Social insurance is a legally prescribed insurance system. Consequently, every citizen of the Federal Republic of Germany is obliged to take advantage of this comprehensive insurance coverage.
The most important facts in brief
Social insurance is mandatory for every citizen in Germany.
It protects citizens against financial risks and ensures an adequate standard of living.
The social insurance system in Germany is based on the principle of solidarity.
It consists of five insurance branches: Health, pension, accident, long-term care and unemployment insurance.
Social insurance: Comprehensive protection for more than 200 yearsThe statutory social insurance has been in existence since 1883, when Reich Chancellor Otto von Bismarck introduced the insurance step by step to prevent social unrest. The purpose of this policy is to protect citizens against the most important risks of life and to maintain their standard of living even in emergencies. Since such existentially threatening emergency situations often result from illness, need for care, occupational accidents, unemployment or old age, social insurance benefits provide protection against precisely these risks. Compulsory insurance for employeesOne of the basic principles on which social insurance is based is compulsory insurance. Employees are generally subject to compulsory insurance and must take out policies in the various branches of social insurance. However, exceptions also apply, for example, to the self-employed, civil servants, freelancers, marginally employed persons and soldiers.Employees who are subject to compulsory social insurance share half of the social insurance contributions with the employer for most types of insurance. Compulsory insurance ensures that even socially disadvantaged citizens have comprehensive insurance coverage. In addition, policies must not discriminate against individual members because of their high health risk, for example.The five pillars of German social insuranceThe German social system is one of the most powerful social systems in the world for good reason.
The reason for this is the versatility of social insurance, which can be broken down into the following five insurance branches:
Long-term care insurance
Health insuranceHealth insurance guarantees insured persons partial or complete reimbursement of the costs of medical treatment. The so-called benefit-in-kind principle applies to the statutory health insurance, as it provides benefits in kind, such as medicines and bandages. Every citizen of the Federal Republic of Germany is obliged to be a member of a health insurance fund. In the case of statutory health insurance, the amount of contribution depends on income and not on the age or state of health of the insured person. Employees whose income exceeds the compulsory insurance limit are no longer compulsorily insured by law and can switch to private health insurance.
However, this is not part of the social security system. Anyone who is a member of the statutory health insurance scheme can also insure family members free of charge if they are not themselves subject to compulsory insurance.Pension insuranceThe statutory pension insurance scheme in Germany protects insured persons against reduced earning capacity in old age and also provides for surviving dependents in the form of orphans’ and widows’ pensions in the event of death. An intergenerational contract regulates the financing of benefits.
Thus, the generation of current employees subject to social insurance contributions finances the pensions of current retirees. In this way, they earn their later pension entitlement, which exists after a statutory minimum insurance period.
However, due to the advancing demographic change in Germany, the level of pensions is increasingly decreasing, which is why many citizens choose to take out additional private pension insurance. Accident insuranceIn contrast to all other insurance lines of social insurance, the employer completely finances the statutory accident insurance. This policy is designed to mitigate financial risk in the event of an accident at work or occupational disease, and to restore the employee’s earning capacity with comprehensive health care. The amount of the contribution that the employer must pay is based on the risk potential of the relevant occupation. Professional associations decide on the amount of the rates.