The disability insurance (Berufsunfähigkeitversicherung, hereinafter referred to as BU) will pay you your monthly pension when you are no longer able to work at your current job for health reasons.

How does disability insurance work?

Disability insurance pays a monthly pension when you can no longer do your current job. It doesn't matter if you can do any other work.

It does not matter what exactly caused the disability: an accident or illness. You will receive a BU pension if you have lost at least half of your working capacity and can no longer do what is necessary for work (or can only work part-time). 

Who is eligible for insurance

You should not rely solely on the state disability pension, it is rarely enough to cover the cost of living. The state disability pension is on average 30% of your income and is paid only in case of serious illness, if you are unable to work more than 3 hours a day.

You can do without private reserves only if you are already provided for and do not depend on your income from work.

Private disability insurance is especially useful for:

  • Anyone who can't do without income from work
  • Families in which the main income comes from one family member
  • Self-employed, as they often do not have mandatory pension insurance
  • At the beginning of a career, because young and healthy people can get cheap insurance

Civil servants can also take out disability insurance if their living wage requirement is higher than the state pension.

Simply saving money "for a rainy day" is unlikely to be a worthy alternative to BU insurance. Statistics show that people who cannot work for health reasons are on average only 53 years old. If you want to use your savings from now on to wait until retirement age, those savings must be quite substantial. Not everyone can save them.

About the causes of disability

A disabled person is a person who cannot engage in his professional activity for at least six months due to health reasons.

Anyone doing manual labor is usually at greater risk than someone who works in an office. However, depression or burnout should not be forgotten: they are currently the most common cause of occupational disability.

According to statistics, the following diseases are the cause of disability:

  • Mental and nervous diseases - 32%
  • Diseases of the musculoskeletal system – 21%
  • Cardiovascular disease - 15%
  • Cancer - 15%
  • Accidents - 9%
  • Other - 8%

How much does disability insurance cost

The cost of disability insurance varies from insurer to insurer. The most significant factor is your current job: the riskier the company considers it, the higher the insurance premiums. Only the profession you are engaged in at the time of application is taken into account.

Anyone engaged in hazardous or manual labor is more likely to become disabled, their insurance will be more expensive. A hardcore hockey player, rock climber, or horseback rider also pays more for high-risk hobbies.

But only risks known at the time of application are taken into account.

The cost also depends on the state of your health. For some diseases, such as type 1 diabetes or epilepsy, the contract is generally difficult to conclude.

BU insurance checklist before signing the contract

Get BU insurance as early as possible. The healthier you are when you apply for disability insurance, the cheaper your insurance premium will be.

Hurry up with the application before the end of the year approaches, as many insurance companies change the age of the insured on the eve of the new year, and not on the actual birthday. Consequently, immediately after the start of the new year, the insured becomes a year older, and insurance premiums will become higher.

There are three design options:

  • independent occupational disability insurance;
  • BU as an additional option to life insurance (Risikolebensversicherung);
  • additional insurance to endowment life insurance or pension Lebensversicherung.

We advise you to take out BU independent insurance and, if necessary, separately insure the life of the Risikolebensversicherung. The advantage of having two separate contracts is to maintain flexibility. You can always cancel one without affecting the other contract.

Choose a sufficient BU pension.

Many BU pensions are too low. Make sure that the sum insured will be enough to finance your current expenses for family, housing, insurance and groceries.

We recommend setting the amount of pension payments at 60-80% of your Netto income.

Choose insurance companies with experience and high financial stability. The service provider must exist in 20 or 30 years. It is not recommended to apply to companies that have been on the market for only a few years.

Disability insurance: comparison

The answer to the question “which disability insurance is better” is individual for each person. Disability insurance is a very individual product. The choice of insurance company and tariff depends on your age, profession and health status. For example, a high-performance, low-cost plan may not be right for you if you have had health problems in the past.

In this complex topic of selecting an insurance rate in case of disability, one cannot do without an individual consultation. An independent insurance broker can make anonymous preliminary inquiries about risks in various companies for you. And find the one that will offer the most favorable conditions for your personal case.

We provide services to select the best tariff for your individual situation.

Ask a question - write to us at e-mail or Telegram and we will answer you promptly.

Is it possible to insure after suffering a serious illness

Pay attention to the following points:

  • Answer all health questions honestly
  • In some cases, it may be worth waiting until you no longer have to report critical treatments. For example, if you were in psychotherapy four years ago, it makes sense to enter into a contract only after one year, since outpatient psychotherapy treatment data is only kept by the doctor for 5 years.
  • It's important to review medical records and talk to your doctor so you don't forget any treatment you've had in previous years.

If it becomes obvious that getting disability insurance will be difficult due to health problems, make prior anonymous risk inquiries with as many insurance companies as possible. How the disease is assessed can vary considerably.

It is worth paying attention to this when concluding a contract.

 In order for the pension to be sufficient in 20 or 30 years, it is important that it be possible to adjust its size when new life circumstances arise, or in connection with increased inflation. Consider the option of annual dynamic growth in pension payments, for example, by 1-3%.

Take into account the insurance period - the period during which professional disability must occur in order for the insurance company to pay a pension. If this period ends at age 50 and you become disabled at age 51, you will not receive any money.

Notice when your children are most likely to become financially independent from you. 

What to do if insurance is too expensive

Talk to your insurance broker about an anonymous preliminary risk inquiry. Your personal data will not be shared and you will avoid the problem of refusal by the insurance company.

If your work does not match the standard description, a more specific and detailed description will help you get a lower bid.

A shorter insurance period will also bring savings.

Some companies offer so-called starting rates for the first 3-5 years, only then increasing them. This will be useful if you have a temporary low income, for example, while studying.

Conclusions

Decide on an experienced consultant and a tariff with a good rating.

Choose a pension level that will provide for you if you can no longer work.

In order for the pension to be sufficient in 20 or 30 years, it is important that its size can be adjusted later.

Add a comment

Your email address will not be published. Required fields are marked *