Taxes on life insurance (Lebensversicherung) in Germany
(Besteuerung der Lebensversicherung in Deutschland)
A life insurance policy (Lebensversicherung) is a contract that can provide, depending on its type:
a lump-sum payment in case of death (Versicherung im Todesfall),
a payout if the insured person is still alive at a certain age or date (Erlebensfallversicherung),
or a private retirement / savings plan (Kapitallebensversicherung – capital-forming life insurance).
It is often used as a combination of long-term savings and financial protection for the family.
Yes, but only at the time of payout – when you actually receive money from the policy.
The premiums you pay regularly are generally not directly taxable, and in most modern contracts they are not fully tax-deductible as expenses.
| Type of contract | Taxable? | How is the tax applied? |
|---|---|---|
| Death benefit (Todesfallleistung) | No income tax for beneficiaries | Only relevant for inheritance tax (Erbschaftsteuer) if the estate exceeds tax-free allowances |
| Survival benefit (Erlebensfall) | Yes | Only the profit (gain) is taxable, not the full payout |
| Long-term contract (≥ 12 years + payout after 62) | Yes – but tax-privileged | Income tax applies to 50% only of the profit |
Basic formula:
Total payout – total premiums paid = profit (gain)
So the tax is not charged on the full payout, but only on the amount exceeding the sum of your contributions.
If the following conditions are met together:
| Condition | Tax consequence |
|---|---|
| Contract duration at least 12 years | Only 50% of the profit is taxable |
| Payout after the age of 62 | “Half-income” taxation on the gain |
| Contract has not been previously tax-deducted as special expenses | Avoids double tax benefits |
In that case:
→ Only half of the gain is included in your taxable income in the income tax return (Einkommensteuererklärung).
If the minimum contract duration or age requirement is not fulfilled, the gain is usually treated as capital income and subject to capital gains tax (Kapitalertragsteuer) on the entire profit:
Capital gains tax: 25%,
plus solidarity surcharge,
plus church tax where applicable.
In practice, the effective rate is around 26.375% or more, depending on your church tax status.
For old life insurance policies, especially those:
concluded before 1 January 2005,
fulfilling specific conditions regarding duration (≥ 12 years) and regular premium payments,
and with payout after age 60 in many cases,
the payout may be completely tax-free, both in terms of income tax and capital gains tax (inheritance tax rules may still apply in case of death).
| Type of contract | Tax-deductible? | Notes |
|---|---|---|
| New contracts after 2005 | Generally no | Premiums usually cannot be deducted as special expenses |
| Old contracts before 2005 | Partly yes | Can in some cases be included as Sonderausgaben |
| Retirement-focused contracts (Riester / Rürup) | Yes | Separate, special tax regime with state incentives |
| German term | Arabic meaning |
|---|---|
| Lebensversicherung | التأمين على الحياة |
| Erlebensfall | survival case (still alive at maturity) / حالة البقاء على قيد الحياة |
| Todesfall | death case / حالة الوفاة |
| Kapitallebensversicherung | capital-forming life insurance / تأمين حياة ادخاري |
| Kapitalertragsteuer | capital gains tax / ضريبة الأرباح الرأسمالية |
| Einkommensteuer | income tax / ضريبة الدخل |
| Sonderausgaben | special expenses / نفقات خاصة قابلة للخصم |
When a life insurance policy pays out, only the profit (gain) is taxed, not the total payout.
If the contract runs for at least 12 years and the payout occurs after age 62, income tax is applied to only 50% of the gain, which significantly reduces the tax burden.
The premiums themselves are typically not tax-deductible for modern contracts, with exceptions for some older policies and specific retirement products (Riester, Rürup).
In case of death, the benefit is paid to beneficiaries without income tax, but may be taken into account for inheritance tax (Erbschaftsteuer) if the estate is large enough.
The editorial team of this website endeavours to provide accurate information based on intensive research and multiple sources. Nevertheless, mistakes or incomplete details cannot be ruled out. Therefore, the information in this article should be regarded as an initial orientation only. For binding, up-to-date advice, always consult a qualified tax adviser or the competent authorities.
