How Does Contributions Relief Work?
You can include contributions relief as an add-on, called "Beitragsentlastungstarif" to your private health insurance coverage to lower the cost of your monthly premiums as of the age of 67. For example, a 30-year-old could lower their premiums by as much as 300 euros per month during retirement age for roughly 80 euros per month. When employer subsidies and tax incentives are factored in, your personal contribution could be even lower and cost as little as 30 euros per month.
Why Add Contributions Relief to Your Private Health Insurance?
If you plan to retire in Germany, earn a good income and are privately insured, adding contributions relief to your existing coverage can be a very attractive option. If we take the example above, by paying an additional 360 euros a year whilst still of working age and in control of your earnings, you’d save a whopping 3600 euros per year during retirement. For those in the right position, who wouldn’t want to invest such a nominal amount to make retirement a little more comfortable in the future?
Since high-earning, privately insured individuals without dependents tend to pay less on their monthly premiums than those who are publicly insured, it also makes sense to re-invest the money saved back into some sensible retirement provisions. So switching to private health insurance not only betters your overall health provisions but also helps you to have more money left for retirement costs.
Are There Any Downsides?
As with all health insurance decisions, it’s important that you carefully consider what’s right for you and your personal circumstances.
Whilst the long-term advantages of adding a contributions relief component to existing coverage is a no-brainer for employees, who get half of their contributions paid by an employer, it looks a little different for those who are self-employed and do not receive the same subsidy.
For this group, we’d recommend carefully calculating the financial benefits in the long run since there is no employer subsidy and because the money is bound to the health insurance plan. Meaning if you leave the country before retirement and cancel your health insurance plan, you won’t be able to get the money you contributed back. In this case, something like an individual savings plan would be the wiser choice.
Another thing to keep in mind is that the need to pay the add-on applies for the entire duration of your health insurance coverage, and does not end when the contribution relief itself kicks in at the age of 67. Thus if you pay 80 euros monthly to reduce your contribution by 300 euros as of age 67, your net savings would be 220 euro total.
In summary?
Thinking about retiring in Germany and would like to learn more about including the contributions relief add-on to your existing private health insurance coverage?
Or would you like to make the switch to private health insurance to take advantage of this benefit?
Get in touch and we’ll advise you on whether this option is the right one for you.
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Mirja Lundehn – Independent insurance broker
Co-founder of KLforExpats and licensed insurance expert