Occupational disability: How to protect yourself against loss of income

 

The loss of work following illness or accident usually also means a significant loss of income. Many people need to be made aware of this. However, you can protect yourself from the financial consequences with good occupational disability insurance.

The essentials in brief:

• Occupational disability insurance is essential for everyone who lives on their own income. An accident or serious illness can cause you major financial problems.
• The insurance covers a risk that threatens one's existence and, alongside personal liability insurance, is the most critical private insurance. There are no natural alternatives.
• The conditions of different providers range from "very good" to "poor," and significant price differences are possible. Careful comparisons and independent advice are, therefore, significant.

That's why insurance against occupational disability is so important.

Anyone who can no longer work in their job due to illness or accident often also faces financial problems. It can happen to anyone: according to the statutory pension insurance, one in five new pensioners already receives a pension due to reduced earning capacity. Despite the high risk and the low statutory benefits, shockingly, few working people have additional private insurance in the event of an emergency.

Most working people are not aware of the possible causes of occupational disability and the associated gaps in care:

• For people born after January 1, 1961, there is only a disability pension from the statutory pension insurance. And today, on average, this still pays below the basic security level.
• Even those who have supposedly taken precautions through occupational disability insurance are often lulled into a false sense of security: with an average monthly disability pension of around 400 euros, financial security is usually inadequate - and a significant financial gap remains.

In addition to taking out the insurance on time when you are healthy, the famous small print decides whether and what the insurance company will pay. But the market needs to be more apparent, and sound advice is essential!

Where can you find a reliable price-performance comparison?

The differences in contributions and benefits between insurance companies are enormous. They can even make up 200 percent for the same services. Depending on the scope of the contract, you could easily waste several thousand euros if you choose the wrong insurer.

• Consumer advice centers offer price-performance comparisons. There is a fee for these, but all companies on the market that meet the criteria described here are considered. It is best to seek individual advice on occupational disability.
• Stiftung Warentest offers an independent test of numerous tariffs.
• Officially approved insurance advisors also offer paid comparisons without commission interest.

Be careful when making online comparisons!

Before you query one of the apparently free comparison portals on the Internet, consider the following: These portals are also usually registered as insurance intermediaries who live from the closing commission. There is a risk that only selected providers will appear in the comparison.

What should excellent occupational disability insurance contain?

The path to good insurance coverage is often difficult. There are many providers with even more tariffs and a wide variety of services,, and contract conditions. This makes the selection very difficult. There are also problems when taking out insurance: the health requirements, the profession, the risky hobby - all of these points are assessed differently by the companies and, therefore, become further obstacles to insurance coverage.

In our opinion, for a contract to offer truly reliable protection, it must contain at least the following provisions:

1. The pension is paid if the insured person can no longer work at least 50 percent of the time in the job they last practiced when they were healthy due to illness, physical injury, or more than age-appropriate loss of strength. This also applies when changing careers. Example: If you trained as a locksmith but now work as an IT expert, your work as an IT expert will only be checked.
2. It is not checked whether one could carry out another activity with knowledge, skills, or experience and training (so-called "abstract waiver of referral"). Example: It is not examined whether an operating surgeon could also act as an expert if his hand is permanently impaired after an accident.
3. Occupational disability occurs if the insured person is expected to be more than 50 percent unable to work for 6 months or if this period has already passed.
4. The pension is also paid retroactively from the first day of the six months.
5. If you report late, your pension will be paid retroactively for at least three years.
6. If desired, the contribution can be deferred during the performance test. Anyone unable to work often finds it difficult to continue paying their monthly insurance premiums.
7. The insurer waives the right to terminate the contract or increase the premiums if it later turns out the insured person did not declare previous illnesses through no fault of his own. This can otherwise lead to a nasty surprise if you have paid into insurance for a long time. Still, when you become incapacitated, it researches it, finds previous illnesses, and ultimately refuses to pay.
8. The contract applies worldwide.
9. With temporary recognition, the insurer does not demand the repayment of pensions that have already been granted if it turns out that the claim was not justified.

Some companies pay for rehabilitation measures and one-off transitional assistance. Although these services are helpful in individual cases, they should not be a selection criterion.

Sensible regulations for contributions

The most sensible and affordable option is "independent occupational disability insurance." If the worst comes to the worst, it pays the agreed pension and then takes over the contribution payment. In other words, you get the agreed insurance benefit but no longer have to pay your monthly contributions.

It is also essential to agree on a dynamic. This allows you to protect against increases in income or inflation, for example. For example, if you insure 1,000 euros a month today, these 1,000 euros will correspond to significantly less purchasing power in twenty years. With 2 percent per year of inflation, the purchasing power after 20 years is only 672.97 euros. Dynamic insurance should at least take such an increase into account.

With a supplementary insurance guarantee, you can increase your pension during special events (e.g., professional career, marriage, birth of a child, building a house, etc.) without further health checks. This often makes sense because you could set new priorities during such events - many people would like to make more provisions for their children.

Attention: Couplings with capital-forming life insurance policies are also offered. This is usually too expensive and makes no sense: endowment life insurance rarely makes sense as a private pension plan.

Choose a pension of the right amount.

The insured pension should cover all everyday expenses that must continue to be paid even after the onset of occupational disability (e.g., household costs, rent, retirement provision).

80 percent of the current net is often a good guideline.

Also, be careful with the running time.

Ideally, The contract should run until you retire, i.e., at 67. If you no longer need the contract or only need it partially due to savings, you can shorten it or terminate it entirely at any time.

The likelihood of occupational disability increases with age. Therefore, be careful if insurers offer to end your contract before retirement. You then risk losing insurance coverage at precisely the time when it is essential.

How can people starting their careers insure themselves remarkably cheaply?

Average occupational disability insurance with suitable conditions is often too expensive for people in training, studying, or at the start of their working life.

That's why some insurers offer so-called "starter policies," which have a lower price during a start-up phase in the first few years of the term under the same conditions. However, after the start phase has ended, the contribution increases above the regular gift.

The bottom line is that this is more expensive. But this way, you can afford comprehensive protection early on.

Good to know: If you decide on such a starter tariff, ensure the conditions for the benefit case also meet the requirements mentioned here. It is essential regarding the duration of benefits that insurance coverage is guaranteed until your expected retirement age.

Compare prices!

A 30-year-old commercial employee pays around 50 euros per month for insurance coverage up to the age of 67 for a monthly BU pension of 1,000 euros from a low-cost provider. With an expensive insurer, a contribution of more than 100 euros is due for a BU pension of 1,000 euros. The differences are significant - in the conditions and in the premium!

The situation is similar for a roofer: If he receives a monthly BU pension of 1,000 euros from an inexpensive provider for around 100 euros per month from the age of 20 to the age of 65, he will pay more than 200 euros for an expensive contract if the conditions are the same.

The situation is better for the roofer who has already taken out BU insurance as a student - he benefits from the favorable professional classification over the entire contract term with a good provider and, therefore, only pays around half to a third compared to the qualification as a roofer.

Anyone who takes out initial employment insurance as a school or student usually receives - in addition to the often good state of health - favorable contributions and an advantageous classification of the professional group.

The occupational group remains, even if a manual or other high-risk profession is later pursued.

Insurance application, previous illnesses, and preliminary risk inquiry

Before you sign a contract for occupational disability insurance, you must answer health questions. Be sure to answer them thoroughly and correctly! Otherwise, the insurer can later withdraw from the contract due to a "breach of the pre-contractual disclosure obligation." In the worst-case scenario, you would have paid for such insurance for a long time, but you would be left empty-handed as soon as an occupational disability occurs.

Insurers do not assess the answers to health questions uniformly. Tests have shown that the same person with identical information would have received a contract from some providers, paid a risk premium from other companies, and been entirely rejected by other insurers.

If you are afraid of having problems due to pre-existing conditions, you should start an anonymous risk inquiry. A service provider asks insurance companies whether and under what conditions they would insure you. Your name and address should be given so you do not end up on lists with your previous illnesses and can find an insurer with other contracts.