🌈 A quick taster for you:
- The idea of insurance was developed out of a desire for solidarity.
- You can insure pretty much everything and anything.
- Health insurance and liability insurance are the two must-haves.
🧐 Why do I care?
- There are a couple of types of insurance that you do need to have.
Insurance companies exist to offer you security and peace of mind. But there are an infinite amount of policies to choose from — some are mandatory, some are must-haves, others are completely up to you. All this choice can feel confusing, so we’re here to explain how insurance works, and which ones you really need.
🔍 What exactly is happening here?
- How does insurance work?
The concept of insurance dates back to the Middle Ages. At that time, houses and huts in villages regularly burned down, leaving the people living there facing financial ruin. In need of a solution, public institutions were created — people regularly paid them small amounts of money, and the institution guaranteed that they’d cover any rebuilding costs. Of course, sometimes the person paid their money and their house never burned down! But, if their home did burn down, then the costs of rebuilding it were covered, even if the fire happened in the first year of being insured. This solidarity is the principle behind insurance policies. And it essentially still works the same way today, albeit in a more complicated fashion.
- What can I insure?
Today, you can insure anything and everything.... so long as an insurance company makes you an offer. But the goal of these companies is no longer pure solidarity, but to make money. Which isn’t so surprising, is it? That's why they no longer say: okay, if you have a house, then that’s X amount every month. Nope. Instead, insurance companies will estimate exactly how likely it is that your house will burn down and then they’ll set the monthly costs accordingly. And the more likely they deem the risk, the higher the sum you’ll have to pay.
- We promise you that we’ll now stop talking about houses! Because you can replace "house" with anything that belongs to you... the principle remains the same. For example, when it comes to your health, disability insurance will look at how old you are, how healthy you are, and what job you have — and these factors determine your risk, which in turn determines the cost of your insurance. Jennifer Lopez even had her butt insured, but exactly how the risk was determined is left to your imagination.
The two most important types of insurance!
- Health insurance.
In Germany, everyone has to have health insurance. So, this is one of the mandatory ones. Nothing is as important, or as valuable, as your health! And, if you do get sick, then your health insurance covers 100% of the costs involved e.g. examinations or hospital stays, both of which can be extremely expensive.
Remember: from the age of 25 you’re no longer covered on your parents’ health insurance so you must insure yourself! Because health insurance is mandatory by law in Germany, the prices between different providers tend to be pretty similar. But do take a look at the respective bonus programs. For example, there are health insurance policies that cover teeth cleaning, or which pay you a bonus at the end of the year if you have demonstrably done something good for your health, e.g. joined a gym.
Another important point: Your health insurance is only valid in Germany, so if you’re going travelling outside the EU you should take out additional international health insurance. This is generally inexpensive and can be organised at short notice.
- Private liability insurance.
This is not compulsory, but it is a must-have. It covers you if you accidentally cause damage to someone else, whether that's damage to their property or a personal injury — so long as no crime has been committed of course! You’re holding your mate’s phone and accidentally drop it? No worries. Your private liability insurance will cover the costs. Of course a phone would only be a small claim, but some damages can run up to massive costs. So it's wise to have this insurance as it only costs you a small amount per year.
Keep in mind: After the age of 25, or at the end of any vocational training (apprenticeship or studying), you’ll no longer be covered on your parents’ health insurance and so you must insure yourself!
🤓 What does this mean for me?
- Which types of insurance should I have?
Find out which types of insurance make sense for you, and which ones don’t. There are always moments in life when it’s a good idea to get some additional insurance — such as when you start a career, or have your first child. So talk to your friends about what types of insurance they have, and always remember that insurance is ultimately there to help you get financial support when you need it.