the payment frequency alone (e.g. monthly payment with an annual insurance period).
Understanding these connections enables you to manage your contracts actively and, for example, not miss a switch to better terms.
Expert knowledge: Legal nuances and design tips for the policy period
The Insurance Contract Act (VVG) forms the legal basis for the insurance period. Under § 12 VVG, one year is generally deemed the insurance period, unless the premium is calculated for shorter periods. This has a direct impact on the cancellation arrangements, which are set out in detail in § 11 VVG. For contracts with a term of more than three years, you as the policyholder can, for example, cancel at the end of the third year and then annually thereafter, usually with three months’ notice. Our expert tip: Always check the exact wording in your General Terms and Conditions of Insurance (AVB), as individual agreements may differ from the standard rules, provided they do not place you as the customer at an unreasonable disadvantage. For example, the cancellation period for some contracts may be just one month.
Please note the following paragraphs and rulings for further insight:
§ 12 VVG: Defines the insurance period as the calculation period for the premium, usually one year.
§ 11 VVG: Regulates notice periods (one to three months) and termination dates, often at the end of the insurance period.
§ 92 VVG: Deals with the right of cancellation after an insured event for both parties, often with a notice period of one month.
Consumer advice centres point out that if the contract starts partway through the year, the first insurance period may be shorter and cancellation cut-off dates may vary.
The Bund der Versicherten emphasises that the insurance period may be no more than one year and is crucial for cancellations.
A precise understanding of these provisions protects you from unwanted contract renewals and enables you to fully exercise your rights as a policyholder.
Insurance period and cancellation: How to make the best use of your knowledge
The insurance period is inextricably linked to your cancellation rights. For contracts running for an indefinite period, ordinary termination by either party is generally only possible at the end of the current insurance period. The notice period must be the same for both sides and, under Section 11(3) of the German Insurance Contract Act (VVG), may be no less than one month and no more than three months. Many motor insurance policies, for example, have a notice period of one month to the end of the insurance period, which often coincides with the calendar year, making 30 November an important cut-off date. Miss this deadline and your contract will usually be automatically extended by a further year. A special right of termination often applies in the event of premium increases without improved benefits or after a settled claim. Here, the notice period is usually one month from receipt of the notification or conclusion of the claims negotiations. Find out about your statutory cancellation rights.
Understanding the differences: insurance period versus contract term
It is important not to confuse the insurance period with the entire contract term. The contract term is the entire period for which an insurance contract is concluded, for example three or five years. The insurance period, by contrast, is, as already explained, the shorter calculation period for the premium, usually one year. Even if a contract has a minimum term of, for example, three years, the premium is still calculated for annual insurance periods. After the minimum contract term has expired, and for contracts that run for an indefinite period from the outset, the insurance period plays the decisive role for annual cancellation options. Even with multi-year contracts, you can often cancel annually at the end of the respective insurance period after the third year. A look at your insurance policy will clarify the exact terms and periods.
Special cases and exceptions: When the standard insurance period deviates
Although the annual insurance period is the rule, there are exceptions. For short-term insurance, such as travel insurance for three weeks, the insurance period corresponds to the contract term. Some insurers define the insurance period differently, for example as the period of the payment frequency. If you pay monthly, in theory it could also be cancelled monthly, if this is stipulated as such in the terms and conditions of your disability insurance. In life insurance, cancellation is often possible at the end of the current insurance period without observing a notice period, if premiums are paid annually. Therefore, always check the specific clauses in your contract to avoid surprises if you intend to cancel. The insurance policy number helps you identify your contract quickly.
A solid understanding of the insurance period gives you, as the policyholder, greater control. You can confidently meet notice periods, which are often only one month, and thus avoid unwanted, expensive contract renewals. You can recognise the difference from the pure payment frequency and understand when premiums are calculated for which period – for example, when taking out a policy in the middle of the year, only pro rata for the first, shorter period. This knowledge enables you to compare offers more effectively and make well-founded decisions when it comes to protecting your assets, whether it is supplementary dental insurance or more complex cover. Use this knowledge to actively negotiate better terms or switch to a more favourable provider in good time. Paying attention to the correct insurance period can save you significant amounts each year.
Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Wikipedia offers a comprehensive overview of insurance contracts in Germany and their legal foundations.
On Gesetze im Internet, you can find the full and current text of the Insurance Contract Act (VVG).
The Federal Statistical Office (Destatis) provides official data and statistics on financial service providers in Germany.
The German Insurance Association (GDV) offers model terms and conditions and other industry-relevant information for insurance companies.
FAQ
What exactly is the insurance period?
The insurance period is the defined period for which your insurance premium is calculated. Under Section 12 of the Insurance Contracts Act (VVG), it is usually one year, unless the premium is calculated for shorter periods. It is also relevant to your cancellation rights.
How does the insurance period differ from the insurance year?
The insurance year often begins with the individual policy commencement date and runs for twelve months. The insurance period is the premium calculation period. Sometimes the two coincide, but for some contracts the first insurance period may be shorter (e.g. until the end of the year), while the insurance year is counted from the commencement of the contract.
What influence does the insurance period have on my cancellation options?
The insurance period largely determines when you can give ordinary notice to terminate a contract – usually at the end of the current period, observing a notice period of one to three months (§ 11 VVG). For contracts lasting more than three years, there is often an annual right of termination after the third year.
Does paying monthly change the insurance period?
No, the agreement on the payment method (e.g. monthly, quarterly) does not affect the length of the insurance period. Even with monthly payments, the insurance period can still be one year.
What is the difference between the policy period and the contract term?
The contract term is the total duration for which a contract is concluded (e.g. one, three or five years). The insurance period is the (usually annual) section within this term for which the premium is calculated and at the end of which cancellation options may exist.
Are there exceptions to the annual insurance period?
Yes, for short-term insurance policies (e.g. travel insurance for a few weeks), the policy period corresponds to the contract term. Some insurers may also stipulate shorter periods in their terms, based on the payment cycle, but this must be clearly agreed.
