What Insurance Do You Actually Need?

Understanding insurance is crucial for financial security, as it collectively covers risks through pooled premiums. Once a risk has occurred, it cannot be retrospectively insured.

Types of Insurance:

There are broadly three main categories:

• Property and Liability Insurance: This includes vehicle insurance, glass insurance, pet owner liability insurance, and building insurance. While mandatory for vehicles, others are voluntary.
• Health Insurance: This encompasses statutory health insurance, private health insurance, and supplementary policies such as hospital daily allowance insurance, accident insurance, and dental insurance.
• Life Insurance: This category includes term life insurance, funeral expense insurance (for dependents), disability insurance, critical illness insurance, and private pension plans like Riester or Rürup annuities.

Statutory insurance offers basic protection, but often lacks individual flexibility and optimal benefits, requiring personal investment for enhanced coverage.

Essential Insurance Coverage:

The necessity of insurance is highly personal and depends on individual circumstances, such as family status, homeownership, and income.

It is advisable to insure assets and income streams that are valuable and difficult to replace independently. Here are some examples:

1. For a sole earner with a mortgage: A risk life insurance and disability insurance are essential minimums. Private liability insurance is also recommended. Accident insurance is beneficial in case of home modifications needed due to an accident.
2. For homeowners with financed vehicles: Building insurance is vital for damages like fire or storm. Comprehensive car insurance is necessary to cover loan payments and replacement costs for damaged vehicles.
3. For families with children: Consider private supplementary health insurance for children. Long-term care insurance for parents is also advisable to cover potential future care costs and prevent children from being liable.

Personal Insurance Review:

Historically, comprehensive insurance coverage was maintained, including:

• Private liability and household contents insurance.
• Accident and private long-term care insurance.
• Various private pension plans and disability insurance.
• Legal protection insurance (considered less essential by some).
• Vehicle insurance (liability, partial, or comprehensive).
• Supplementary dental insurance, travel health insurance, and hospital daily allowance insurance.
• Building savings contracts linked to employer-provided financial benefits.

Monthly insurance premiums could amount to a significant portion of income.

Modern Insurance Approach:

Relocation to another country can impact the validity and tax benefits of existing insurance policies. Some policies, like disability insurance, may not be transferable. A reassessment of insurance needs revealed that certain policies, such as legal protection and some private pension plans, offered limited value or returns compared to their cost. For instance, legal protection insurance premiums might outweigh the cost of resolving minor disputes independently. Similarly, private pension plans without survivor benefits were re-evaluated. Hospital daily allowance insurance was also deemed less necessary if basic medical costs are covered by statutory health insurance and private room upgrades are affordable out-of-pocket.

Currently, the focus is on essential coverage: mandatory vehicle insurance, household insurance including pet liability, and statutory accident, health, and pension insurance. Remaining funds are directed towards personal savings and investments, providing a sense of financial security.