Insurance in Germany
In Germany, insurance is a good thing to have -- health insurance and liability insurance for motor vehicles is mandatory.
If you are planning to spend more than six months in Germany, or have moved here in a job-related capacity, here's a primer on other insurances you may want.
Third-party Private Liability Insurance
The most important and yet the least expensive insurance cover you will need in Germany is third-party private liability insurance (Haftpflichtversicherung). It will provide cover to you or to any insured member of your family in the event that you commit an act for which a German court would consider you ordinarily negligent.
Under German Law, there is no ceiling on the level of damages an individual could have awarded against them for an act they committed, even one committed innocently but carelessly, or for the misdeeds of their dog or horse.
Ordinary negligence could be a simple matter of damaging someone else's property, for instance knocking over a vase while visiting a friend or in a shop, or causing an accident as a pedestrian by not crossing at the zebra crossing, causing bodily injury whilst skiing or engaging in other sports activities. Please note that dogs and horses must be insured separately and are not included in a single or family policy. This essential insurance is intended to give you more than just peace of mind and is strongly recommended and often contractually required, when you are renting a property.
Any damage claims can be painful and a high level of cover, (we suggest 10 million Euros for a family, less for animals) costs relatively little. Saving by taking out a cheap policy with limited coverage is very much a false economy.
Third-party private liability insurance will not provide cover for anyone driving a car, piloting an aeroplane, or sailing a boat; no cover is provided for hunting. All of these require separate insurance policies.
You should be aware that German third-party private liability insurances with either a three or five year term cannot be cancelled before the term is up. An insurance agent selling these term contracts will receive a higher commission for locking a client into a multi-year product. Our strong advice is to buy only annually renewable polices; there is absolutely no reason to take out a policy which leaves you unable to switch at a renewal date if a more attractive or a better quality insurance cover becomes available.
Household Contents or Home Insurance
Household contents insurance (Hausratversicherung) is necessary to indemnify you for loss of, or damage to your possessions. Included are all belongings contained in your home, such as furniture - including (optionally) built-in kitchen units -, clothing, collectibles, sports equipment, valuables and computers for personal use. Fixtures and fittings attached to the building and not owned by you are generally excluded as these are the responsibility of your landlord or the house owner under their own separate insurance policy.
The coverage includes the risks of fire, burglary, storm damage, water damage and/or vandalism. Coverage outside the premises (for instance, robbery) is often limited up to approximately 10-15% of the total insured sum. The risk of fire, water damage and theft from your home in your absence increases the longer you are away and you must notify your insurer if you intend to leave the premises for longer than 60 days. Some policies also include limited cover for damage caused by electrical surges.
If you are a tenant, you should be aware that your household contents insurance will not cover damages to any rental furniture.
The insurance sum is calculated using the replacement value of all your belongings; if your total household possessions are worth more than 75,000 Euros, there are a number of international insurance companies which offer all-risk coverage which may be of interest to those with art collections, jewellery and other items of considerable value. This cover is more comprehensive than is normal for standard German policies.
Bicycle thefts are a problem in Germany, where so many people use two wheels; additional insurance should be purchased, especially if more than one bicycle is owned or if the iron steed in your possession is especially valuable. Some insurance tariffs include coverage for bicycle theft, but this is by no means universal.
Breakage of window panes can also be insured separately; this is a good idea when the panes of glass are large and costly to repair and especially so when there are young children in the household who are prone to launching their harder possessions without necessarily aiming too consciously.
If you are self-employed and normally work from home, you must insure your office equipment separately.
The premiums for any household insurance cover depend on the area in which you live, the value of your possessions and the benefit levels you wish to have.
You should be aware that German household contents or home insurances with either a three or five year term cannot be cancelled before the term is up. An insurance agent selling these term contracts will receive a higher commission for locking a client into a multi-year product. Our strong advice is to buy only annually renewable polices; there is absolutely no reason to take out a policy which leaves you unable to switch at a renewal date if a more attractive or a better quality insurance cover becomes available.
Legal Assistance insurance
Both the German language and indeed the German legal system are probably radically different from the traditions and experience of most new residents. Misunderstandings or disagreements with employers, landlords, neighbours, local merchants, and tax authorities, not to mention parties involved in a car or perhaps another accident, happen often enough.
Legal assistance insurance (Rechtsschutzversicherung) could save you significant amounts of money and a lot of personal discomfort. This insurance can help protect your rights and allow you to litigate without having to spend your own money in advance without knowing whether you will win your case and having your legal expenses reimbursed at some later date.
Most people simply cannot afford to take the risk of going to court, especially when they don't understand the language.
The attorneys' and court fees in Germany are based on the amount in dispute. For instance, should you have a dispute with your landlord and need to go to court based on a disputed amount of 8.000 Euros, the court and attorney's fees that will have to be paid in advance can be as high as 7.000 €. If you have legal assistance insurance and your claim is held to be valid by your insurance company, the insurer would take care of any necessary payments.
This insurance covers the costs of your own attorney, court fees, and witnesses, costs of the opposing side if you lose the case and bail outside Germany.
Good insurance will normally cover:
- Disputes with landlords or neighbours (3 month waiting period)
- Employment law (3 month waiting period)
- Unwarranted driver's license loss, traffic accidents and violations
- Disagreement with the tax authorities (in court cases)
- Advice on inheritance issues (though not for disputes between beneficiaries)
- Claims for compensation for damages (personal injury or property)
It should be noted that the legal consultation concerning inheritance and family law is limited and that divorce is not included.
There are specialised policies available for self-employed people or those in senior management positions.
Accidental Death and Disablement insurance
Insurance which covers death or disablement (Unfallversicherung) is often forgotten or just ignored as it is uncomfortable to think about. It normally pays a lump sum in the event of a valid claim resulting from an accident.
As a rule of thumb, a policy for accidental death or 100% disablement should provide cover for 5-6 times the insured's annual income.
Death is self explanatory, but there is a table of compensation rates for damage to, or loss of individual body parts; for instance, blindness in both eyes could receive compensation of up to 100% of the total insured sum, whereas the loss of a leg up to the knee could result in compensation of up to 50% and the loss of a finger up to 30%.
Many accident insurance policies will also pay benefits in the event of an insured child swallowing a poisonous substance.
This insurance must not be confused with occupational disability, critical illness or income replacement cover. Benefits under an accident insurance policy will not be paid if you become disabled due to an illness.
You should be aware that German accident insurances with a multi-year term cannot be cancelled before the term is up. An insurance agent selling these term contracts will receive a higher commission for locking a client into a multi-year product. Our strong advice is to use only annually renewable accident polices.
Term Life Insurance
Term Life insurance (Risikolebensversicherung) makes sense for those with a family and/or mortgages, as it will provide a lump sum in the event of an insured person's death by practically any cause. This insurance is inexpensive and the cost is based on the age of the insured at the start of the insurance, the insurance sum itself, the insurance term and the medical history and smoker status of the insured person.
For those with existing term life insurance from their home country, it is important to receive confirmation from your existing insurer that the policy is valid while residing in Germany.
Annual Travel Insurance
An annual travel insurance policy (Reiseversicherung) offers comprehensive insurance cover for each private (or if you are self employed, also business) trip without the need to purchase a new policy for each journey.
An annual travel insurance policy will normally pay for itself after your second private journey overseas. There are no limits on how often you can travel, with global coverage barring known war zones. You should be aware of the normal maximum duration of each trip which, depending on the chosen tariff, can lie between 31 and 42 days. In the event that you wish to undertake a longer trip, this should be advised to the insurance company in advance.
An annual travel insurance package will normally include the following benefits:
Travel cancellation insurance
Reimbursement of cancellation fees arising from an inability to travel due to an accident or a serious illness. This is normally only worthwhile as a standalone product, for trips which cost at least 500 Euros per person.
Trip curtailment insurance
In case you cannot finish your trip on schedule, any additional costs for the return journey will be reimbursed. You should be aware that depending on the severity of the grounds for curtailing your trip, some insurance companies will also reimburse the value of the unused portion of a curtailed holiday.
Travel health insurance
This will reimburse the costs of necessary medical treatment overseas for acute illnesses as well as any necessary repatriation of the insured in the event of an emergency.
If you are or will be in the German Government Health System, we strongly recommend that you purchase an annual travel health insurance policy which will cover you for emergency hospital and out patient treatment, medically advised evacuation and emergency dental care when outside Germany.
Travel luggage insurance
The present value of your possessions and luggage in the event of a theft or robbery, or the costs arising from damage to or the disappearance of your possessions while being transported, will be reimbursed; up to the maximum limit set within the policy.
The majority of insurance companies offer assistance via their hotlines in case of emergencies.
Insurance Information supplied by Matz-Townsend Finanzplanung. Copyright 2009. All information as per April 2009 - no guarantee for accuracy or completeness. Published with permission from author.