Premium relief plan: how the component makes private health insurance cheaper in old age

Technically, the component is an additional, funded component in your private health insurance contract. The extra cost goes into a savings pot that is calculated and invested like the ageing reserves. In return, the insurer guarantees a fixed monthly premium reduction from the target age, for life and regardless of how the plan premium develops until then.

You choose the amount of the relief yourself and can increase it later. There are no health questions, because the component does not insure a benefit. It only redistributes money. This is exactly what sets it apart from a plan change. It does not make the plan cheaper. It prefinances part of your future premium.

As a rule of thumb, each guaranteed relief of €100 from age 65 costs an extra premium that depends heavily on your entry age (values from experience):

• at 35 years: around €30 per month
• at 45 years: considerably more
• at 55 years: often double the amount for a 35-year-old

The premiums named are guide values.

For employees, the decisive lever applies. The component is part of the health insurance premium under § 257 SGB V. The employer pays half until the maximum employer contribution of €508.59 is reached. If you have not yet reached the cap, you save with half the outlay. If you are above it, you pay the extra cost alone. For tax purposes, the premiums are mostly treated like regular private health insurance premiums in practice, so a large part of them is deductible. The later relief itself is tax-free.

The premium relief plan shares the fate of the ageing reserves, only without their transfer value. If you cancel the component or change insurer, the saved amount goes to the pool of insured people, there is no payout. If you run into financial difficulty, you can usually make the component premium-free or reduce it. This keeps the relief reached up to then in proportion. You cannot access the money early in any case, not even in an emergency.

This commitment is the price of the guarantee, and it defines the target group. The component suits people who stay loyal to their insurer, above all civil servants with a lifelong perspective in private health insurance. It suits self-employed people with uncertain membership in a system less well.

The alternative is simple. You put the same amount into a broad savings plan and use it in retirement to subsidize your premium. On returns, the capital market almost always wins, because the guaranteed interest of the component is deliberately cautious. The component scores in three other places:

• the employer pays half, which no savings plan offers
• the tax deduction of the premiums
• the discipline of the guarantee, which knows neither stock market moods nor the temptation to withdraw

In practice, a combination often works well. A base amount goes through the component as long as the employer contribution covers it, and the rest goes flexibly into the capital market. If you only save on your own, answer the discipline question honestly, because a savings pot raided at 60 does not lower any premium.

In our advice work, we see two recurring mistakes with the premium relief plan. Employees calculate without the employer contribution and reject the component too quickly. And existing clients take it out in their mid-50s, when the extra cost hardly justifies the relief anymore.

We recommend that you treat the decision like an investment. Compare the extra cost after the employer contribution and tax with the guaranteed relief over statistical life expectancy. Next to it, put the savings plan scenario with a realistic return, and only then sign. This calculation takes an hour and decides on a five-figure amount over your lifetime.

Yes, the agreed amount is deducted from the premium that applies then, no matter how high it is. However, it is a fixed amount. If the premium rises sharply, the relief covers a smaller percentage. The component itself can also be subject to premium adjustments.

No, the employer contribution ends when you retire. It is replaced by the subsidy from the pension insurance, which is based on the gross pension and does not increase the relief component. The advantage of the component therefore arises during your working life.

Yes, many insurers allow you to increase it in steps, also later. Each component is calculated at your age at that time. Steps started early are therefore the cheapest, and late increases are more expensive accordingly.