Private supplementary care insurance

Supplementary care insurance provides financial security in the event that an individual should be in need of long-term care, as compulsory insurance only covers part of the associated costs. This applies equally to people with statutory and private insurance.

In many cases, a “care gap” arises, which cannot usually be closed by pension benefits alone. The personal contribution towards the costs of outpatient care for care grades 2 and 3 (the grades assigned to most people in need of care) can amount to 1,000 euros or more per month. For residential care, this is usually several thousand euros per month. The care insurance funds’ lists of services and price comparisons provide an overview of the costs associated with care in nursing homes, for example. 

One reputable search portal is the Care Guide (“Pflegelotse”) portal operated by the Association of Substitute Health Insurance Funds (Verband der Ersatzkassen, VDEK). It allows you to search for care facilities and find information about the services and quality standards they offer.

If a person has no other incomings or sufficient assets, supplementary care insurance can, for example, help them avoid a situation in which they have to use their own home to cover the costs of their care or apply for social welfare. Spouses have an obligation to pay support for care costs, while adult children and parents of children in need of care are only obliged to do so if their gross annual income exceeds 100,000 euros.

Three models are available to help people avoid a care gap in older age:

• long-term care daily allowance insurance, including the optional government-subsidized daily allowance for long-term care (under the “Pflege-Bahr” program)
• long-term care cost insurance
• long-term care pension insurance

The costs of these types of insurance depend on the benefits, as well as on the age and health of the individual at the time the insurance policy is taken out – the younger and healthier they are, the lower their contributions will be.

How likely is it that a person will need long-term care in older age?

In principle, any person may need long-term care in older age. However, when and how this need arises depends on the individual.

The likelihood of needing long-term care increases as people age:

• Only 9 percent of people aged 70 to 75 have an assigned care grade.
• This increases to 54 percent among those aged between 85 and 90.
• The figure reaches almost 82 percent for people aged 90 and older. 

More than half of all people in need of long-term care have an assigned care grade of 2 (41%) or 3 (29%), and these are the grades that remain assigned for the longest periods. Only 5% reach the highest care grade of 5. 

According to projections, the average period of time spent in long-term care was 4.3 years for people aged 60 and older in 2019. While women require long-term care later in life than men, the amount of time they spend in care is longer (4.9 years compared to 3.6 years on average).

People with long-term care daily allowance insurance receive an agreed allowance for every day during which they need care. For care grades 1 to 4, this is often paid on a pro-rata basis, while the full rate is usually only paid at care grade 5 (or 4 in some cases).

It is not necessary to keep a record of how the allowance is spent – the person in care is free to spend it as they wish, e.g. to pay towards outpatient care. This flexibility can be important, as most people are cared for at home by loved ones.

This is a type of risk insurance. In other words, the contributions paid are forfeit in the event of death or early cancellation of the contract, or if a need for long-term care never arises. When signing a contract, you should therefore consider the fact that your financial situation may change over the course of your lifetime, e.g. as a result of unemployment or divorce. Make sure that the premiums (i.e. contributions) you are paying are not too high so that you will not be forced into canceling your policy if you temporarily find it difficult to make your payments. Be aware of the fact that your contributions will not remain the same over the term of the contract but will increase.

When taking out this type of insurance at a young age, it is particularly important to consider the effects of inflation in the years to come and to contemplate the dynamic relationship between premiums and benefits. 

What are subsidized contributions to daily allowance insurance (“Pflege-Bahr”)?

Government-subsidized contributions towards a daily allowance insurance for long-term care are an option provided under the “Pflege-Bahr” program. This program seeks to ensure that people are able to take out supplementary insurance for long-term care, even though they may find it very expensive or even impossible to sign a policy contract with providers because of their age or a pre-existing illness. 

The subsidy is available to all adults with compulsory insurance who are not yet in need of care and who contribute at least 10 euros per month towards their insurance. The government subsidy is 5 euros per month and is subject to certain conditions:

• The insurance company must not make the contract dependent on a medical examination of the prospective policyholder – the monthly premiums must be based solely on their age and on the scope of benefits provided. 
• The insurance company must waive its ordinary right of contract termination. However, it may agree a qualifying period of five years, during which it does not pay any benefits.
• If a need for care arises, the classifications applied under the insurance policy must correspond to care grades 1 to 5 used in statutory long-term care insurance (a recognized need for care in accordance with the Eleventh Book of the German Social Code, SGB XI).
• The benefits from the subsidized long-term care daily allowance insurance must not exceed those from statutory long-term care insurance.
• Policies may be temporarily paused if policyholders find themselves in financial need. There must also be an option to terminate the policy with retroactive effect to the date when the financial need initially arose.

Your consumer advice center can provide more information about subsidized daily allowance insurance for long-term care, including details of who would benefit most from this type of insurance and who should seek an alternative option. 

Long-term care cost insurance supplements the benefits of compulsory long-term care insurance when a need for care arises. 

Depending on the level of cover selected, it covers a percentage of the costs that have to be covered by the individual themselves or covers all of these costs up to a specified maximum amount. This means that there may still be a shortfall to pay despite having supplementary insurance. 

As with compulsory long-term care insurance, only the costs of nursing care and support are covered. Accordingly, most insurance providers do not cover any costs relating to accommodation and meals in care facilities – and people with care grade 1 often receive no benefits at all.

The policyholder must furnish proof of expenses, which means that the benefits of long-term care cost insurance cannot be used as flexibly as those of long-term care daily allowance insurance.

Long-term care pension insurance is offered as a form of life insurance – if a need for care arises, the insurance provider will pay the agreed long-term care pension for the remainder of the policyholder’s life – ideally supplemented by profit participation.

With this type of supplementary insurance, the premiums do not generally increase. However, the scope of benefits is defined at the start of the policy contract and only changes if dynamic adjustment is agreed.

Once the policyholder has been assessed as having a need for care with a care grade of 2 or higher, insurance providers are not usually required to pay additional benefits. Usually, however, the amount of the monthly long-term care pension is based on the care grade, and so the full amount is only paid as of care grade 4 or 5. Under certain circumstances, policyholders with a lower care grade may only receive a portion of the long-term care pension or none at all, depending on what has been contractually agreed. This also applies if they are staying in a nursing home.

The premiums serve to create capital, which can then be made available to surviving relatives of the policyholder in the event of their death, depending on the terms of the contract. The contract can be terminated or, in the event of financial difficulties, it can be paused without the premiums that have already been paid being entirely lost. 

The insurance premiums are generally much higher than those with other types of supplementary care insurance. 

Private supplementary care insurance is a long-term financial commitment with an uncertain value – if a need for care never arises, there is simply no payout of benefits in the case of long-term care daily allowance insurance and long-term care cost insurance. 

In order to decide whether it makes financial sense to take out private supplementary care insurance, it is essential to first gain an overview of the income and expenses that are to be expected in older age: 

• How much do you expect your retirement pension to be?
• Do you have any other income, e.g. from letting and leasing?
• Do you own your own home? Is your home suitable for living in as an older person or can it be renovated to be fully accessible to allow you to live there independently for as long as possible?
• Do you have any financial investments or do you have an endowment life insurance or pension insurance policy?
• Is it possible to save some money each month in a publicly accessible retirement fund?
• Will you be in a position to continue paying premiums for private supplementary care insurance – potentially beyond retirement age and when you are already in need of care? Consider that the contributions to be made may increase significantly over time.
• Have you already taken out other, more important insurance policies? These may include personal liability insurance and occupational disability insurance, as well as house and contents insurance or residential building insurance.

If income and savings are likely to be sufficient to close the “care gap” if a need for care arises in the future, independent experts agree that this is the preferable solution. 

It’s no simple task for young people to predict how their career and life in general will unfold, what their financial circumstances will look like in older age and how the premiums to be paid for supplementary insurance may change. For this reason, consumer advice centers generally do not recommend that people under the age of 50 take out supplementary care insurance. 

For advice on various retirement planning options where the amounts saved are not linked to a need for care, or for help with questions relating to contracts, consult your consumer advice center.

If you want to ensure greater security for your possible future care needs, it is worthwhile comparing several insurance providers and the terms and conditions they offer, as premiums and benefits can differ widely between one provider and the next. 

Particular attention should be paid to the following criteria to avoid unwelcome surprises at a later stage:

• Is there a qualifying/waiting period during which no benefits are paid?
• Does the insurance also cover care provided at home by loved ones?
• Which minimum care grade is required in order to qualify for benefits? What is the value of the benefits paid for lower care grades?
• As of which care grade does an exemption from contributions apply?
• Are benefits and premiums dynamically adjusted?
• Is there a right of termination or an option to pause premiums for a certain period of time?
• Is the need for care classified using the same criteria as those applied to compulsory long-term care insurance?
• How and within which time-frame are benefits to be claimed from the insurance provider if a need for care arises? 
  
  

A brochure published by the German Association of Private Health Insurers (Verband der Privaten Krankenversicherung e. V.) discusses the things that consumers should watch out for when seeking to take out supplementary care insurance.

Insurance companies may differ widely in terms of the level of cover they offer and the terms and conditions of their contracts, and it can be difficult to make sense of all the details. 

A good place to start when looking for objective advice is your consumer advice center or an independent insurance advisor. 

The website of the Center for Quality in Care Foundation (Stiftung Zentrum Qualität in der Pflege) offers a database of advice centers in your area. 

For an initial phone consultation, as well as face-to-face and written advice, contact the insurance advice service of your customer advice center.

The Federal Association of Insurance Advisors (Bundesverband der Versicherungsberater e.V., BVVB) offers independent advice in return for a fee.