Everyone lives with certain risks, which in the event of damage can quickly result in very high costs. Insurance is important so that for example in the event of illness or after an accident you do not have to bear the costs alone. In Germany, a distinction is made between insurance that every employee must have (social insurance) and private insurance.
1. State Social Security
The social security system in Germany includes protection against the largest risks. If you work in Germany subject to social security contributions, you are usually a member of the following statutory insurance companies:
- The statutory health insurance covers the costs for visits to the doctor as well as for many medications and therapeutic measures.
- The statutory long-term care insurance offers basic income support in the event that you are permanently dependent on care due to illness.
- The statutory accident insurance covers the costs of medical treatment and reintegration into working life after an accident at work or in the event of occupational diseases. It pays compensation for wages during incapacity for work as well as pensions in the event of permanent health problems including survivors' benefits.
- The statutory pension insurance covers rehabilitation benefits as well as the payment of pensions in the event of old age, reduced earning capacity or in the event of death.
- The statutory unemployment insurance pays an income while looking for a job under certain conditions and supports the job search with advice and placement offers.
Social security membership costs a fixed percentage of your income. You bear part of the costs, the other part is borne by your employer. The costs are deducted directly from your wages.
If you are employed in Germany, you are usually obligated to be insured with the German social security system.
Please note: There are exceptions to this principle for certain forms of work. For example for certain posted persons, cross-border workers and persons who work in several EU countries.
Your employer has to register you under social security law. This means that the employer must provide the responsible health insurance company with the following information:
- Your name,
- Your address,
- Your insurance number,
- Your nationality,
- Your salary and information about the job
With this notification it is ensured that the employer pays the social security contributions. In order for the employer to be able to fulfil its obligations, you must give the employer all the necessary details and information. You are therefore subject to an obligation to cooperate.
Please note: The employer must give you a copy of the reported data. If you violate the reporting obligations, both you and the employer can be sanctioned.
In some sectors, the employer must submit a report before starting employment:
- in construction,
- in a restaurant or hotel,
- at a shipping company,
- in the transport and related logistics sector,
- in the building cleaning sector and
- in the meat industry.
This means that you must also provide the necessary information as part of your obligation to cooperate before taking up employment and must always have your ID with you in the event of an inspection.
You can find more information on the registration and contribution procedure at German pension insurance. The health insurance companies also offer information on their websites.
Tip: When you register for social security, you will receive a social security number that you will keep for life. With the help of the social security number, the data required for the pension determination are brought together and kept ready. So keep this number in a safe place.
2. Private insurance
The social insurances mentioned in Germany cover important life risks such as health, unemployment or old age. However, there are other risks that you should insure yourself for in Germany. But not every insurance is suitable for every life situation. Above all, insurance cover should cover the risks that could threaten your existence in the event of damage.
The most important private insurances in Germany include:
A liability insurance: Did you break something that belongs to someone else? That can be very expensive, in extreme cases it can even threaten your own existence. In these cases, liability insurance applies. Liability insurance is generally considered to be the most useful and important among voluntary insurance. Family members are usually also insured. Liability insurance can be taken out for less than 100 Euro a year.
An occupational disability insurance: If you can no longer work in the long term due to a serious illness and therefore no longer have an income, in the worst case scenario you are threatened with financial ruin. The State insurance is very small with the disability pension and does not always apply. That is why every employed person should think about whether he or she protects himself against the loss of his own working with an occupational disability insurance. In addition to private liability insurance, this is one of the most important voluntary insurance policies.
A household contents insurance: Household contents insurance pays if things break in the apartment, for example after a fire, break-in or water damage. The costs for home contents insurance depend, among other things, on the size of your apartment. Home insurance can be particularly worthwhile if you keep valuable items in your home.
A motor vehicle liability insurance: If you have a car or motorcycle, you also need motor vehicle insurance. Without a motor vehicle liability insurance, you cannot register your vehicle in the first place. If you cause an accident in your car or injure someone, the insurance will cover the damage. The cost of insurance varies widely and depends, for example, on the type of vehicle and how many years you have not had any accident.
There are many other voluntary insurances. For example, private accident insurance pays for an accident during your leisure time. Legal protection insurance for legal help in a legal dispute. There is also insurance for pets, loans and travel. Check exactly which insurance you really need. As every insurance costs money.
Tip: Which insurance is right for whom also depends on age and marital status. The consumer advice centres and the Stiftung Warentest help you to choose the right voluntary insurance for you.
If you are employed in Germany, you are normally required to be insured in the German social insurance systems.
Please note: There are exceptions to this principle for certain forms of work, including for certain posted workers, cross-border workers and people who work in multiple EU countries, for example.
Your employer is required to register you under social insurance law. This means that your employer must provide the following information to the health insurance fund in question:
- your name,
- your address,
- your insurance number,
- your nationality,
- your pay and information about your job.
This ensures that your employer remits the social insurance contributions. You must give your employer all of the necessary details and information to enable it to comply with its obligations. In this respect, you have an obligation to cooperate.
Please note: Your employer must give you a copy of the information it has submitted in the notification process. In the case of a violation of the notification requirements, both you and your employer can face sanctions.
In some sectors, the employer must submit a notification even before you take up employment:
- in the construction sector,
- in restaurants or hotels,
- in freight forwarding companies,
- in the freight transport industry and associated logistics sector,
- in the industrial cleaning industry, and
- in the meat industry.
This means that you have an obligation to cooperate by providing the necessary information even before you take up employment, and you must always have your identity document with you in case checks are carried out.
More information on the notification and contribution procedure is available from German Pension Insurance (Deutsche Rentenversicherung). The health insurance funds also offer information on their websites.
Tip: When you are registered for social insurance, you will receive a social insurance number (Sozialversicherungsnummer), which you will keep throughout your life. Your social insurance number is used to collect and hold the information required for you to receive a pension. Take care not to lose this number.
German Pension Insurance (Deutsche Rentenversicherung) has an audit office which checks every four years, if not more frequently, whether employers are correctly calculating and paying social security contributions for all employees. If suspicions exist concerning a specific case, this office can carry out audits at short notice.
The Customs unit responsible for enforcing the law on illegal employment and benefit fraud also monitors compliance with the notification obligations. You can find more information about how Customs monitors illegal employment on its website.
If an employer does not comply with its stipulated notification, contribution or record-keeping obligations, this is considered illegal employment (Section 1 (2) no. 1 of the Act to Combat Undeclared Work and Illegal Work (Schwarzarbeitsbekämpfungsgesetz)). If an agency finds that payments have not been made correctly, the employer must subsequently pay the contributions, plus a late fee for the contributions which were initially not paid correctly.
In addition, the employer can face a fine of up to 50,000 euros (Section 111 (1) of Book IV of the Social Code (Sozialgesetzbuch), Section 8 of the Act to Combat Undeclared Work and Illegal Work). In some cases, the employer can also be convicted of a criminal offence (Section 266a of the Criminal Code (Strafgesetzbuch)). It is a criminal offence for employers not to pay your share of social security contributions or their own share.
If an employee fails to comply with his or her obligation to cooperate and provides false, inadequate or late information, a fine of up to 5000 euros can be imposed (Section 111 (1) no. 4 of Book IV of the Social Code, Section 8 of the Act to Combat Undeclared Work and Illegal Work).
If the Customs Administration needs information from you in order to check whether your employment is legal, you must provide this information. For example, you must produce time sheets or other documents showing your working hours and the nature of your work.
Germany’s social security system provides protection against the major risks in life. If you have a job in Germany with compulsory social insurance coverage, you are normally a member of the following statutory insurance systems:
- Statutory health insurance (gesetzliche Krankenversicherung) covers the costs of doctor’s appointments and many medicines and treatments.
- Statutory long-term care insurance (gesetzliche Pflegeversicherung) offers basic provision for the event that you become dependent on long-term care as a result of illness.
- Statutory accident insurance (gesetzliche Unfallversicherung) covers the costs of medical treatment and occupational reintegration after an accident at work or in the case of occupational diseases. It funds a wage replacement benefit while you are unable to work and a pension if your health is permanently damaged, as well as benefits for surviving dependants.
- Statutory unemployment insurance (gesetzliche Arbeitslosenversicherung) provides an income while you are looking for work, subject to certain conditions, and provides support in the form of advisory and placement services.
- Statutory pension insurance (gesetzliche Rentenversicherung) provides rehabilitation benefits and pays old-age pensions, reduced earning capacity pensions, or pensions to your surviving dependants in the event of your death.
Membership of these social insurance systems costs a fixed percentage of your income. You pay part of the costs and the remainder is paid by your employer. The costs are deducted directly from your wages.