Is Disability Insurance Worth It in Germany? Costs vs Benefits (2024)

Work is essential. 

It keeps life moving—paying the bills, feeding your family, and allowing you to enjoy your passions. 

But what happens if, one day, you can’t work anymore? Imagine injuring your back, burning out, or becoming permanently disabled. 

What happens to your income then? 

Government benefits might help, but they fall short of maintaining your lifestyle.

Here’s the thing: German welfare programs have limits. 

As of 2024, the maximum you could receive ranges from €35,647.50 to €53,471.25 per year, depending on your level of disablement. 

That’s not terrible, but it’s hardly enough for vacations or saving for your kids’ education. 

Plus, what you’re eligible for depends on how long you’ve been paying into the system, which isn’t great news for newcomers to Germany.

So, what’s the solution? Disability insurance.

Also known as income protection insurance, it’s like a safety net for your paycheck. 

If you cannot work (due to being at least 50% disabled), this insurance will replace a portion of your income—an amount you can choose when setting up your policy. 

But is disability insurance worth it? After all, what are the chances of something serious happening? 

Let’s find out.

What are the pros and cons of disability insurance?

How popular is disability insurance in Germany

Disability insurance in Germany is relatively popular, with about 40% of households having coverage. This figure highlights that many people recognize its importance, but there’s still room for more widespread adoption.

Who tends to buy disability insurance?

1. Young people
   Disability insurance appeals to young workers because they have many years of potential earnings ahead, and it’s most affordable for them. This insurance can replace their income for most of their missed career.
2. Primary providers
   If you’re the main breadwinner for your family, losing your ability to work could create serious financial challenges. Disability insurance ensures your family can maintain their lifestyle.
3. People in high-risk jobs
   Jobs with physical demands, like construction or healthcare, come with higher risks of injury. For these workers, disability insurance is vital.
4. Caregivers
   If you have dependents—like elderly parents—disability insurance provides a safety net. 

Losing your ability to work doesn’t just affect you; it can impact your entire household. Disability insurance fills the gap, replacing lost income so you can still cover living costs, debts, and retirement goals.

What does disability insurance actually cost in Germany?

Disability insurance in Germany typically costs 2% to 3% of your income. The exact amount you pay depends on a few key factors, so let’s break it down step by step:

1. Age: Younger people pay less because they are seen as having a lower risk of developing a disability.
2. Coverage amount: The higher your monthly income you want covered, the higher your premium will be. For example, insuring €2,000 per month costs more than €1,000 per month.
3. Health status: Insurers assess your health, often using your Body Mass Index (BMI) or medical history. Good health lowers costs, while health issues raise them.
4. Profession: Risky jobs (e.g., in healthcare) usually cost more to insure than office-based jobs because they have a higher chance of injury.
5. Length of coverage: Policies that extend coverage into later years are more expensive than short-term plans.
6. Concrete vs. abstract referral clause

This one takes a little more explaining. Concrete referral means the insurance can only suggest a new job (and thus stop paying your benefits) if it closely matches your:

• Skills
• Experience
• Previous salary
• Social standing

However, an abstract referral means the insurance company considers whether you can work in any job, regardless of your previous field or experience.

For example, if a salesperson injures their back and can’t drive to meet clients, the insurance might offer them an office job with the same salary. Since this job matches their skills and experience, they would have to accept it—this is called a concrete referral.

However, if the insurance company offers an entirely different job, such as cashiering, it can only make you take it if your policy allows abstract referrals.

Typical costs for a 30-year-old healthy individual:

Below is an idea of how monthly premiums might look based on desired coverage amounts:

What disability insurance pays for

By law, disability insurance will payout once you’re 50% or more disabled.

This means that you either can’t work for 50% of the workweek — ie, 20 hours or more— or can’t do 50% of the tasks assigned to you by your employer.

Depending on your insurer, it’ll either be your own doctor or one specified by your insurance who will determine your degree of disability. 

In 2024,  these are the most common reasons for disability:

1. Mental health: 34%
2. Skeleton and musculoskeletal system: 20%
3. Cancer and malignant ulcers: 17%
4. Other: 15%
5. Accidents: 7%
6. Heart and vascular system: 6%

When does disability insurance become worth it?

Disability insurance becomes worth it when you think about what’s at stake: your ability to earn a living.

Your income is likely your most valuable asset, especially if you’re young. It fuels everything—your savings, investments, and daily expenses. Losing it due to injury or illness could be devastating.

Let’s look at some numbers:

Covering €3,000 of monthly income costs around €96.49 per month. If you face an “average length disability” (about 82 months), the total payout would be €246,000. That’s 212 years’ worth of premiums.

Plus, disabilities are more common than you think. One in four people will face a disability during their career. It’s not just freak accidents—chronic illnesses, injuries, or even stress-related conditions can make working impossible for months or years.

Many policies continue paying until retirement if you can’t return to your original job. For example, if a surgeon develops a hand injury and can’t operate anymore, their policy might still pay out—even if they switch to a desk job.

Some advisors even argue disability insurance should be a higher priority than maxing out retirement accounts. 

Why? 

Because if you lose your income, you can’t contribute to those accounts in the first place.

What to watch out for when buying disability insurance

Most policies follow strict government laws, so they’re similar in many ways. However, there are still important factors to consider to ensure you get the best coverage.

First off, here’s what stays the same across all policies:

1. When Payments Begin:

Payouts usually start if you are at least 50% disabled. This means you’re unable to perform at least half of the tasks required for your job, or can’t work for half of the work week.

2. Policy Cancellation:

Insurers cannot cancel your policy after you claim benefits. Even if you receive benefits for years and later return to work, the insurer must honor the contract as long as you keep paying your premiums.

3. Premium Increases:

Insurers can raise your premiums anytime, even doubling them in one year. This makes choosing a trusted company especially important.

Now that’s out of the way, let’s look at the key differences to consider when choosing your insurance company:

1. Concrete vs. abstract job referrals:

Concrete referral: The insurer can only stop your benefits if they find you a job that matches your skills, experience, previous salary, and social standing.

Abstract referral: The insurer can suggest any job, even one unrelated to your previous work or experience.

Why it matters: A concrete referral policy is much better because it ensures you’re not forced into unsuitable jobs. The cost difference is usually small, but the benefits are far greater.

2. Additional coverage options:

Some policies let you add features like:

Care pension: A monthly payment if you need nursing care.

Serious illness payment: A lump sum payout if you suffer a major illness like a heart attack or stroke.

Not all companies offer the above, while others offer other types of benefits. It’s worth shopping around to see if a certain add-on is particularly important for you.

3. When payments end:

Standard policies pay until age 67, which is the usual retirement age. Cheaper policies may stop payments earlier, usually at 63 or 64.

Best Option: Choose a policy that adjusts to any future increases in the retirement age. For example, if the government raises it to 70, your benefits will also last until 70.

How to choose the right disability insurance company

When picking your disability insurance, these are the four main factors to consider:

• Reputation and trust: Since insurers can raise premiums, trust is crucial. Look for companies with a history of fair pricing and good service.
• Customer reviews: Check reviews to see how the company treats its customers, especially when handling claims.
• Support services: Ensure the insurer offers clear communication and support in your preferred language.
• Recommendations: Ask friends and family for their experiences and suggestions.

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Final thoughts: Is disability insurance worth it?

That brings us to the end of our discussion on whether disability insurance is worth it in Germany.

Here’s what you should remember:

Disability insurance is a valuable investment for many people. It’s especially helpful if your policy has features like an abstract referral and coverage that lasts until retirement—or even longer if the law changes.

While the cost difference between basic and more comprehensive policies is often small, those extra features could make a massive difference if you ever need to rely on your insurance.

Overall, it’s smart to consider disability insurance if you’re early in your career or have big financial responsibilities, like a mortgage or a family to support.

Still have questions? Fill out the form below, and one of our insurance experts will get back to you within a day or two!

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The Feather team regularly checks and updates this article. It was last revised on 30.12.2024

Théo Max Leimer

Author

Yassine Kacem

Editor