How does a Direktversicherung through your employer work?

Figures for 2026 and typical amounts for a Direktversicherung funded by salary conversion.

Three parties: your employer signs the contract with a life insurer, you are the insured person, and the benefit goes to you or your survivors. This is called the right of benefit, Bezugsrecht.

It is usually paid through salary conversion, Entgeltumwandlung: part of your gross pay is not paid out but goes into the contract. If your employer pays extra from its own pocket, that goes into the same contract.

What you convert yourself belongs to you from the first month. The law requires an irrevocable right of benefit, so the employer may neither borrow against nor assign the contract. If only the employer pays, your claim is secure once the promise has existed for three years and you are at least 21.

While saving, your gross pay drops by the converted amount. No wage tax is due on it, and up to 338 euros a month no social charges either. That is why a 200 euro contribution usually costs you only a little more than half in net pay.

In retirement it turns around. The pension is taxed at your personal rate, and members of statutory health insurance pay the full health and care contribution, together about 21 percent. In 2026 the first 197.75 euros a month are free of health contributions, but not of care.

The numbers work well if the employer gives more than the minimum and costs are low. They are tight or negative if the contract is expensive and you face high deductions in retirement.

A Direktversicherung is an insurance contract with acquisition and administration costs. A reduction in return of 1.0 to 2.5 percent a year is common. Over 30 years one percentage point easily adds up to a five figure amount.

The guaranteed rate for new contracts has been at most 1.0 percent since 2025. Many tariffs guarantee only part of the contributions and invest the rest in funds. More guarantee usually means less chance of return.

Ask for the effective costs in percent and the costs in euros. Your employer may choose the provider, but you may see the figures before you sign.

If you change jobs, you can demand within one year that the value be transferred to the new employer, as long as it does not exceed the pension insurance contribution ceiling. Often the new employer simply takes over the contract.

If not, you have two options: the contract rests without contributions until retirement, or you continue paying privately from net pay. Paid privately, the tax advantage is lost, but no health contribution is due on that part later.

Before retirement age you generally cannot reach the converted money. Cancelling and cashing out is largely excluded by law. A Direktversicherung is therefore no emergency fund.

If your employer only adds the mandatory 15 percent, the tariff is expensive and you want to stay flexible, your own savings plan from net pay can be equivalent, without deductions in retirement.

With only a few years left until retirement, a very low income with little tax saved, or if you plan to retire with private health insurance, the picture changes each time. Have the figures shown for your case.