Understanding the German Social Insurance (Sozialversicherungen)

When you start working in Germany, you get quite a shock when you receive your first payslip – especially when your job is fulltime with full benefits. Your first instinct is to call the HR department and ask if someone made unlawful deductions only for them to announce that those deductions are real and legal, but what do they mean?

Care and prevention through social insurance is tightly regulated by statute and is administered by self-governed insurance carriers. There are five statutory social insurances (Sozialversicherungen) in Germany:

1. Pension – Rentenversicherung (RV)
2. Unemployment – Arbeitslosenversicherung(ALV)
3. Health – Krankenversicherung(GKV)
4. Long-term Care – Pflegeversicherung (PV)
5. Accident insurance – Unfallversicherung (UV)

With the social insurances, the employee pays 50% while the employer pays the remaining 50%. The level of the contributions is based on the individual level of income, and the level of contribution also determines the benefit level.

1. Pension Insurance (Rentenversicherung)

Whether it is classic retirement pension, pension in case of reduced capacity to work or medical benefits for maintaining health – the statutory pension insurance offers financial protection and is chiefly financed by contributions from the insured individuals and their employers. Individual occupational groups may be insured in a pension plan set-up according to occupation. But who can claim a pension?

• Statutory pension provides for old-age pensions, reduced earning capacity pensions and surviving dependants’ pensions. Further, to claim a pension one must have fulfilled a minimum insurance period and satisfied certain legal and personal conditions. More details can be accessed at the Federal Ministry of Labour and Social Affairs.

 

2. Unemployment Insurance (Arbeitslosenversicherung)

It offers benefits to insured individuals in case they lose their jobs. All working individuals are covered by compulsory insurance. The premiums are paid on equal shares between the beneficiary and the employer i.e. the employer contributes an equal share as the employee.

3. Health Insurance (Krankenversicherung)

An illness can become a financial burden. One requires a health insurance in order to ameliorate this burden. The statutory health insurance covers you and your family in the event of illness. As an employee in Germany, you are generally required to be insured, which means you are automatically covered through statutory health insurance or voluntarily insured in the statutory or in private health insurance. Here again, the premiums are borne by employees and employers alike.

Further, health insurance covers the necessary medical assistance. This means that there are exceptions to the entitled benefits i.e. after an accident or as a result of a professional illness. These two cases, are covered by statutory accident insurance.

However when it comes to health insurance, some insurance providers charge an extra percentage (Zusatzbeitrag) that is paid by the employee. The Zusatzbeitrag ranges from 0.3% to 1.8% depending on your provider.

4. Long-term Care Insurance (Pflegeversicherung)

This statutory insurance is driven by the philosophy that human beings are unable to control everything and as such it is difficult to predetermine the future. Therefore, human beings will always need care at the end.

This form of insurance offers coverage against the consequences of a need for care. What a need for care means and who needs care is clearly defined by statute. Statutory long-term care insurance is structured as “uniform insurance” with uniform benefits and no differences in the contribution rate. The contributions are made equally by employees and employers. Employees without children contribute more.

5. Statutory Accident Insurance (Unfallversicherung) 

This has existed since 1884 and is carried out by the professional trade cooperatives, the agricultural professional association and the accident insurance authorities of the public sector (accident coffers, state accident funds, municipal accident insurance associations). It is mandatory for employees in Germany.

The insurer is the relevant occupational insurance association in each case. It covers all benefits of an insured event (work-related or commuting accident as well as occupational disease) worldwide up to the statutory limits. This means that it absorbs the costs of medical care and treatment (physician and clinic costs) and pays benefits for occupational injuries and transitional benefits as well as disability and survivor pensions.

The following are protected by statutory accident insurance:

• Farmers,
• Children in child day care centers or with suitable day care staff,
• Students,
• Helpers in case of accidents,
• Civil protection and disaster relief workers,
• Blood and organ donors,
• Home caregivers,
• A certain category of volunteers as statutorily defined.

More details in regard to social insurance can be found here.