How much life insurance do I need?
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How much life insurance do I need?

Summary: If you ever plan to support others or buy a house or an apartment, it’s probably a good idea to have a life insurance policy. Your early planning can have a huge impact on the people you care about, whether you have a significant other, children, relatives, friends, or even a business partner who depends on your financial support. 

Life insurance for a mortgage

If you’re planning on buying a home for whatever reason, you probably won’t be accepted unless you have a life insurance plan. Mortgage brokers require financial backing to pay for your mortgage if you pass, so most companies are partnered with life insurance companies to get you signed up during the application process. 

Depending on how much you have in savings, you’ll need to have a life insurance plan that will cover the rest of the mortgage. Since you can adjust plans once per month, you’ll be able to reduce your insured sum to accommodate for any changes like paying off debt of having a child. The only limitation is that you don’t go below the minimum €50,000 insured sum, and if you go over €400,000, you’ll need a health check-up for approval.

To support children 

If your children are younger, you’re going to need more coverage than someone who has older children. First, you’ll need to ask yourself what kind of support you’d like your children to have and for which purposes. If you’d like them to go to a private school that requires tuition, you’ll need to think about the average cost of that tuition each year and how inflation might impact the cost. 

If you’d like them to also have support throughout university or through vocational training, you’ll also need to consider the cost of the program they’d be entering into and the cost of living. Most students in Germany are only covered to a small extent with the assumption that parents will take over the additional costs. 

Knowing which program they’ll be entering into and how much government funding they’re likely to receive during this time is key in calculating how much life insurance coverage you’d need. 

To support your significant other

If you’re in a relationship with someone who depends on you for either a portion or all of the rent, groceries, or other financial responsibilities, you’ll need a life insurance plan with enough coverage to support them for at least two years while they adjust their living situation by either getting additional training to afford the same lifestyle or changing their lifestyle entirely. 

While it’s also not really a fun thing to think about, it’s important to make sure that they have the financial freedom for these two years to adjust to grieve and adjust to the new situation. 

If you have a stay-at-home spouse, this is especially important since they’ll most likely not be able to afford to live to the same standard as they once did before. This may result in rushed decision-making and moving into government housing without the ability to go through training to accommodate for the changes. 

To support business partners 

One dependent that you might not be aware of is a business partner. Many start-ups and small businesses have multiple co-founders or partners who are financially supporting the operations of a business. Without a life insurance plan, if something were to happen to them, the business might need to take on other partners or investors in rushed decision making, which could lead to a mismatched team and negative consequences for the business as a whole. 

In an even worst-case scenario, the business could also be sold or need to shut down because of the missing funds and the lack of time to restructure. 

Life insurance to cover debt

If you have any existing debt (including mortgages), then it’s also good to have this covered under a life insurance plan since many creditors will find your next-of-kin or dependents and try to claim their assets through their association with you. This includes significant others, children, family members, and a business partner. 

Since they might be depending on you financially already, having them face any debts you might have taken out to purchase a car, start a business, or finance your lifestyle could be potentially devestating. 

How can I apply for life insurance?

The application process for life insurance is a bit complicated compared to other insurances like household contents, where you only need to have an address, or dental insurance, where you just need to have public health insurance, and less than four missing teeth at the time of signing up. 

For life insurance, you’ll initially fill out a pre-application form before being sent another questionnaire that will take approximately 15 minutes to complete if you don’t know the answers right away or you have certain medical conditions that require extra information. Once you’re finished filling it out, you’ll get a final quote. 

Since our plans aren’t over €400k, it means you don’t need a health check-up to get approval. We also plan on expanding our available coverage for life insurance past this initial €400k, so if you do choose this option once it’s available, just know that you’ll need a general health check-up for approval. We can help you book this check-up, and we’ll also reimburse you for the costs, so make sure you keep the receipt. 

Just signed up for private health insurance and are unsure how it works? Payments for private health insurance are actually structured differently than public health insurance, so it takes a bit of time to get used to the new system. In this article, we explain what these payments are, which bonus programs are included, and what you can expect when switching to private health insurance.

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