10 useless insurance policies in Germany and what to replace them with

The right choice of insurance policies is the key to effective savings. But how do you navigate all the nuances if you are not an expert in German insurance?

There is a risk of buying something you actually won’t need, and thus spending money unnecessarily.

In my practice, I frequently encounter cases where people have insurance policies that are completely unnecessary. Nevertheless, they have to pay for them.

There is no such thing as useless insurance — only poorly chosen policies

Insurance doesn’t become useless on its own, but rather when it doesn’t fit your situation or is written in such a way that it doesn’t pay out when you need it. Below are three traps that cause money to go down the drain, and an analysis of ten specific policies: when they are truly unnecessary, and when they are needed but the wrong ones were bought.

The first trap is a three-to-five-year contract. The long term is almost always to the advantage of the person selling, rather than the person paying. Your situation changes over five years: relocation, family, income, job. Market conditions change too, yet you remain stuck on the old tariff. A normal term today is one year with auto-renewal and the option to terminate by the end of the term. If you are offered five years “at a discount”, calculate that discount in euros and compare it with what you lose in flexibility.

The second trap is the all-in-one package. When four or five insurance policies are bundled into a single contract, you cannot opt out of the unnecessary one without also giving up the necessary one. For the necessary part, you pay one and a half to three times more than you would for a standalone policy.

The third trap is the absence of key clauses. When two policies have the same name but one costs twice as much, the reason is usually not greed but a different scope of cover. It is precisely the missing items that turn a necessary insurance policy into a useless one. Below, for each type of insurance, is exactly what to check.

1. Standalone Pannenhilfe (breakdown assistance) insurance

When it is unnecessary

A standalone policy is almost always more expensive than the same service included in motor insurance. Within own-damage cover (Kasko) and motor third-party liability insurance, it is called a Schutzbrief (breakdown and travel assistance cover) and costs around €10–20 a year, whereas a separate contract costs several times as much.

When it actually makes sense: if you do not own a car, but frequently drive someone else’s or a hired one, and also if you drive a lot outside of Germany and repatriation home from another country is important to you.

What to check: does this include vehicle recovery, a courtesy car, overnight accommodation and the return journey — and at what distance from home does all this start to apply? Often, assistance only applies more than 50 km from your place of residence.

2. Hausratversicherung (home contents insurance) without the necessary clauses

What makes it useless

Home contents insurance itself is needed by almost everyone: fire, water damage, theft and, in many policies, power surges caused by lightning. What makes it useless is not its name, but what it covers.

What to check in the contract:

Bicycle theft at any time of day. With cheap tariffs, night-time theft isn’t covered — and that’s precisely when they steal.
Lock requirements. If the terms specify a lock of a certain cost or grade and you have a different one, there will be no payout.
Gross negligence — grobe Fahrlässigkeit. Without this clause, a window left open or a key under the mat gives the insurer the right to cut your payout according to the degree of fault, in extreme cases down to zero.
Natural hazards — Elementarschäden. Flooding, heavy rain and river floods come as a separate add-on and are not included in the basic tariff.
Sum insured based on floor area. The market benchmark is around €650 per square metre. An understated amount means underinsurance and a reduced payout.

3. Privathaftpflicht (personal liability insurance) with limited cover

What makes it useless

This is the most essential insurance in Germany — and at the same time the one where the difference between tariffs changes everything. A smashed shop window belonging to someone else or ruined parquet flooring in a rented flat cost thousands of euros, whilst a severe injury caused by you costs millions.

What to check in the contract:

Sum insured: from €50m. Tariffs with less coverage save you a few euros a year, and you will feel the difference once in a lifetime and very painfully.
Forderungsausfalldeckung - a payout if damage is caused to you, and the at-fault party has neither insurance nor money. Without this clause, you are left with nothing.
Mietsachschäden - damage to rented accommodation: parquet flooring, tiles, fitted kitchen, plumbing.
Loss of keys, including work keys and keys to the building’s central locking system. Replacing the locking system in a block of flats can easily cost up to five thousand euros.
Deliktunfähige Kinder — damage caused by children under seven (under ten in road traffic). By law, they are not liable for their actions, and their parents are liable only if they have breached their duty of supervision. Without this clause, the insurer will not pay, and the people harmed, often neighbours or friends, will get no compensation unless you pay yourself.
Gefälligkeitsschäden — damage caused while helping acquaintances for free, for example during a house move.
Grobe Fahrlässigkeit — in Privathaftpflicht, gross negligence is covered by law anyway: the insurer may refuse to pay only if the damage was caused intentionally. In Hausrat and Kasko (own-damage cover for your car), however, you should definitely check this clause.

A policy without these clauses formally exists, but in a typical situation it will not work.

4. Riester-Rente (state-subsidised private pension) that doesn’t suit your situation

Who it is not suitable for

The Riester pension is neither a good nor a bad product in itself — it is beneficial where the state subsidy outweighs the contract costs. This applies to families with children and people with a high tax burden. For single people without children, those with an income between €15,000 and €40,000 a year, the self-employed, and those over 50, it is usually unsuitable.

Important for 2026: A new Riester contract can only be taken out until 31 December 2026. From 1 January 2027, the scheme will be closed to new contracts and replaced by the Altersvorsorgedepot (state-subsidised retirement investment account), with a basic state allowance of up to €540 a year instead of €175. Existing contracts will remain valid.

Detailed analysis: who the Riester pension is not suitable for and what will replace it from 2027.

5. All-in-one packages of four or five insurance policies

Why a package almost always costs more

One or two required insurance policies are bundled together with three or four add-ons. It is not possible to cancel an add-on individually — the entire contract must be terminated. As a result, you end up paying one and a half to three times more for the required part than a standalone policy would cost.

How to check: Ask for a breakdown of the premium by each risk in euros per year. If they won’t provide a breakdown, that is your answer. Then compare the required items with individual tariffs on the market.

6. Three to five-year contracts

What are the dangers of a long term

A long-term contract locks you into a tariff, yet no one locks down your life. Over five years, your income, family, housing, work, and the market itself all change. All that time, you’re paying for conditions tailored to a situation that no longer exists.

The second effect is that leaving early is harder: a contract running for more than three years cannot be cancelled before the end of the third year, and you must give three months’ notice. If, however, the insurer raises the premium without extending the cover, you have a special right to cancel within one month. A normal benchmark is a term of one year with automatic renewal and the right to cancel at the end of the period, usually with three months’ notice.

A long-term discount sounds convincing only until you convert it into euros. As a rule, it amounts to 5–10 % of the premium — the price for which you give up the right to change your mind for up to three years.

If the contract has already been signed, look at the end date and the notice period: how cancellation differs from withdrawal — the difference in timescales and consequences is fundamental.

7. Separate bicycle insurance for theft only

When it is unnecessary

If a bicycle costs less than €1,000 and you do not go cycle touring, a separate policy does not pay off. It is cheaper and more reliable to include bicycle theft as an option in your home contents insurance.

When a separate policy is justified: an expensive bicycle or e-bike worth €2,000 or more, and also if you need cover for breakdowns, wear and tear of parts and worldwide cover — the add-on to home contents insurance usually doesn’t include this.

What to check in any version: is theft at night covered, what are the lock requirements and are there restrictions on where the bike is kept — many policies do not pay out for a bicycle stolen from a shared basement.

8. Endowment life insurance instead of term life insurance

What is the difference and why does it matter

Here, two different products are being confused. Term life insurance — Risikolebensversicherung — protects your family in the event that the main breadwinner is no longer around. It’s affordable and is essential for almost anyone with children, a mortgage or a partner who doesn’t have their own income.

Endowment life insurance combines protection and accumulation in a single contract. For this combination you pay in charges, and the return on the savings component usually lags behind a simple long-term investment. It is precisely this structure that most frequently turns out to be unprofitable.

Rule of thumb: keep protection and savings separate. Cover the risk with a term life insurance policy for the duration of the mortgage or until the children reach the age of majority, and save separately — that is cheaper and more transparent.

9. Income protection insurance with catches that ruin everything

What makes a contract useless

Income protection insurance (Berufsunfähigkeitsversicherung) is one of the most important types of insurance for a working person: the state disability benefit is small and it is impossible to live on it alone. What makes this insurance useless is not doubts about its necessity, but specific clauses in the contract.

What to check:

Abstrakte Verweisung (abstract referral) — the insurer’s right to send you to “any other suitable job” instead of making a payout. A normal policy does not contain this clause.
Threshold 50 %. The payout should begin upon the loss of half your capacity for work in your specific profession, rather than in any profession.
Benefit period — until retirement age, and not until 60 years old.
Nachversicherungsgarantie (guaranteed insurability option) — the right to increase the sum insured without new medical underwriting upon marriage, the birth of a child, or taking out a mortgage.
Honest answers on the health questionnaire. Concealment is the most frequent reason for refusal of payment after many years.

Detailed information on terms and amounts: income protection insurance in Germany.

10. Phone and gadget insurance

When it does not pay for itself

For a phone costing €300–500, insurance is almost always a bad deal: the premium for two years plus the excess are comparable to the cost of a repair or a new device. Add in the exclusions — water damage, wear and tear, and loss without a break-in — and the point of it is completely lost.

When it actually makes sense: expensive device starting from €1,000, equipment necessary for work, and the first year or two, while the replacement cost is at its maximum.

What to check: is loss covered or only burglary, is there an excess, and does the payout decrease with the device’s age down to its residual value? Some of these risks are already covered by your home contents insurance — first check what you have.

And another one that people ask about most often: luggage insurance

Reisegepäckversicherung (luggage insurance) is a classic example of a policy that seems sensible but almost never pays out. German consumer organisations consider it unnecessary, and there are three reasons for this.

Strict requirements regarding the “supervision” of belongings. Luggage left in a car, in a hotel room or unattended for even a few minutes is usually not covered.
Low limits on valuable items. Electronics, jewellery and cash are either partially covered or not covered at all.
Residual value payout. For a three-year-old suitcase, you’ll get the value of a three-year-old suitcase, not the price of a new one.

What works instead: Burglary from a hotel room and robbery are generally already covered by home contents insurance. The carrier is liable for luggage delays and loss under the Montreal Convention, and claims must be made against them. A separate policy is not required for this.

When it actually makes sense: long journeys with expensive professional equipment — but in that case, you’d need separate insurance for the equipment, not for your luggage. What’s really worth taking on a trip — travel health insurance: it covers a risk that could cost tens of thousands of euros.

How to check your contract in fifteen minutes

Take your policy and go through the six points. That’s all it takes to work out whether your insurance actually works or just looks like insurance.

Term and expiry date. A one-year contract with automatic renewal is fine. A term of three to five years is a reason to recalculate whether it pays off. While you’re at it, check the notice period for termination – it’s usually three months.
What exactly is covered by the insurance. Not the tariff name, but a list of risks. If a clause isn’t in the contract, it doesn’t exist in real life either.
Sum insured. For liability, from €50m. For property, based on the apartment’s floor area.
Excess. How much do you pay yourself each time, and does it not completely defeat the point of the insurance?
Exceptions. The most useful section of the contract and the only one that is rarely read.
One contract or a package. If it’s a package, request a breakdown of the premium by risk in euros per year.

If the documents do not answer any of these points, ask the insurer for the answer in writing. A verbal “of course it’s covered” means nothing in a dispute.

Frequently asked questions

Are there any types of insurance that nobody needs at all?

Virtually none. There are some that rarely pay off: luggage insurance, separate glass cover, mobile phone insurance for a low-cost handset, passenger insurance in a car, and extended warranties on electrical goods. In each case, the question is the same: how much would the same risk cost without insurance?

Why am I being offered a five-year contract?

A long-term contract is convenient for the seller: it secures both the customer and the commission. It gives you a discount of 5–10 % on the premium, but you cannot cancel such a contract before the end of the third year. Calculate this discount in euros and compare it with the cost of not having flexibility.

Is an all-in-one package always a bad thing?

Not always, but you must always check. Ask for a breakdown of the premium for each risk in euros per year and compare the necessary items with standalone rates. If they refuse to provide the breakdown, that in itself is an answer.

What level of cover is required for liability insurance?

From €50m. The price difference between 10 and €50m is a matter of a few euros a year, but the difference in cover for a severe case is fundamental.

Is it worth setting up a Riester pension scheme before the end of 2026?

Only if it works out for you financially: a family with children, a high tax burden. The fact that “the scheme is being phased out” is not an argument in itself. From 2027, the basic state allowance will be up to €540 a year instead of €175 (the maximum requires contributions of €1,800 a year). You will also be able to receive it in the new Altersvorsorgedepot, a securities account.

What should you do if a contract has already been signed and it turns out to be a bad deal?

Check the expiry date and the notice period. You can usually withdraw from the contract within 14 days of receiving the policy and the contract documents; for life insurance, including pension insurance, the period is 30 days. After that, you can only cancel with effect from the end of the term. It is not wise to cancel state-subsidised pension contracts without doing the maths first: you will have to pay back the allowances you have received.

About the author. Valery Melech, Finber. Versicherungsmakler (insurance broker) licensed under Section 34d(1) GewO and Immobiliardarlehensvermittler (real estate loan broker) under Section 34i GewO, registered with the IHK Rhein-Neckar. Intermediary register numbers: D-HIAG-TDBW7-60 and D-W-153-ABGZ-14. Over 20 years of practice, approximately 6’000 clients, upwards of 400 partners.

Sources. The list of essential and superfluous policies has been checked against the position of German consumer organisations: Verbraucherzentrale, “Welche Versicherung brauche ich?” (Which insurance do I need?) and Verbraucherportal Bayern, “Unnötige Versicherungen” (Unnecessary insurance). Carrier liability for baggage — Montreal Convention.

Status. The data was checked in August 2026. The page is reviewed at least once a year, and sections with dates are updated as the law changes.

This material is for informational purposes and does not constitute individual advice. Whether a specific policy is suitable for you depends on your situation.

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