Who Can be Covered by Sickness Allowance Insurance as Part of their Health Insurance Plan?
This income security option applies to both
- employees and
- those that are self-employed or employed on a freelance basis
The sickness allowance insurance applies to you whether you are enrolled in
- either a private or
- public health insurance scheme
How Sickness Allowance Insurance Applies to Different Levels of Illness or Injury
It’s important to note that there are two levels of sickness and injury recognised by insurance companies and German law. These are associated with the length of time that you are deemed unable to work. This could either be a short period of time or a longer, more permanent period of time where it is unlikely you’ll ever be able to work again.
The latter is not covered by the sickness allowance insurance or daily sick pay which we discuss in detail in this blog post. For the purpose of this blog post, we are talking about sickness allowance insurance and daily sick pay in relation to short term incapacity to work; the Arbeitsunfähigkeit (AU).
Long term incapacity to work- Berufsunfähigkeit (BU)
This applies to you if you experience a serious injury or illness permanently restricting your ability to work for life. When this is the case, it is considered an occupational disability (BU). It is not something that can be covered by health insurers as part of sickness allowance insurance or daily sick pay. Those who are affected in such circumstances either receive a small amount of social welfare from the German government. Alternatively, a private disability pension can also be purchased from insurers.
Short Term Incapacity to Work- Arbeitunfähigkeit (AU)
The Arbeitsunfähigkeit (AU) is applicable to you if you are deemed unable to work for a short period of time. This is usually anywhere from 6 weeks up to 18 months. If you are an employee of a company, our German law states that you are entitled to receive a continuation of salary for up to 6 weeks from your employee in the event of inability to work. After this point, your health insurance compensation would then kick in if you have this option as part of your health insurance policy.
What You Need to Know as an Employee of a Company
Privately Insured Employees
We always encourage people to buy the daily sick pay allowance option. This applies especially to employees that are privately insured. If you don’t have the sickness allowance insurance option, you have no financial coverage whatsoever. Both your employer and the government have no obligation to help compensate you.
The daily sick pay is tax free and paid out to you on a per calendar day basis. You are also permitted to insure up to 80% of your gross income. This means that it can almost be equal par with your net income. Not too bad, huh?
It’s also important to consider that after 6 weeks, your employer will cease payment of your insurance contributions. This is in addition to cutting your salary. So, if you don’t opt for the extra coverage? You will have both your personal expenses to cover and the full premium of your health insurance too. Not ideal!
Publicly Insured Employees
If you’re employed and publicly insured, you’ll be covered by sickness allowance insurance automatically. Unlike those insured privately, you are unable to opt out of this option.
However, there is a slight catch which exposes you to a potentially substantial income gap. As a result of this income gap, we advise people to buy supplementary private daily sick pay insurance on top. Why is covering yourself against this income gap so important? Many are unaware that you are only eligible to receive 70% of your gross income but not more than 90% of your net. This10% pay cut could prove substantial to your monthly income and is not to be ignored.
What If You’re a High Earner?
Many people do not know this! And it means that daily sick pay in the public scheme is limited to roughly €90 per day. This could be a huge drop in salary if your ordinarily used to earning €10,000 a month.
Those on the public health scheme should also be mindful that compensation will cease after being incapacitated for over 78 weeks. This is just another reason it is always advised to seek additional private health insurance cover when it comes to income security regarding the daily sick pay allowance.
If you’re a high earner, there is also a cap related to the Income Contributions Assessment Ceiling. Those that earn more than the Income Contributions Assessment Ceiling (€54,450 gross per year), will not be eligible to receive 70% of their gross or 90% of their net income as part of their daily sick pay. That means that whether you earn €4,500 or €10,000 per month, you are liable to get the same daily sick pay. It’s limited by 70% of the Contributions Assessment Ceiling.
What You Need to Know as Someone Who is Self-employed
Privately Insured Self-Employed Workers
When you opt for daily sick pay with private health insurance, you have greater flexibility compared to the public scheme when it comes to when you receive payments. It could be as little as 1-2 weeks after you are injured or fall ill. Or it could be at a later date depending on your personal circumstances and when you require the financial support.
in addition, the private daily sickness benefit can be adjusted to your actual net income, without cap upwards.
But of course the well-known principle applies that the private health insurance may make a medical risk examination when applying. So if you have serious pre-existing conditions, you are better off with the daily allowance from the statutory health insurance.
Publicly Insured Self-Employed Workers
If you are self-employed, you are not automatically covered for daily daily sick pay on the public health scheme. You should also expect to pay 0.9% of your income towards daily sick pay allowance. For this price you will be eligible for the daily sick pay after a grace period of 6 weeks of being unable to work. If you are willing to pay more you can shorten this grace period. But remember: In accordance with the Contributions Assessment Ceiling, you will not be insured for more than €90 a day in the event that you are unable to work.
If you’re self-employed and buy this supplementary daily sick pay insurance with your statutory fund, it’s important to be mindful that this will be locked into your sick pay policy for at least 3 years. This does not mean you cannot switch your public fund however.
Is Sickness Allowance Insurance for You?
As you can see, there’s a lot to unpack. Through our experience, we always see the benefit in including sickness allowance insurance in your policy. This is regardless of whether you are on the private or public health scheme. Slightly heavier premiums could save you a lot of pain, heartache and financial burden in the long-run.
Deciding whether this type of health insurance coverage is right for you? Look closely at the fine print and be aware of the facts. If you still find yourself unsure, reach out to us at KLforExpats. We’ll then get in touch about your personal circumstance!