Unlocking Life Insurance in Germany: A Detailed Guide with Top Provider Recommendations
Understanding life insurance in Germany can be a daunting task, particularly if you're new to the concept or the country. This essential financial tool offers peace of mind, ensuring that your loved ones are financially secure should the unexpected occur. This comprehensive guide aims to simplify the process, discussing the basics of life insurance, different types available, how they function in Germany, the best life insurance providers in Germany, and when such coverage would be beneficial or not.
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Disclaimer: This article is intended to provide general information about life insurance in Germany and is not meant to provide specific financial, legal, or tax advice. While every effort has been made to ensure the accuracy of the information at the time of publication, life insurance policies, regulations, and tax laws can change, and the specifics of your situation can affect how these general principles apply.
Moreover, the pros and cons listed for each provider are based on common feedback and general characteristics; individual experiences may vary. The insurance companies themselves may have updated their offerings, underwriting rules, or other key details since the time this article was written.
Therefore, before making any decision about life insurance, you should check the most recent information directly with the insurance companies, consult with a financial advisor, and consider your personal needs, objectives, and circumstances. Always read the terms and conditions of any insurance policy carefully before purchasing.
What is Life Insurance in Germany
Life insurance in Germany offers financial protection to an individual's loved ones in the event of their untimely demise. Two primary types are term life insurance (Risikolebensversicherung) (RLV), which covers a specific period, and endowment life insurance, also called Permanent Life Insurance (Kapitallebensversicherung), combining a death benefit and savings component.
With reputable providers like Feather, Allianz, Die Bayerische, CosmosDirekt GetSurance, among others, one can choose the right policy based on their specific financial situation, needs, and long-term goals. This crucial financial planning tool ensures financial stability for dependents, managing debts, and securing future financial needs.
Related: If you don’t have it already, we highly recommend looking at the various types of insurances available in Germany. Such as: Liability insurance, dental insurance (top-up plan), legal insurance and bike insurance.
Top Life Insurance Providers in Germany
Germany boasts a wide range of reputable life insurance providers. Some of the best life insurance providers in Germany: Feather, Allianz, CosmosDirekt, Die Bayerische, and GetSurance. Here are the pros and cons of each of these providers to help you make a decision on which is best for you.
Source: Feather.
#1: Feather
Pros:
Starts at €1.98 per month, one of the least expensive
100% English sign-up and lifetime support, ideal for expats/immigrants
Feather handles all the German paperwork
The only full English option of these 5 options
No appointments necessary
Up to €400k without a doctor’s appointment
Easy online application process
Adjustable coverage
Adjust coverage each year for situation changes
Policy can be managed online, providing convenience
Strong customer service reputation
Cons:
Limited rider options
Lack of face-to-face options for direct communications
Go here to get a quote at Feather!
Source: Allianz. Translated to English with Google Translate.
#2: Allianz
Pros:
Large, globally recognized company with a strong reputation in over 70 countries
Wide range of insurance products available
Provides both term and endowment life insurance
Very high maximum coverage of €10 million
Variety of rider options for policy customization
3 plans: Basic, Plus, & Plus Accident
Immediate payment due to terminal illness
Clear coverage benefits of each plan
Insured sum can increase in the future without health check
Low risk of price increases with existing contracts
Comprehensive customer support options
Digital services for policy management and claims
Broad range of life insurance products, allowing tailored coverage.
Broad term length range of 1 to 50 years
Cons:
Premiums may be higher compared to other providers
In German only
Policy terms and conditions can be complex.-
Go here to get a quote at Allianz!
Source: CosmosDirekt. Translated to English with Google Translate.
#3: CosmosDirekt
Pros:
Starting at €1.78 per month, the cheapest of the 5 reviewed here
Recommended by the “Stiftung Warentest,” the German consumer product organization
Part of Generali Group, one of the world’s largest insurance providers
Competitive pricing, one of the lowest available
Offers a range of term lengths for maximum flexibility
Online tools for easy policy management
2 plans: Base and Comfort
No premiums have been increased in 30 years
Monthly cancellable contract
Included services clearly shown and explained at sign-up
Immediate payment due to terminal illness (12 months)
5% discount if partner added
Increasing edging (dynamic option) increases payout each year
Cons:
Term life insurance only
In German only
Source: Die Bayerische. Translated to English with Google Translate.
#4: Die Bayerische
Pros:
A long-established company with a solid reputation
Wide range of additional benefits and riders available
Adaptable plans to life changes (property, children, marriages, etc.)
Clear contract without fine print
Monthly cancellable contract
Immediate payment due to terminal illness (3 months)
Two plans: Active Life & Active Life Plus
€20,000 – €3 million coverage
10-40 year plan, maximum age of 75
Cons:
Term life plan only
May be more expensive than other providers
Slightly complicated application process
In German only
Source: GetSurance. Translated to English with Google Translate.
#5: GetSurance
Pros:
Easy online application and policy management
1 minute to receive a quote
Health check comes after quote
No medical exam required for certain policies
Focused on digital experience and modern policy offerings
Flexibility with coverage amounts
Coverage amounts can be changed later on
Cons:
Starting at €3.49 per month, one of the most expensive available
In German only
Lowest maximum coverage of the €50K at €250K
Higher cost than others reviewed
Lack of face-to-face service
May not offer as many policy options as more established insurers
Product range might be limited compared to more traditional insurers.
Go here to get a quote at GetSurance!
Here’s a summary of some of the German life insurance items we consider to be important. Cost per month*, English support, coverage amounts, and flexibility of the term’s range.
Monthly Price | € 15.60 | € 16.32 | € 16.75 | € 14.13 | € 17.58 |
English Support | Yes | No | No | No | No |
Coverage Amounts | €50K -400K | €20K -3M | €25K-10M | €25K - 600K | €50K - 250K |
Term Length Options (Years) | 5-30 | 10-40 | 1-50 | 5-45 | 5-40 |
*Inputs to calculate cost above: 30 years old, 30-year term coverage, €300,000 coverage, mechanical engineer, non-smoker, no high-risk leisure activities, no health problems, term-life plan, and only the base plans. GetSurance had maximum coverage of €250,000.
It's important to remember that these are general observations, and individual experiences may vary. It's always a good idea to research and compare options, taking into account your unique circumstances and needs, before choosing an insurance provider. However, these services are what we believe to be the best life insurance providers in Germany.
Are you hoping to retire in Germany? Here is a complete checklist to help get you started with your planning.
The Basics of Life Insurance
Life insurance is a contract, also known as a policy, between an individual (the policyholder) and an insurance company (the insurer). This agreement offers financial protection to the policyholder's beneficiaries in the event of the policyholder's death.
At its core, life insurance is designed to provide peace of mind and financial security, ensuring that one's loved ones aren't burdened with financial stress during an already challenging time of loss.
Here's How Life Insurance in Germany works:
1. Policyholder and Insurer Agreement: The policyholder pays a premium (typically monthly or annually) to the insurance company. The amount of this premium is based on a variety of factors, including the policyholder's age, health, lifestyle, the type of policy, and the amount of coverage (death benefit) they desire.
2. Beneficiaries: The policyholder designates one or more beneficiaries who will receive the death benefit upon the policyholder's death. Beneficiaries can be individuals (like family members or friends), trusts, charities, or organizations. Some of the best life insurance providers in Germany will let you change this.
3. Death Benefit: The death benefit is the amount of money the insurance company promises to pay the beneficiaries upon the policyholder's death. This money is usually tax-free (see more below) and can be used to cover expenses such as funeral costs, outstanding debts, daily living expenses, future education costs for children, or loss of income. Some of the top life insurance providers in Germany will also provide an early payout for a terminal illness, for example CosmosDirekt will pay 12 months early.
4. Claim Process: Upon the death of the policyholder, the beneficiaries file a claim with the insurance company, providing a certified copy of the death certificate. Once the claim is approved, the insurance company pays the death benefit to the beneficiaries.
Life insurance is an important part of financial planning, especially for individuals with financial dependents. By understanding the basics of life insurance, you can make an informed decision about the type of coverage that best suits your needs and circumstances.
Types of Life Insurance in Germany
In Germany, the two most common types of life insurance are term life insurance (Risikolebensversicherung) and endowment life insurance (Kapitallebensversicherung).
Here's a more detailed look at these types of policies:
#1: Term Life Insurance (Risikolebensversicherung):
Term life insurance, known as Risikolebensversicherung in Germany, is a straightforward and generally affordable type of life insurance that provides coverage for a specific period, or "term". Here's a detailed breakdown of how it operates:
Policy Agreement: When you purchase a term life insurance policy, you agree to pay regular premiums to the insurance company for the duration of a specified term. This term can typically range from 1 to 50 years, depending on the policy.
Fixed Premiums: The premiums for term life insurance are usually fixed for the duration of the term. These premiums are determined based on factors such as the policyholder's age, health status, lifestyle, and the amount of coverage.
Death Benefit: If the policyholder dies during the term of the policy, the insurer pays out a pre-agreed amount, known as the death benefit, to the policyholder's beneficiaries. This death benefit is usually tax-free and can be used by the beneficiaries however they choose.
Term Expiration: If the policyholder survives past the end of the term, the coverage ends, and no death benefit is paid out. Some policies offer the option to renew the policy for another term or convert the policy into a permanent form of life insurance, such as an endowment policy, at the end of the term. However, the premiums for a renewed or converted policy may be higher, reflecting the policyholder's older age.
No Cash Value: Unlike other types of life insurance like endowment or whole life policies, term life insurance does not have a cash value or savings component. It is purely life cover, which is one reason why it is often more affordable than other types of life insurance.
Policy Termination: The policyholder can choose to terminate (or "surrender") the policy before the end of the term. However, since term life insurance does not accumulate cash value, the policyholder typically does not receive any money back upon termination, unless the policy has a return of premium feature.
#2: Endowment Life Insurance (Kapitallebensversicherung):
Endowment life insurance, known as Kapitallebensversicherung in Germany, is a life insurance type that combines a death benefit with a savings component. It’s designed to provide a lump sum either upon the policyholder's death or upon policy maturity, acting as both a life insurance policy and a long-term investment tool.
Here's a detailed look at how it works:
Policy Agreement: Similar to other life insurance policies, the policyholder agrees to pay regular premiums to the insurer over a defined policy term. The policy term is often tied to a specific financial goal, such as retirement.
Combination of Insurance and Savings: A portion of the premiums paid is used to provide life cover, ensuring that a lump sum (death benefit) is paid to the beneficiaries if the policyholder dies during the term of the policy. The other portion of the premium is invested by the insurance company, creating a cash value that grows over time.
Investment Growth: The invested part of the premium grows based on a guaranteed minimum interest rate, with the potential for additional surplus participation if the insurer's investments perform well. This investment growth creates a cash value for the policy.
Maturity Benefit: If the policyholder survives the policy term, they receive the policy's maturity benefit. This is the guaranteed sum assured plus any surplus participation, providing a lump sum that can be used to meet financial goals like retirement or paying off a mortgage.
Surrender Value: If the policyholder decides to terminate the policy before its maturity date, they receive the policy's surrender value. This value is usually less than what they would receive at maturity and can sometimes be significantly less in the early years of the policy.
Tax Benefits: Endowment policies in Germany also come with tax benefits. If the policy is held for at least 12 years and the policyholder is over 62 at the time of payout, only half of the income from the policy is subject to taxation.
Optional Extras: Some policies offer additional options, like disability riders or critical illness riders, providing further protection beyond the base policy.
While endowment life insurance can be an effective tool for combining life cover with long-term savings, it's important to consider your personal circumstances, financial goals, and risk tolerance when choosing a life insurance policy. Consulting with a financial advisor can provide valuable guidance in making this decision.
Add-ons
In addition to these two primary types, there are several variations and add-on options that policyholders can consider. For instance:
- Unit-Linked Insurance Plan (ULIP): These are investment-cum-insurance plans where a part of the premium goes towards life cover, and the remainder is invested in various equity and debt schemes. The returns are subject to market risks and can be higher or lower based on the performance of the chosen funds.
- Riders: These are additional benefits that can be added to a basic life insurance policy, providing extra coverage for specific situations. Common riders include critical illness, accidental death and dismemberment, disability, and waiver of premium riders.
Remember, choosing the right type of life insurance depends on your specific financial situation, needs, and goals. Therefore, it's advisable to carefully evaluate these factors and consult with a financial advisor or an insurance professional if necessary.
When is Life Insurance in Germany Beneficial?
Life insurance in Germany can be invaluable in various situations:
Family Dependents: If you have dependents who rely on your income, life insurance ensures they have financial support in your absence.
Mortgage and Debts: Life insurance can help pay off outstanding debts like a mortgage, preventing your family from bearing this financial burden.
Funeral Expenses: The death benefit can cover funeral and burial costs, relieving your family from these expenses during a difficult time.
Inheritance: Life insurance can serve as a tax-efficient way to leave an inheritance to your heirs. (More information on this below)
Business Protection: If you're a business owner, life insurance can protect your business from financial instability or provide funds for a buy-sell agreement in the event of your demise.
When Might Life Insurance in Germany Be Unnecessary?
There are also situations where life insurance might not be necessary:
No Financial Dependents: If you're single with no dependents, the need for life insurance is significantly reduced, as there's no one relying on your income for support.
Adequate Savings: If you have amassed enough wealth to cover any outstanding debts, funeral costs, and to support your dependents, you may not require life insurance.
Coverage Through Employer: Some employers offer death-in-service benefits, which may negate the need for an additional life insurance policy.
What to Consider When Choosing a Life Insurance Plan
When selecting a life insurance plan, you'll want to ensure the coverage meets your needs and aligns with your financial goals. Here are some key factors to consider:
Understand Your Needs: The type of life insurance plan you choose should match your needs. Term life insurance, for instance, can provide coverage for a specific period and is often suitable for those with young families or significant debt. Permanent life insurance, like endowment or whole life policies, can provide lifelong coverage and often include a savings or investment component.
Financial Stability of the Provider: You'll want to ensure that your life insurance provider is financially stable and able to pay out claims when necessary.
Premium Costs: The cost of your life insurance policy will play a significant role in your decision. Consider how much you can afford to pay in premiums against the level of coverage you need.
Policy Features and Options: Some policies offer optional riders, like critical illness cover, or features like premium waivers in case of disability. Understand what's included in your policy and what can be added for additional cost.
Consider Future Needs: Life insurance is a long-term commitment. Consider future needs such as potential changes in your income, family size, or retirement goals when choosing your policy. Some of the best life insurance policies in Germany will let you change coverage amounts.
Read the Fine Print: Make sure to understand the terms and conditions of your life insurance policy, including any exclusions or waiting periods, before signing the contract.
Tax Implications: Depending on the type of policy and your individual circumstances, there may be tax implications associated with your life insurance. It's advisable to consult with a tax advisor to understand potential tax liabilities. We’ve discussed this more below.
Independent Advice: If you're unsure about what type of coverage is best for you, consider seeking advice from an independent financial advisor. They can provide personalized advice based on your specific circumstances.
Taxation of Life Insurance in Germany: Understanding Your Liabilities
When considering life insurance in Germany, it's essential to be aware of the potential tax implications. This is often overlooked, but can significantly impact the overall value of your policy. Below, we'll explore how life insurance proceeds are taxed in Germany and if there are any "tricks" to optimize your tax position.
#1: Tax on Payouts
Life insurance payouts can fall into two categories: death benefits paid to beneficiaries and maturity benefits paid to policyholders.
- Death Benefits: In general, death benefits paid to beneficiaries upon the death of the policyholder are not subject to income tax. However, these benefits could be subject to inheritance tax, depending on the relationship between the beneficiary and the policyholder and the amount of the benefit. In Germany, tax-free allowances for inheritance vary between €20,000 (for unrelated beneficiaries) and €500,000 (for spouses).
- Maturity Benefits: If the policy matures and the policyholder is still alive (as with endowment policies), the payout may be subject to income tax. However, if the policy has been held for at least 12 years and the policyholder is over 62 years old at the time of payout, only half of the income from the policy is subject to taxation (the so-called "Halbeinkünfteverfahren").
#2: Tax on Surrender
If a life insurance policy is surrendered before maturity, the surrender value is subject to income tax if the policy has been held for less than 12 years. This tax applies to the gains from the policy (i.e., the surrender value minus the total premiums paid).
#3: Tax Planning Considerations
One commonly used "trick" to optimize tax implications involves policy splitting. Instead of taking out one large policy, policyholders may choose to split their coverage into several smaller policies. This can help keep the payout of each policy below the tax-free allowance for inheritance tax, potentially resulting in significant tax savings for the beneficiaries.
However, tax laws are complex and subject to change, so it's advisable to consult with a tax advisor or financial planner before making decisions based on tax implications. This will help ensure that you're not only choosing the right life insurance policy for your needs, but also optimizing your tax position.
Inheritance Tax in Germany
Inheritance tax, or Erbschaftsteuer, in Germany is a tax imposed on the value of an estate or property, financial assets, and other belongings passed on after a person's death. The amount of inheritance tax that beneficiaries have to pay depends on the value of the inheritance and the relationship between the deceased person and the beneficiaries.
The following table summarizes the tax-exempt amounts for different groups of beneficiaries:
Relationship to the Deceased | Tax-Free Allowance (as of 2023) |
Spouses, registered partners | € 500,000 |
Children, stepchildren | € 400,000 |
Grandchildren | € 200,000 |
Parents, grandparents (when inheriting) | € 100,000 |
Other Relatives (siblings, nieces/nephews, parents, and grandparents when gifting) | € 20,000 |
Unrelated beneficiaries | € 20,000 |
It's important to note that inheritance tax rates can vary between 7% and 50% depending on the value of the inheritance and the relationship to the deceased.
Please note: The above information is intended as a general guide and does not constitute tax advice. Always consult with a professional tax advisor for personalized advice based on your specific circumstances.
Related: If you don’t have it already, we highly recommend looking at the various types of insurances available in Germany. Such as: Liability insurance, dental insurance (top-up plan), legal insurance and bike insurance.
FAQ
What is life insurance?
Life insurance is a contract between an individual (the policyholder) and an insurance company (the insurer). The policyholder pays regular premiums, and in return, the insurer promises to pay a specified amount (the death benefit) to the policyholder's beneficiaries upon their death.
What are the main types of life insurance in Germany?
The two main types of life insurance in Germany are term life insurance (Risikolebensversicherung), which covers the policyholder for a specific period, and endowment life insurance (Kapitallebensversicherung), which combines a death benefit with a savings component.
What factors influence the cost of life insurance premiums?
Premiums for life insurance policies are influenced by various factors, including the policyholder's age, health, lifestyle, the type and length of the policy, and the amount of coverage.
Who needs life insurance?
Anyone with financial dependents—like a spouse, children, or aging parents—can benefit from having life insurance. It's also a good idea for individuals with significant debts that could be passed on to loved ones or business partners upon death.
How do I choose the best life insurance provider in Germany?
Choosing the best life insurance provider in Germany depends on your individual needs and circumstances. Consider factors such as the type and amount of coverage you need, the provider's reputation and financial stability, premium costs, customer service, and policy flexibility. With reputable providers like Feather, Allianz, Die Bayerische, CosmosDirekt, GetSurance, among others, one can choose the right policy based on their specific financial situation, needs, and long-term goals. We strongly looking at these 5, as we believe they are the best life insurance providers in Germany.
What happens if the policyholder outlives their term life insurance policy?
If the policyholder outlives their term life insurance policy, the coverage ends and no death benefit is paid out. Some policies offer the option to renew or convert the term policy into a permanent one at the end of the term.
What is the cash value in an endowment life insurance policy?
The cash value in an endowment life insurance policy is a savings component that accumulates over time. A portion of the policyholder's premiums is invested by the insurer, and this invested amount can be paid out if the policyholder survives the policy term.
Can I change my life insurance beneficiaries?
Yes, in most cases, policyholders can change their life insurance beneficiaries as often as needed unless the beneficiary designation is irrevocable.
Do I need to undergo a medical exam to get life insurance in Germany?
The requirements vary by insurer and policy. Some insurers require a medical exam, particularly for larger coverage amounts, while others offer policies without a medical exam, usually at higher premium rates.
Can I have more than one life insurance policy in Germany?
Yes, an individual can have multiple life insurance policies. This can be beneficial in certain circumstances, such as wanting to increase coverage or having specific policies to cover different financial needs. This will need to be disclosed in most of the German life insurance provider questionnaires.
Conclusion
Life insurance in Germany, whether term or endowment, serves as a pivotal part of comprehensive financial planning. Understanding its function, the available options, and the top providers empowers you to make informed decisions that best cater to your specific circumstances. By weighing when such coverage is beneficial or unnecessary, you can optimize your financial strategy for the well-being and security of both you and your loved ones.
Go here to get a quote at Feather!
Go here to get a quote at Allianz!
Go here to get a quote at CosmosDirekt!
Go here to get a quote at Die Bayerische! (Term Life)
