Insurance: an expert explains what types of insurance really make sense

Especially when you’re young, what economists sensibly call your human capital is by far your greatest asset. What you will earn, strictly discounted to this day, for the rest of your life is often much more than what you already have in your accumulated wealth. .

Finding the Right Disability Insurance Is Hard

You must insure the failure of this cash flow if you do not have assets or income that is sufficient even without your job. In the short term, unemployment insurance and your emergency liquidity can fill this gap. If you are absent for a long time, you need the so-called BU, a work disability insurance. A BI does not have to guarantee you a prosperous life, but it must be dimensioned so that your standard of living does not collapse completely. A BU is relatively expensive, which means that many people here sign contracts that are not enough at all. But anything less than solid minimum coverage is pointless.

The high costs of a BU have another side effect: a BU is a good deal for your insurance seller: high premiums, long term, high commission. If a 30-year-old man insures himself up to the age of 63 with an insurance contribution of 100 euros, he quickly earns more than 2,000 euros. Everything is facilitated by a high degree of lack of transparency, because a BU is extremely complex: What is in the fine print? What is excluded? In how many cases does the insurance company refuse to pay a benefit and what do I do then? Is 75 euros fair to secure a monthly pension of 2,500 euros for a 40-year-old lawyer if the “damage event” occurs before the age of 60? Why is the contribution almost doubled if the insurance continues until the pension begins? And why is the contribution 25 percent more expensive for your assistant of the same age in the same constellation?

You really need some good advice, and that’s actually the bad news. Because your insurance seller is subject to a blatant conflict of interest: you want comprehensive, personalized protection at a fair price. You want to graduate with little effort and earn as high a commission as possible. For him, consulting is a loss, sales are profitable. As a result, insurance salespeople often take a “pragmatic” approach to health issues to speed things up.

The consequence for you: If the worst happens, there is no insurance coverage because you did not declare “something small.” Or: Certain health risks are simply excluded from covered protection because this makes health monitoring too complex or the product becomes more expensive than the competition. So it happens that an internist working in the palliative care unit has no protection against infectious diseases.

A classic that we see over and over again is the byproduct. About a BU, often too small, intertwined with unit-linked pension insurance. Such combinations are forever Nonsense. Even if they are tax deductible. Even if there are government subsidies. Even if your savings contribution is somewhat subsidized by the insurance company as a result of this coupling. Even if pension insurance were a sensible product, which it is not.

Beware of by-products

Never mix the need to insure a biometric life risk with a highly inefficient form of savings. What we experience again and again in practice: People realize that the conclusion of the pension insurance component was a mistake. However, they can no longer exit the product without losing their BI protection. The result: the person in question first has to look for a new BU, which has become significantly more expensive or is no longer available now that he is older and may have previous illnesses. The reverse situation is also conceivable: you only have a few years left to work, and you have saved or inherited a lot in the meantime: a BU protection is no longer needed, but you cannot cancel it, because otherwise you will suffer serious losses. shortly before reaching retirement age Pension insurance savings suffer.

So what exactly should you do? Don’t go to an insurance agent. Even the supposedly “independent” broker, who can theoretically access the best offers from all insurance companies, is a poor choice: will he choose the best offer for you or rather the best offer for his commission income?

In the end, there are only two sensible options. The first is: do it yourself. If you want to decide for yourself, estimate as realistically as possible how much protection you at least need, and then round up to 10 to 20 percent. Buy a Stiftung Warentest brochure or something similar and choose a direct insurance company that ranks well, particularly in terms of its willingness to pay in the event of damage. There you decide on a product with the most complete protection possible, give too much information instead of too little when it comes to health issues, and hope you haven’t missed anything. The result is probably better than the seller’s; I doubt it’s really good.

An independent consultant can help

I strongly recommend the second option: find a really objective advisor. For a hobbyist, I know the BU topic pretty well, but I’d go it alone with such a complex topic. forever Invest money in independent advice. The probability that I would overlook something on my own, cover unnecessary components, or choose an insurance policy that tends to start major arguments before making a payment would be too high for me.

Even if, in extreme cases, the result would be the same with advice as without: As with the power of attorney or living will, the same applies here: the knowledge, or at least the justified assumption, that you are well prepared With the help of a professional in a potential horror scenario, it brings significantly more peace of mind than hoping you haven’t done anything wrong acting alone. The bottom line is that an independent insurance advisor who can arrange so-called commission-free net policies for you is significantly cheaper than the sums that are taken out of your pocket as commissions in a non-transparent way. I think it’s money well spent.

In addition to the BU, there are a number of safeguards that make sense depending on your risk aversion or values, but are ultimately expendable. Not being able to work can mean total financial loss for you and your family: social decline and a very low standard of living included. By contrast, all other risks are relatively harmless. You don’t need to insure what you can afford or bravely bear. Nursing care, daily sickness benefits and much more: if you have enough assets, you can do without them.

Think hard about switching to private health insurance

Germany has, despite two-tier medicine, a pretty good healthcare system. Before taking out private health insurance, keep in mind that your contributions will increase massively in old age: Because policyholders who have taken out the same rate as you get older and, in general, from the point of view of your insurance company, they become a worse and worse risk. Even if you have children, everything quickly becomes expensive. This is overlooked by many high-income young people who are driven by short-term profits.

It often makes more sense to take out private supplementary insurance for really relevant services. Even if insurance companies resist: If you’re insured at such an overpriced rate, it’s almost always possible to switch to a comparable rate with the same insurance company, which is cheaper because it mainly insures younger people. An independent insurance advisor can also help you with both issues. In certain circumstances, it may even be able to allow you to return to compulsory insurance, where this makes sense and is possible.

A number of insurances are largely absurd, such as the so-called terrible illness insurance. It will pay you a lump sum after a serious illness has been diagnosed, usually after it has reached a certain degree of severity. That sells relatively well, because who is not afraid of a heart attack, a stroke, cancer or multiple sclerosis. And, as you now know, fear is even more conducive to selling financial products than greed.

However: it is completely irrelevant to your family’s financial situation if you are no longer able to work due to a stroke or a broken back. However, terrible illness insurance does not cover the most common causes of incapacity for work, namely mental illness and skeletal illness. It’s only worth thinking about if you don’t get a BU due to previous illnesses.

Accident insurance is often not necessary

The same goes for accident insurance: unless you have extremely dangerous hobbies like free climbing, hang gliding or motorcycling, accident insurance is nonsense. First of all, you only pay for permanent damage. Second: The accidents are spectacular and make headlines. Your insurance salesman takes advantage of your fear of this. But accidents are relatively rare. You are nine times more likely to lose your job due to illness than due to an accident. The fact that we perceive accidents so strongly is a typical human misperception. It’s called the availability heuristic, and it’s one of insurance sales’ best friends.

The classic example of the availability heuristic in risk assessment is the shark attack. We are all afraid of sharks. not? So I do. If I swim a little further in Sardinia, dark water below me, maybe a shadow, I watch a movie. Certainly not just because I’ve seen too many garbage movies with sharks, well, that too. Do you know how many shark attacks there are around the world every year? In the last 20 years (2000-2019), the annual number has never exceeded 100, generally much less, with an average of less than six deaths. World. In a whole year. There have also been fatal shark attacks in Sardinia, the last in June 1721. So you’re much more likely to crash your car on the way to the beach or slip fatally into the pool in the morning.

There is another step to the nonsense of accident insurance: accident insurance with return of premium, the so-called UBR. The insurance company’s promise: if nothing happens to you during the term, we’ll refund all premiums – “and there’s a share of the profits, too.” If you take a close look at the product, it is again one of the non-descript by-products. The mostly absurd accident insurance is combined with an even more absurd pension insurance. A small part of your contribution goes to the risk contribution for accident protection, the rest is invested by the insurance company in pension insurance. Your savings and interest are calculated in such a way that the insurance company ultimately earns so much that, after all costs, it gets the sum of your paid contributions.

Great? do not tie up too much investable capital. Capital that would have yielded much more if you had invested it wisely yourself. The interest in the contracts we see is devastating, and the bonuses are kept within strictly defined limits. In the end, the insured loses money because inflation runs through their contributions year after year. Assuming 1.5 percent inflation, this leads to a loss in purchasing power of more than 25 percent after 20 years. There’s only one product I haven’t found yet: shark attack insurance with premium reimbursement. Wouldn’t that be a dream?

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