The absence from work due to sickness over a longer period of time, can have drastic impact on the financial situation of insured persons. Self-employed persons with private health insurance do not get continued wages or coverage when having to stop work due to illness. In order to protect against the loss of income due to illnesses for a longer period of time, self-employed and freelancers should take out a private daily sickness allowance insurance.
Persons insured under the public health insurance, also referred to as statutory insurance, receive sick-pay (unless they pay reduced contribution rates). They can also choose to take out a voluntary private supplementary insurance specifically to receive additional sickness benefits.
Unemployed persons do not need to take out specific insurance to cover daily sickness allowance. Any sick-pay insurance is always linked to and calculated based on your income.
Short Term Incapacity to Work – Arbeitunfähigkeit (AU)
Daily sickness allowance is applicable in the case you are deemed unable to work for a short period of time. A short time is usually anywhere between 6 weeks and 18 months. The German law states that employees are entitle to receive your full salary for up to 6-weeks from their employer, after this the daily sickness allowance is paid by your public health insurance company. This is not applicable for those paying a reduced contribution rate of 14% (which does not include daily sickness allowance).
Long Term Incapacity to Work – Berufsunfähigkeit (BU)
A long term incapacity to work generally applies in case of serious injuries or permanent illnesses affecting your ability to work. This is considered an occupational disability and is not covered by daily sickness allowances. In these cases, one will either receive a small amount from the social welfare fund or alternatively, private disability pensions can be obtained from private health insurance providers in Germany.
Financial Gaps Are Often Underestimated During Prolonged Illness
Similar to those covered by private health insurance in Germany, those that are voluntarily insured in the public health insurance on a reduced contribution rate (14% during 2020), are also not covered for daily sickness allowances.
However, for those compulsory insured in public health insurance, financial difficulties may still arise in the event of prolonged sickness. The main reason for this is that sick pay is calculated at a maximum of 70% of your gross income or 90% of your net income. With this in mind, it may be wise to make up for the income gap during prolonged sickness with a supplemental private daily sickness benefits insurance.
Example Calculation of the Shortfall in Coverage
|Types of Insured||Sick-pay Eligibility||Net Income||Sickness benefit (after deduction of social security)||Shortfall in coverage|
|Employees in Public Health Insurance||Yes||€1,500||€1,169.63||€330.37|
|Employees and voluntary insured with reduced contribution rate (14%)||No||€3,000||–||€3,000|
|Employees and voluntary with full contribution rate (14.6%)||Yes||€3,000||€2,375.33||€624.67|
|Insured with private health insurance||No||€3,200||–||€3,200|
The Difference Between Private and Public Daily Sickness Allowance
The most important thing to know for self-employed persons who are publicly insured is that the daily sickness allowance is capped at €90 per day. This could mean a major difference in income if you earn €5,000 per month. The sickness allowance also stops after being unable to work for more than 78 weeks.
There is also a cap related to Income Contributions Assessment Ceiling, so high earners should be very mindful when choosing to be insured publicly. The assessment ceiling of €54,450 gross per year (during 2020) means you will only be eligible to receive up to 70% of that gross income, or 90% of the net income up to the assessment ceiling.
It is also important to note that although you can change public sickness funds, you are usually locked in for a sickness policy for 3 years at a time.
Private health insurance companies have much greater flexibility. Your waiting time could be as little as 1 or 2 weeks after you get injured or become ill. But more importantly for high earners, the private daily sickness allowance can be adjusted to your actual net income, without any cap.
Daily Sickness Allowance is Tax-Free
Opposed to the statutory public sickness benefit, the daily sickness benefit is not taxable. It is a tax-free benefit and is not subject to the progression of the proviso. It does not increase your income tax rate and doesn’t even have to be specified in the tax return.
The exception to this is for directors of a GmbH company. If the daily sickness benefit contributions are deducted as a business expense, the daily sickness benefits received are taxable income of the company.
Requirements for Receiving Daily Sickness Allowance
Various requirements must be met in order to receive daily sickness allowance benefits. One of the important requirement is that the insured person is being treated by a resident doctor (or dentist), or as an inpatient in a hospital for the duration of the incapacity to work. Additionally, the duration and reason for the absence form work must be certified by a doctor.
Benefit Duration and Adjustment of Calculation
The start of the private sickness allowance benefits can be selected. However, the sooner you receive benefits when becoming ill, the more expensive your contributions will be. The amount of the daily sickness allowance can be determined by you, but the higher the benefits the higher the contributions apply.
It is important to note that when calculating the daily sickness allowance, it can not exceed the net income prior to the incapacity to work. This includes injury benefits, transition allowance and other benefits.
Since the calculation for the daily sickness allowance benefits is based on the net income during the 12 months prior to the incapacity to work, it is always important to notify the insurance company in changes of income so your daily sickness allowance contributions reflect your current income (and thus also your contribution payments).
If your net income increases, the daily sickness allowance can generally be adjusted accordingly. Most insurance companies adjust the sickness allowance benefit every three years. This is also to account for income trends and inflation over time.
Calculation Adjustments In Case of Irregular Income
Although insurance companies generally adjust for salary fluctuations to reflect and base the daily sickness allowance on the persons income, it is not allowed to reduce the daily sickness allowance once they are claimed. This applies in the event of a claim arising where the contributions reflect a higher allowance than the current income because it was not adjusted.
This means that self-employed persons and freelancers with an irregular income will receive their daily sickness allowance accordingly, regardless of a lower income than foreseen.
Daily Sickness Allowance without Medical Examinations
Generally, all applicants must submit a health examination by a doctor before being accepted by private health insurance companies. It is, however, possible to get daily sickness benefits insurance without examinations, but these are often more expensive, have more exclusions (coverage gaps) and include longer waiting until benefits are received when becoming long term ill.
No Sickness Benefit Entitlements for Sick Children
Persons with private health insurance in Germany also have to keep in mind that they are not entitled to daily sickness benefits in case of caring for a sick child. In the case of parents where only one of them has private insurance, sickness benefits are only applicable if the child is assigned to the public health insurance of the other parent (family insurance).
Employees and those who are members of the public health insurance in Germany have the right to stay at home temporary with full pay to care for children.