Studies, jobs, shared apartments, parties – student life is exciting and flies by. That leaves little time (or money) to worry about future security. But it definitely makes sense for students to look into insurance, for example, disability insurance. What if your life takes a turn for the worse?
One in four people currently becomes unable to work before retirement, regardless of age – so it's no wonder that consumer advocates repeatedly point out that disability insurance, alongside personal liability insurance, is the most important insurance of all. The state provides virtually no statutory disability coverage for young professionals and recent graduates during their first five years of employment, and even after that, only a minimal pension.
Important information about disability insurance for students
Students can already take out good disability insurance at very affordable rates, thus securing their standard of living if things don't go as planned. However, you should thoroughly research the topic beforehand and only then sign up for one of the many available offers. The portal Studentenberufsunfähigkeit.de (Student Disability) is helpful for this: there you will find valuable general information on the topic, a guide, and a glossary of the most important technical terms. Furthermore, you can request a quote that is specifically tailored to your individual needs.
Would you like to learn more about the most important terms related to insurance? Then our A-Z list will certainly help you:
Abstract reference:
The abstract reference clause means the insurer is not obligated to pay out if there is another job you could perform that wouldn't significantly impact your standard of living. It doesn't matter whether you actually work in that job or if it's even available. This allows the insurer to always refer you to other jobs you could potentially perform. Therefore, you should always exclude the abstract reference clause! In student insurance plans, some insurers cover your ability to study, while others cover your career prospects after graduation.
Violation of the duty to report:
When applying for insurance, the insured's health status is inquired about. Absolute honesty is crucial here! If information about illnesses or disabilities is concealed during the application process, the insurance company is not obligated to pay out in the event of occupational disability resulting from these illnesses! Good occupational disability insurance policies waive Section 19 of the German Insurance Contract Act (VVG), which releases the insurer from liability even in cases of unintentional breaches of the duty to disclose information (e.g., a congenital but never diagnosed heart defect).
Doctor's order clause:
This clause obligates the policyholder to strictly follow the doctor's instructions. This means that refusing a doctor-prescribed therapy can jeopardize the insurance payout. Since this can frequently lead to situations where treatment is deemed unreasonable (for example, chemotherapy), more and more insurance companies are now waiving this clause.
Exclusion:
If pre-existing health conditions are present before the contract is signed, the insurer may require the exclusion of the affected body part. The benefits of occupational disability insurance are then, of course, severely limited, which is why starting early and while healthy is so important, even with student plans.
Occupational group:
There are dangerous and less dangerous professions. Therefore, a scaffolder naturally expects a higher premium than an administrative assistant. Insurers classify all professions into different risk categories, known as occupational groups. These usually range from 1 to 4 or A to D, with 1 and A representing the most affordable rates. Incidentally, you don't need to re-declare your profession if you change jobs. With good policies, only your most recent occupation, such as scaffolder, is considered, even if you were an administrative assistant at the time of application. Disability insurance rates for students vary considerably.
Biometric risk:
Since the risk of occupational disability depends on many factors, each contract is individually reviewed and has its own price. Factors influencing the price include the amount of the pension and the retirement age, as well as occupational group, age, gender, and pre-existing health conditions.
Bonus pension:
In this surplus utilization scheme, the profits generated are used to guarantee an extra pension. This can be useful if you want to secure substantial salary increases.
Gross contribution:
This is the actual premium payable for the insurance. However, since the money is not needed immediately (ideally never!), the insurer can use it to generate surpluses. You can decide how these surpluses are used. Common uses include immediate premium deduction, bonus payments, and interest-bearing accumulation.
Incapacity for work clause:
Since incapacity for service is not necessarily the same as occupational disability, prospective civil servants and students aiming for civil servant status should be aware that these two terms are used synonymously. The incapacity for service clause states that dismissal and retirement due to incapacity for service are also considered occupational disability without further medical examination.
Dynamics:
A dynamic feature is an increase in the insurance contract that is agreed upon at the time of signing. This is a particularly good option for student plans, as it increases the disability pension slowly and steadily and can be suspended or even completely deactivated if needed.
Incapacity for work:
Incapacity for work describes the condition when you are completely unable to work. This means that the assessment considers not only your most recent occupation, but all possible job profiles. Naturally, this condition is only reached in cases of serious illness.
Free choice of doctor:
Of course, your inability to work should be assessed by a doctor of your choice. However, the insurer has the right to have the diagnosis reviewed by a second doctor. The choice of this second doctor should again be yours.
Health check:
The health check is usually carried out with the application. Questions about your health must be answered truthfully. If you have pre-existing conditions, more detailed information is often required. For high disability insurance payouts, a medical check-up, blood tests, or an HIV test may also be necessary. Interestingly, different insurers can assess the same illnesses quite differently, which is why it can be very helpful to get quotes from several insurers if you are unsure.
Waiting period:
The waiting period is a fixed timeframe during which the insurer is not obligated to pay benefits. If the waiting period is six months, the insurance only pays out starting in the seventh month of occupational disability. Since many occupational disabilities are only temporary, the waiting period significantly reduces the premium. However, you should consider how you will financially bridge the waiting period yourself.
Specific reference:
In the case of a specific referral clause, the insurer is not obligated to pay benefits if you are already working in another profession that corresponds to your previous standard of living. Since the decision to return to work rests entirely with the insured, this is perfectly acceptable. After all, while it's certainly nice to receive a disability pension in addition to your own income, it somewhat defeats the purpose of the insurance. In practice, there are hardly any policies left that waive the specific referral clause.
Performance end age:
The benefit end age refers to the age up to which you can receive the maximum disability pension. Ideally, this coincides with retirement age. It therefore makes sense to link the benefit end age to the start of your retirement savings. This ensures a seamless transition in old age, even if you experience health problems. Since most disability claims arise in old age, the higher this benefit end age, the higher the premium.
Subsequent insurance:
Supplementary insurance is particularly important for students. Since academics often earn little during their studies but quite well afterwards, their disability insurance coverage needs to grow accordingly. A supplementary insurance option allows for an increase in the disability pension without a new medical examination. This can be crucial if illnesses or other health problems arise in the meantime. Student policies should definitely include a good supplementary insurance option.
Net contribution:
If you choose immediate premium deduction when using surplus funds, you will pay significantly less than the original premium from the outset. This is the net premium. Since the already factored-in surpluses are not guaranteed, your net premium may need to be increased, up to a maximum of the gross premium again. In practice, however, the surpluses are calculated conservatively, and price increases are very rare.
“Section 163 VVG”:
One thing to note upfront: There is probably no right or wrong answer to this. Section 163 of the German Insurance Contract Act (VVG) allows the insurer to amend the contract under strict legal conditions. This usually involves a price increase beyond the stated gross premium.
Here's an example: You have a disability insurance policy with insurer X. They've calculated your premium precisely so that you don't overpay and your contribution remains stable. Everything is fine. But then a major disaster occurs in Germany (earthquake, nuclear accident, etc.), and the number of people unable to work rises rapidly. Now, the insurer naturally has to pay out significantly more disability pensions than planned. They now face a choice: either raise the premium or go bankrupt.
Regarding Section 163 of the German Insurance Contract Act (VVG), you have a choice: either absolute security regarding the gross premium (waiver of Section 163 VVG), or an insurance policy that protects its members even in extreme cases through price increases.
Need for care:
A good disability insurance policy should also automatically provide benefits in the event of long-term care needs. For this purpose, companies have developed their own system for determining the level of care required; the statutory long-term care insurance system does not apply.
Forecast period:
Often, it's not entirely clear at the beginning whether it's a simple illness or a case of occupational disability. If this condition persists for more than six months of incapacity for work, good insurance policies consider it occupational disability and automatically provide benefits.
Pension amount:
The pension amount should always be based on current income. Most insurers limit the income to 80-90% of net income, but offer an option to increase the pension later. This is particularly important for students! After all, the income increase after graduation is often substantial.
For example: A student insures his earning capacity. He doesn't earn much yet and therefore agrees to a monthly pension of €750. The policy allows for a 50% increase in coverage. After entering the workforce, he now earns €2000 net, but can only increase his disability pension to a maximum of €1075!
Risk contribution:
This is the contribution that is actually used to cover the currently incurred risk. Since the risk increases with age, the risk contribution for student plans is initially only half the gross contribution. With increasing age, the risk contribution continues to rise and is sometimes even higher than the gross contribution.
Risk surcharge:
Besides exclusion, this is the second way insurers can react to pre-existing health problems. However, in this case, the affected body part is not excluded, which is why a risk surcharge is usually better than an exclusion with the same premiums.
Buyback value:
Since you pay in more at the beginning of the insurance period than is actually needed, a capital sum typically accumulates, which is gradually reduced over the course of your life. You could have this capital sum paid out upon cancellation of the policy. However, you should carefully consider whether you should cancel your disability insurance at an advanced age.
Immediate contribution deduction:
With immediate premium deduction, future surpluses generated from your contributions are used to lower your premium from the start. In other words: cashback from the insurer! This is particularly advantageous for students and young professionals, as money is usually tight in these situations.
State protection:
Unlike in the good old days, the state has largely withdrawn from providing income protection. For people born after January 1, 1961, only a reduced earning capacity pension is paid. A distinction is made between a partial and a full reduced earning capacity pension. If someone is still available to the labor market for 3-6 hours a day, they are entitled to a partial reduced earning capacity pension. If even that is no longer possible, then they receive the full pension. But don't be lulled into a false sense of security: even the full reduced earning capacity pension typically amounts to no more than 35% of gross earnings! It is therefore a basic social security benefit, which is also very difficult to obtain. The rejection rate is around 50%!
Student rates:
Students can vary greatly. Law, business administration, and architecture students are considered low-risk professions, while students pursuing teaching degrees, art, or sports represent a risk that is difficult to calculate. Therefore, insurance companies treat students differently. Some companies don't insure students at all, others classify all students in a medium-risk occupational group, and some then insure them for their intended profession. For graduates of, for example, law, it therefore makes sense to look for an insurer that covers their intended profession directly; students with "difficult" career goals should definitely take advantage of student rates, because, for example, artists are hardly insurable as professionals.
Surpluses:
The insurer can, of course, use your contributions. The resulting surpluses will be credited to you. This can take the form of a bonus pension, an interest-bearing accumulation, or an immediate payout.
Interest-bearing accumulation:
In this case, the portion of the gross premium that exceeds the individual risk premium is invested at interest. The resulting returns are accumulated and paid out to the policyholder at the end of the policy term. Ideally, the policyholder receives their premiums back in this way and has made a small profit. Investment in a fund is also possible.
We at allmaxx inform you as a student about the advantages of disability insurance.
