An occupational disability policy [Erwerbsunfähigkeit] covers the insured against a disease, an accident or cachexia [lack of energy] that incapacitates him to such a degree that it is foreseeable that for at least six consecutive months he will be unable to work three hours per day. There may be a waiting period, which can be several years. If on the basis of a medical examination it is impossible to predict the duration of the insured’s disability, the insurer will take into consideration how long the claimant has already been unable to work. In this case, the trigger for occupational disability [OD] is the need for nursing care [Pflegebedürftigkeit], and if there is the prospect that for six consecutive months the insured will not be able to perform one or two of six activities of daily living [ADL] – depending on the policy – the claim will be admitted. Some policies also cover mental illness and dementia.
The benefit is paid in the form of an annuity, which may be indexed and ceases if the insured recovers. Many policies offer a sum of money – usually capped at Euro 10,000 – for reintegration support on recovery, provided the benefit has been paid for at least three years and the policy has at least five more years to run. Some providers include a variety of bells and whistles, which include a range of assistance benefits, critical illness cover [dread disease] and options to raise the sum insured on significant positive life changing events, such as marriage, the birth of a child or promotion.
Unlike many other insurance markets, in Germany there is no total and permanent disability policy [TPD] that pays out a lump sum for disablement so serious that the insured would be unable to pursue any gainful employment for the rest of his life. On the face of it, this is surprising, because in countries where this type of policy is available, it is taken out as a cheaper alternative to income protection insurance [Berufsunfähigkeitsversicherung]. The difference in price is not only due to the highly restrictive claim definition, but also because after a claim has been accepted and the sum insured paid out, the insurer has no further administration. A possible reason why German insurers are unwilling to provide a lump sum benefit for TPD is that they find an annuity, even one that ceases at the retirement age, more appropriate for disability policies.