Risikolebensversicherung – life insurance in Germany

Risikolebensversicherung or term life insurance (RLV) in Germany is a form of provision for family members: with it, you can best protect your family, ease mandatory mortgage payments or other loans in the event of your death. You can also financially protect your company with an RLV in the event of your death, the death of your business partner or in the event of the death of key employees.

What are the benefits of life insurance?

When something happens to you, your family doesn’t just lose a loved one. Family members may also face significant financial problems. Unfortunately, compulsory pension insurance payouts usually cannot cover existing expenses. Life insurance can close this gap through a lump-sum insurance payout.

However, term life insurance is not designed to provide for retirement. The agreed sum insured is paid out to family members only if the insured person dies. For pension savings, we recommend the Rürup-Rente and the Altersvorsorgedepot (a state-subsidised investment account, from 2027 in place of the subsidised private pension known as the Riester-Rente), as well as pension investments.

Who is life insurance suitable for?

You need life insurance if your death could cause financial hardship for your family members.

This applies, in particular, to:

The only working adult: a death benefit provides financial security for the bereaved during difficult times.
To young families: In the event of the death of one parent, financial security is guaranteed and the children can be well looked after.
Families with loans: for example, a mortgage or a bank loan for your studies. Members of your family can use the death benefit to pay off the loan.
To unmarried people who are in relationships, because they get nothing from the statutory widower’s or widow’s pension.
For entrepreneurs, who wish to protect their company financially in the event of their own death or that of key staff members.

For people buying or building a home

For most Germans, building or buying a house or flat is the biggest financial undertaking of their lives. A mortgage usually accounts for the bulk of the financing.

Unfortunately, if the main breadwinner dies unexpectedly, it is often the case that the remaining family members are no longer able to service their loan payments. Since the collateral for the loan is a house or flat, the grieving relatives lose not only a close family member, but also their home. RLV is often useful when buying a house or flat to protect oneself against financial risks.

For couples

There are three mutual protection options for couples:

• a joint policy on both lives, also known as a Partner-RLV
• one contract per partner
• two contracts with cross-protection

A single policy for both partners is usually slightly cheaper than two separate policies. Whether this is also the best solution depends on individual circumstances: with such a joint policy, only one sum insured can be agreed, which may make sense for people with identical incomes. However, if only one of the two partners is in work, or if their incomes differ significantly, the payouts will also vary considerably depending on which partner dies. The solution is to take out two separate policies with significantly different sums insured.

For business partners

Life insurance makes sense for entrepreneurs; in this case, it is advisable to take out a term life policy together with your business partner – to safeguard the future of your own company. This is because, all too often, a company has to be wound up due to financial difficulties following the death of its owner.

Thanks to term life insurance, business partners can also protect each other and their company in the event of the death of key employees. Ideally, you should keep these business risks separate from the protection you provide for your family.

Who does life insurance not benefit?

If you have no family members to provide for after your death, term life insurance generally makes little sense. As a childless single person, you probably do not need life insurance, unless you wish to take out a loan to finance a property or build a house. Even if you want to build up an additional retirement fund or get your premiums back at the end of the policy term, term life insurance is most likely not the right product for you.

Whether you’re the main breadwinner, a young family with children, or anyone else – RLV is a useful form of protection in many life situations. It’s worth considering the financial consequences of your own unexpected death for your surviving family members.

If you have any further questions about life insurance, you can ask them during a free consultation:

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What should the term of a life insurance policy be?

Life insurance makes sense as long as your family members are at a high risk of financial trouble in the event of your death. Therefore, the term of life insurance depends on your individual situation. If, for example, there is a mortgage, the policy should run until it is paid off. If you want to use life insurance to protect your family, the term should usually only end when the youngest child finishes their education or studies, when they are standing on their own two feet and are no longer financially dependent on you.

How do you calculate the sum insured for Risikolebensversicherung?

Once you have decided on the term of your life insurance policy, the next thing to consider is the sum insured. As a general rule, the sum insured should cover the insured person’s loss of income until all family members are back on their feet.

Rule of thumb: sum insured = gross annual income x 5

We recommend a payout amount that is three to five times the insured person’s gross annual income. For example, if a father of two children earns €50,000 gross per year, the sum insured should be between €150,000 and €250,000. Any outstanding debts on mortgages or other loans must also be taken into account when determining the sum insured.

If you would like to find out what sum insured is required for your life insurance, you need an analysis of your current financial situation. How will your monthly income and expenses change if you die? What are the expected widow’s or widower’s pension and orphan’s pension? Which expenses decrease or increase in the event of death? With the help of these calculations, you can determine the required amount more precisely.

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FAQ / Frequently Asked Questions

Can I get my premiums back or receive a payout at the end of the policy term?

No, the sum insured is paid out only in the event of the insured person’s death.

Are COVID-19 infection risks or vaccine-related damage included in the insurance cover?

Yes, coronavirus cases (COVID-19 infection or vaccine damage) are included in the life insurance cover. The sum is paid out if the insured person contracted the coronavirus and died as a result of the COVID-19 illness or vaccination damage.

When is the right time to take out life insurance?

Life insurance is not, as a rule, tied to a specific point in time. However, there are certain life events when life insurance is particularly important. For example, when you start a family or buy a property. The financial consequences should anything happen to you are something that many people usually only realise when these events occur. The main focus is on ensuring the financial security of your family members in the event of your death. For example, the money could be used to fund your children’s education or to continue repaying loans.

Is the insurance payout taxable?

A death benefit is not subject to income tax, regardless of how long the insurance policy was in force. However, it may be subject to inheritance tax if the payout exceeds the tax-free allowance (Freibetrag): €500,000 for a spouse, €400,000 for a child and €20,000 for an unmarried partner. The tax rate is lower the more closely related the beneficiary of the death benefit is to the policyholder.

What is checked during a medical examination?

To ensure a personalised and fair risk assessment, you will be asked about your state of health. Sometimes a medical examination is also required so that your state of health can be assessed. For example, in the case of very high sums insured. Whether you smoke is also an important factor in the health assessment. Your insurance premiums will be lower if you do not smoke. If you give up smoking at a later date, you can let the insurance company know so that they can review the terms of your policy.

How are life insurance premiums calculated?

The amount of the premiums depends on various factors. The sum insured, the term of the policy and the age of the insured person are the main variables that influence the premium. However, individual risk factors also have a significant impact. These include, for example, your current job, your hobbies and your state of health. High-risk hobbies, such as rock climbing, and health issues can sometimes result in a so-called risk surcharge and, consequently, a higher premium. The premium also depends on whether or not you smoke.