Insurance broker / Insurance questions / Private pension

What is the difference between private pension insurance and life insurance?

In short

The difference between the two is the purpose. Private pension insurance pays as long as you live and protects you from running out of money in old age. Life insurance pays mainly when you die and protects your family. Pure term cover often costs only 6 to 8 euros a month for a young non-smoker. Endowment policies mix both and are usually the most expensive way to do either job.

Request a quote +49 3375 29 12 77

What is the difference between private pension insurance and life insurance?

What it costs

Published premium examples and legal values in Germany, 2026.

Example	Typical range
Term life, age 25, non-smoker, 200,000 euros, 30 year term	about 6.50 euros a month
Term life, age 30, non-smoker, 200,000 euros, 25 year term	about 7.50 to 8 euros a month
Guaranteed rate on new policies with a savings part	at most 1.0 percent a year
Current total crediting rate on savings parts 2026	about 1.8 to 3.5 percent, on average about 2.6 to 2.7 percent
Taxable income share of the pension	18 percent if starting at 65, 17 percent at 67

Premiums are sample quotes from individual insurers for an office job and no pre-existing conditions; smokers, risky jobs and older ages pay considerably more.

Crediting rates are forecasts, not guaranteed.

This is general information, not tax advice.

As of October 2026.

Worked example

Couple, both 35, one child, mortgage of 250,000 euros

How to solve the two risks separately instead of packing them into one expensive combined policy.

Risk 1: one parent dies early	term life insurance for the loan amount, running until it is repaid
Premium for this	usually a low double digit amount a month per person
Risk 2: not enough money in retirement	your own retirement plan, such as pension insurance or a fund savings plan
Endowment policy instead	much higher premium, often a smaller death benefit

Kept separate, you get a death benefit that really covers the family and you can choose your retirement savings freely. Actual premiums depend on age, health and occupation; the premium in this example is an estimate from quoting practice.

Two contracts for two opposite risks

Private pension insurance is worth more the longer you live. You pay in, and from the start date you receive money every month until you die. The risk it covers is a very long life in which your savings would otherwise run out.

Life insurance turns this around. It pays an agreed sum if the insured person dies. It is meant for a partner, children or a mortgage that depend on your income.

In Germany the word Lebensversicherung is used loosely for both, and pension policies are sold by life insurers too. What matters is the wording in your policy: a pension for life, or a sum on death. If you come from the UK or the US, a German Rentenversicherung is close to an annuity, a Risikolebensversicherung is term life.

	Private pension insurance	Term life insurance	Endowment policy
Pays when	you reach the pension start date	you die during the term	you die or the policy matures
Benefit	monthly pension for life, often with a lump sum option	fixed sum to your beneficiaries	sum plus bonuses
Savings part	yes	no	yes
Premium	high, because you save	low	high
Suits	a gap in retirement income	family, mortgage	rarely the best choice

How both are taxed in Germany

If you take the private pension as monthly payments, only the so called income share (Ertragsanteil) is taxed. It depends on your age when payments start: 18 percent of the pension at 65, 17 percent at 67.

If you take the capital in one go, the endowment rule applies. If the policy ran for at least 12 years and you are at least 62 when paid, only half of the gain is taxed at your personal rate. Otherwise the full gain is subject to the 25 percent flat tax on investment income, plus solidarity surcharge and church tax if you pay it.

A payout from term life insurance is not subject to income tax. It can trigger inheritance tax if the policyholder and beneficiary are badly chosen. Unmarried couples therefore often insure each other crosswise, each owning the policy on the other's life.

Why endowment policies rarely fit

They combine saving and death cover in one contract. That sounds convenient, but the death benefit is usually smaller than a family needs, and the savings part carries costs and a guaranteed rate of at most 1.0 percent.

If you want to protect dependants and save for retirement, a cheap term policy plus a separate retirement plan is often the better deal. You can then adjust or end each part on its own.

Old policies with a high guaranteed rate are a different case. Cancelling them often costs money and guarantees that no longer exist. Have them checked before you act.

When you need neither

You do not need term life insurance if nobody depends on your income and no loan relies on it. Singles without children or debt can skip it.

Private pension insurance is unnecessary if the state pension, a company pension and your own assets cover your needs, or if you invest with discipline yourself and do not need a payment for life. Its real value is the promise to pay until you die, not the return. If you plan to leave Germany for good, check how the contract and its tax treatment work abroad before you sign.

Step by step

Decide which risk you want to cover: early death, a long life, or both.
For early death: add up the loan and the income your family would lose.
For a long life: work out the gap from your annual German pension statement (Renteninformation).
Find your existing policies and check whether they pay a pension or a sum on death.
Get separate quotes for both purposes and compare them with a combined policy.

Checklist

Policy type clear: pension for life or sum on death
Death benefit covers the loan and lost income
Beneficiaries in the policy up to date
Inheritance tax considered for unmarried couples
Guaranteed pension and costs of the pension policy known
Old policies with a high guaranteed rate checked before cancelling

Common mistakes

Choosing an endowment policy to protect the family and ending up with too little death cover
Buying pension insurance when the real need was to protect the mortgage
Cancelling old policies with a high guaranteed rate too quickly
Not updating the beneficiary after separation or marriage

Questions and answers

Frequently asked

Is pension insurance a type of life insurance?

Legally it belongs to life insurance in the broad sense because it depends on the insured person's life. But it pays for survival, not for death.

What happens to my pension insurance if I die?

It depends on the options agreed. Before the start date the paid premiums or the policy value are often paid out; after it only if a guarantee period or capital refund was agreed.

Do I need life insurance without children?

Usually not. Exceptions are a joint loan or a partner who relies on your income.

Can I take my pension insurance as a lump sum?

Many policies allow this through a lump sum option before the start date. The endowment tax rules then apply, and the protection against a very long life is gone.

Which is cheaper, term or endowment?

Term life for pure death cover, because nothing is saved. Young non-smokers often pay under 10 euros a month for 200,000 euros.

Is an old endowment policy still worth keeping?

Policies from times with high guaranteed rates are often valuable. Have the surrender value and guarantee checked before changing anything.

Sources

NAMMERT insurance broker

Request a quote: Private pension

We compare insurers and come back to you, in English. Free; the insurer pays our fee.

1Who is it for?

Personal My company

2Which insurance?

Choose as many as you like. For each one, the details an insurer needs for a quote appear below.

Personal

Business

Please review all my existing policies

3Details

Private pension insurance in Germany

Which type of pension are you interested in? * Year of birth * Employment status in Germany * Planned contribution * Planned retirement age How important is a guarantee? * Existing pension contracts and plans For example a pension from your home country, a German company pension, how long you plan to stay

4Your current policy

Current insurer Policy ends on What matters more to you?

5How can we reach you?

Name * Email * Phone Postcode Town Preferred contact Anything else we should know