# Payment protection on a German loan: do the maths before you sign

> A Restschuldversicherung pays the instalments or the outstanding balance of a loan if the borrower dies, falls ill or loses their job. In Germany it is almost always sold by the lending bank, and it is often expensive for what it does. Since 2025 a bank may no longer sell it in the same breath as a consumer loan.

Quelle/Source: https://www.nammert.com/en/insurance-broker-payment-protection.php  
Updated: 2026-11-05

## Does the bank need me to take payment protection to give me the loan?

As a rule, no. Since 1 January 2025 payment protection on a consumer loan may only be signed at least one week after the loan agreement (section 7a(5) of the Insurance Contract Act, VVG). The waiting period does not apply to mortgages. If a bank does make insurance a condition of the loan, it has to include the cost in the effective interest rate. Do not let anyone rush you: the loan is available without it, and death cover is often cheaper through your own term life policy.

## At a glance

- **What it covers:** death, inability to work, unemployment, alone or as a package
- **Waiting period:** at least one week after the loan agreement, since 1 January 2025 (section 7a(5) VVG)
- **Commission cap:** at most 2.5% of the insured loan amount, since 1 July 2022 (section 50a VAG)
- **Withdrawal:** 14 days, 30 days with death cover, counted from proper notice
- **Typical cost (Finanztip):** roughly 5 to 13% of the loan amount

## Why German payment protection is so often poor value

Payment protection is sold at the very moment someone needs a loan, which is exactly when nobody compares prices. In 2017 BaFin, the German financial regulator, found that insurers paid banks commissions of sometimes more than half of the premium. At the end of 2022 the average was still around 26 per cent of the premium, according to its figures.

The premium is usually a single payment added to the loan, so you pay interest on the insurance as well. Banks rarely include it in the effective rate, because they only have to when the insurance is a condition of the loan. The rate in the offer therefore looks better than the loan really is.

At the end of 2020 Stiftung Warentest, the German consumer testing body, compared the payment protection of 25 lenders on a loan of 10,000 euros over 60 months. Prices varied widely, and no product scored good in all three components. Death cover mostly did well; for inability to work, 17 of the 25 only rated adequate or poor, mainly because benefits stop after a limited period.

## Two rule changes worth knowing

Since 1 July 2022 the commission for arranging payment protection is capped at 2.5 per cent of the insured loan amount (section 50a of the Insurance Supervision Act, VAG). The cap limits what the bank earns, not the premium you pay.

Since 1 January 2025 there is a one week waiting period: on a consumer loan, the insurance may only be signed a week after the loan agreement. The aim is that nobody believes the loan depends on it. Mortgages are excluded. Whether the rule survives is being debated as Germany implements the new EU Consumer Credit Directive.

## Withdrawal: the loan and the policy are linked

You can withdraw from the insurance within 14 days, or usually 30 days if it includes death cover (section 152 VVG). The period only starts once the insurer has given you proper notice of the right. Your loan stays in place.

It also works the other way round. The Federal Court of Justice held in 2009 (XI ZR 45/09) that a loan and its payment protection can form a linked transaction. If you withdraw from the loan, the insurance then falls away as well. If the loan's withdrawal notice fails to mention the link, withdrawal may in some cases still be possible after the deadline. A consumer advice centre or a lawyer can check the paperwork.

## The alternative: your own cover, independent of the loan

For death, a term life policy (Risikolebensversicherung) does the same job, often for a fraction of the price, and it survives refinancing or a change of bank. Against loss of income, disability insurance (Berufsunfähigkeitsversicherung) protects you for decades rather than months.

Unemployment is hard to insure privately, and it is the component you rarely find outside payment protection. It is also where waiting periods, maximum benefit periods and exclusions are tightest. If your job is secure, or you are a civil servant or self employed, you often pay for it without any chance of using it.

## What is covered

- Death of the insured person: the outstanding balance is paid to the bank
- Inability to work: instalments are paid after an initial waiting period
- Involuntary unemployment: instalments are paid for a limited number of months
- Critical illness or accidental death, depending on the policy
- A second borrower, if they are insured in their own right
- Partial refund of the premium on early repayment, under the policy terms

## What is not covered

- Unemployment after you resign or agree to leave
- Unemployment during the waiting period at the start of the policy
- Conditions known or treated before the policy began, depending on the health clause
- Instalments beyond the maximum benefit period
- Loss of income through divorce, short time working or closing a business
- Self employed people and civil servants for the unemployment component, usually excluded

## Who needs it

- Sole or main earners whose family could not carry the instalments without them
- Borrowers who cannot get term life or disability cover for health reasons and read the terms closely
- Anyone with an existing bank policy who wants to know whether withdrawal or cancellation pays off

## Who does not need it

- Small loans that savings could clear if needed
- People who already hold term life and disability cover large enough for the loan
- Civil servants and the self employed, who cannot use the unemployment component

## What it costs

Payment protection is usually a single premium added to the loan. The price follows the loan amount and term, hardly your personal risk, so young and healthy borrowers often pay far more than their risk is worth.

| Example | Typical range |
| --- | --- |
| Consumer loan of 10,000 euros over 60 months, Stiftung Warentest 2020 | around 540 to 1,260 euros for the full term |
| Consumer loans in general, depending on lender and components | around 5 to 13% of the loan amount, per Finanztip |

**What drives the premium:**

- Loan amount and term
- Components chosen: death, inability to work, unemployment
- Age of the insured person
- Single premium added to the loan or regular premium
- One or two insured borrowers

_Ranges from Stiftung Warentest (12/2020) and Finanztip. Your price is only fixed in the quote. Always compare it with a term life policy for the same sum._

## The policy levels on the market

- **Death only:** The balance is cleared on death. The best value component, yet exactly where your own term life policy is usually cheaper.
- **Death and inability to work:** After a waiting period the insurer also pays instalments while you are signed off sick, usually up to a maximum duration. Read these terms most carefully.
- **Death, inability to work, unemployment:** The full package with the highest premium. Unemployment only pays after a waiting period, only if your employer ends the contract and only for a limited number of instalments.

## How to recognise a good policy

| Criterion | Minimum standard | Strong policy | Why it matters |
| --- | --- | --- | --- |
| Benefit period for inability to work | a few months per claim | until the end of the loan term | Limited benefit periods were the main reason for poor test results. |
| Initial waiting period for illness | several months | as short as possible | Until it ends you pay the instalments yourself, often from sick pay below your salary. |
| Waiting period for unemployment | long, from the start of the policy | short and clearly defined | Lose your job soon after signing and you otherwise get nothing. |
| Health clause | blanket exclusion of known conditions for years | health questions at the start, no exclusion afterwards | Blanket clauses exclude exactly the conditions most likely to lead to a claim. |
| Premium structure | single premium added to the loan | regular premium, cancellable monthly | You pay interest on a financed premium, and refunds on cancellation are often calculated tightly. |
| Refund on early repayment | flat rate formula | pro rata to the remaining term | When you refinance you want the unused premium back as fully as possible. |
| Second borrower | only the first borrower insured | both with their own cover | For couples, the income that disappears is often that of the partner who is not insured. |

## Insurers on the German market

Payment protection in Germany is written by a small number of life insurers working closely with banks. We also list term life insurers that offer death cover independent of the loan. This is a market overview, not a statement about which insurers we work with.

- **Credit Life**: credit protection specialist based in Neuss, part of the RheinLand group, sold through banks and retailers
- **R+V**: life insurer of the cooperative banking group, sold through Volksbanken and Raiffeisenbanken
- **Allianz**: life insurer of the Allianz group, agents and brokers
- **Hannoversche**: direct insurer of the VHV group, term life as an alternative
- **CosmosDirekt**: direct insurer of Generali Deutschland, term life as an alternative
- **Dialog**: specialist for biometric risks, sells through brokers
- **EUROPA**: direct insurer from Cologne, part of the SIGNAL IDUNA group

77 insurers supervised by BaFin, the German regulator, are licensed for this class of insurance. (Lebensversicherer). Source: BaFin company database, 2026-09-18; EU insurers without a German office excluded.

## Typical claims and who pays

- **Borrower dies with a balance owing** (the full outstanding balance): This is what every policy is for: the bank receives the balance. A term life policy pays the same to your family and is not tied to the loan.
- **Slipped disc, four months off sick** (several monthly instalments): Only with the inability to work component, and only after the waiting period. You pay the first weeks yourself.
- **Made redundant by the employer** (instalments while out of work): Paid after the waiting period and only for a limited number of instalments. Whatever remains is yours to pay.
- **You resign for a new job** (instalments until the new salary): Resigning or signing a termination agreement is not covered. Even the full package does not pay here.
- **Back problem known beforehand** (instalments while signed off): Many policies exclude conditions treated before the start. The health clause decides whether anything is paid.
- **Separation, one income left** (half the household income): Divorce and separation are not insured events. The only protection is an instalment that fits your income.

## Myth or truth

- „Without payment protection the bank will not give me the loan." ✘ False: since 2025 it may only be signed one week after a consumer loan agreement. If a bank still makes it a condition, the cost has to be included in the effective interest rate.
- „The effective rate in the offer shows the full cost of the loan." ✘ Not necessarily: optional payment protection is not part of the effective rate. To compare two offers, add its price yourself.
- „I can withdraw from the insurance and still keep the loan." ✔ True: the policy has its own right of withdrawal, usually 30 days with death cover, counted from proper notice. The loan continues unchanged.
- „A large part of my premium can end up as commission for the bank." ✔ True: in 2017 BaFin found commissions of sometimes more than half the premium, and still around 26 per cent on average at the end of 2022. Since July 2022 a cap of 2.5 per cent of the insured loan amount applies.
- „If I lose my job, the insurance pays the instalments until the loan is repaid." ✘ False: it pays after a waiting period and usually only for a limited number of months. Resignation is excluded, and the self employed and civil servants often cannot get this component at all.

## Common mistakes

- Assuming the insurance is a condition of the loan
- Looking only at the monthly instalment and missing the financed premium
- Comparing effective rates without adding the insurance
- Insuring unemployment as a civil servant or self employed person
- Letting the withdrawal period pass because the papers are still in a drawer
- Forgetting the old policy when refinancing and not claiming the unused premium

## FAQ

### How much does payment protection cost in Germany?

Finanztip puts it at roughly 5 to 13 per cent of the loan amount. In the Stiftung Warentest comparison (12/2020), cover for a loan of 10,000 euros over 60 months cost around 540 to 1,260 euros depending on the bank. As the premium is usually financed, interest comes on top.

### Is the insurance included in the effective interest rate?

Only if the bank makes it a condition of the loan. If it is optional, its price sits outside the effective rate, and you have to add it yourself to compare two offers fairly.

### Can I withdraw from the insurance and keep the loan?

Yes. The policy has its own right of withdrawal, 14 days or usually 30 days with death cover, counted from proper notice. The loan continues. A financed premium is then set off against the loan.

### What happens to the policy if I withdraw from the loan?

Where the two form a linked transaction, as the Federal Court of Justice confirmed for typical cases in 2009, the insurance ends together with the loan. Whether that applies to your contract depends on the paperwork.

### What is the one week waiting period?

Since 1 January 2025, payment protection on a consumer loan may only be signed at least one week after the loan agreement (section 7a(5) VVG). It does not apply to mortgages.

### What does the commission cap mean for me?

Since July 2022 the commission for arranging the policy is capped at 2.5 per cent of the insured loan amount (section 50a VAG). That limits the bank's earnings. It does not directly cap your premium.

### Does it pay if I resign from my job?

No. The unemployment component only pays if your employer ends the contract and you are registered as unemployed. Resignation, a mutual termination agreement and unemployment during the waiting period are excluded.

### Do I get money back if I repay the loan early?

Usually part of the single premium. Many policies use a flat rate formula, so the refund is lower than the share of the remaining term. When refinancing, it is worth checking the calculation.

### Is term life insurance the better choice?

For death cover, very often. It usually costs less for the same sum, is independent of the loan and survives refinancing. For loss of income, disability insurance offers stronger protection.

### Why use a broker?

Because a bank only offers you its own insurance. We compare it with term life and disability cover, check existing policies for withdrawal or cancellation, and act on your behalf.

## Legal basis and sources

- [Insurance Contract Act (VVG, German)](https://www.gesetze-im-internet.de/vvg_2008/)
- [BaFin company database (licensed insurers)](https://portal.mvp.bafin.de/database/InstInfo/)

## Request quotes

We obtain quotes and come back with a comparison, free of charge. You can write in English. https://www.nammert.com/en/insurance-broker-payment-protection.php#anfrage

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