When it comes to car and health insurance, those insured have no choice: These policies are mandatory in Germany. With most other insurances, however, German citizens can freely decide whether they want to take out this. From glasses to cell phones to insurance against “domestic emergencies”, insurance companies can come up with a lot to sell contracts. However, some policies make no sense – either because the damage occurs very rarely or because the insurance is more expensive than the expected damage. Kim Paulsen also comes across these offers again and again. He is an expert at the Association of Insured Persons (BDV) and explains why Germans can often save money.
Life insurance providers advertise with the promise of at least relieving relatives of financial worries in the worst case scenario: If the insured person dies, the family will get the money saved from the insurance company. Since there used to be comparatively high interest rates of four percent and more, such endowment life insurance policies were primarily a savings product for many policyholders. “Many policyholders have taken out these policies for old-age provision, but they are completely unsuitable for this,” says BDV expert Paulsen. Because capital life insurance is one thing above all: expensive.
The running costs of the insurance are usually very high. However, the insurers only invest what is left of the premium paid after deducting all costs. Due to the low interest rates, this is currently hardly worthwhile for the policyholder: the policies hardly generate any income.
According to the expert, private life insurance is also hardly worthwhile. The policy pays the policyholder a monthly pension until the end of life. Accordingly, the older the insured, the more it pays off. According to federal statistics, the average life expectancy for 65-year-old men in Germany is 83 years, for women it is 86 years. So that the insurance companies have to pay as little as possible from their own funds, they set life expectancy at a very high age. “The best providers expect a current 40-year-old to have a life expectancy of at least 95 years,” says Paulsen. Those who die before the calculated date are giving away money.
Death benefit insurance
Death benefit insurance is also a form of capital life insurance. In the event of death, the insurance pays the paid-in money plus income to the surviving dependents who pay for the funeral costs. “The contributions are often higher than what the insurance company pays out later,” says insurance expert Paulsen. If the insured person dies within three years of taking out the insurance, most providers offer no money at all. The insurance is only worthwhile if you die shortly after the usual waiting period of three years. Since death cannot be planned, however, the BDV recommends saving up the money for a funeral in another way or putting it aside.
Anyone who goes on vacation can insure themselves against just about anything. While travel cancellation and international travel health insurance can still be useful additions, the money for luggage insurance is probably better invested in a cocktail on the beach. The insurance is liable if the luggage is lost. But there is only rarely money, as BDV expert Paulsen knows: “The insurers often accuse the traveler of gross negligence and say: ‘You weren’t paying attention!'”. So if you don’t chain your suitcase to yourself at the airport or train station, you won’t get a replacement. If travelers forego the supposed protection, they still have good cards to be reimbursed for the loss. If the suitcase is lost after check-in, the airport or the airline are liable. If a burglar steals the suitcase or valuables from the hotel room, the contents insurance is liable in many cases, explains Paulsen.