Which insurances do you need and which not?
When it comes to the topic of insurance, many people still think of the classic agent who comes by once a year for a cup of coffee and reviews the current policies. For some complex products, it can also be very helpful to have a professional who takes care of a correct needs analysis and offers the appropriate products. But of course, you shouldn't rely solely on the judgment of your commission-based personal advisor. Find out here which insurances you actually need - and which you can safely do without.
What are the most common insurances?
Nowadays, everything can be insured. From models insuring their left leg to alien abduction insurance, it's all there. To get a better overview, it's worth taking a closer look at the most common insurances. Besides the social insurances, which are automatically paid out of your gross salary every month, there are private insurances, which you can take out voluntarily. Basically, a distinction is made between property insurance and personal insurance, but both cover the same risk: an unforeseen damage to an object or a person.
Property insurance covers the risk that an object will be damaged or destroyed. Classic property insurance policies include:
- Liability insurance
- Motor vehicle insurance
- Building insurance
- Household insurance
- Legal expenses insurance
Personal insurance is intended to cover certain risks in personal life. This includes, among other things, protection against financial problems due to occupational disability, accident, illness or death. Common personal insurance policies include:
- Health insurance
- Occupational disability insurance
- Term life insurance
- Accident insurance
- Travel health insurance
Which insurances are mandatory?
Some insurance policies are required by law in Germany. These compulsory insurances include health insurance, statutory pension insurance for employees and motor vehicle liability insurance for vehicle owners. In addition, there are special compulsory insurances like the dog liability insurance in some federal states or the horse owner liability for riders.
Every German citizen must have health insurance at all times. A distinction is made between the statutory health insurance, which is paid directly from the gross salary as a part of the social security contributions, and the private health insurance, which higher earners and self-employed persons can opt for. In this way, basic medical care is financially secured in the event of illness. Additional insurances, such as supplementary dental or cancer insurance, are not mandatory and can be taken out additionally.
Over 65 million vehicles are registered in Germany (as of 01/2020) and it is mandatory for every single vehicle owner to take out motor vehicle liability insurance. It covers damage caused by oneself in road traffic - both property damage to other vehicles and personal injury. Damage to your own vehicle, for example due to theft or a self-inflicted accident, can be covered additionally. This can be done with comprehensive and partial coverage insurance, which is not required by law and is therefore voluntary.
Which insurances are important?
In addition to the legally required insurances, there is a whole range of private insurances that you can take out. Some of them are indispensable because they cover risks that threaten your existence, others you can save yourself.
We give you an overview of the most important and useful insurances.
Indispensable: Private liability insurance
Private liability insurance offers protection against financial damage caused by self-inflicted actions. Both property damage and personal injury caused by non-intentional, culpable actions are insured.
For example, if another person is injured because you hurt them through carelessness, you are obligated to pay for any medical treatment. If care costs arise, these must also be borne and can quickly lead to economic hardship or even financial ruin. Private liability insurance covers this risk and is therefore indispensable.
Insurances that could be worthwhile
Many insurance policies are only suitable for certain groups of people. You should consider which areas in your life are particularly worth protecting against and which risks could threaten the existence of you and your environment. For example, if you are the sole breadwinner in a family, your needs will naturally be different from those of a student who is financially supported by his parents.
If you are the owner of a property, building insurance is of fundamental importance. It protects you against damages caused by fire, tap water, storm and hail. In addition, you can cover damage caused by natural hazards by taking out supplementary insurance.
Repairs to the building can be extremely expensive - so you should think about whether you could pay for such a measure out of your own pocket or whether you want to insure the risk. If you are still paying off your house and it is destroyed by fire, you no longer have a house - but still owe the bank. This is true for owners who occupy their property themselves as well as landlords. In addition, homeowners insurance is often required when financing through a bank.
Term life insurance
Another insurance policy that often accompanies a real estate loan is term life insurance. Typical of "term insurance" is that only in the event of a claim is the previously agreed sum paid out. The higher the sum insured that is paid out in the event of death, the higher the insurance premium. Many banks require such a policy as collateral for the loan - so if the insured person should die during the repayment phase of the loan, the remaining debt can be settled by paying out the sum insured.
Term life insurance can also be useful for providing financial security for the family. If a parent dies, the partner suddenly has to secure the family's income alone. To protect the surviving dependents from economic problems, a sum insured can be agreed to make up the financial difference.