The role of basic abilities insurance (GFV)

Basic abilities insurance (Grundfähigkeitsversicherung, GFV) is an important addition in the field of income protection, especially for people who cannot or do not want to take out occupational disability insurance. It provides protection if essential abilities are lost and can thus close financial gaps that arise when an ability needed in everyday life is lost. In view of the current discussions, however, it is crucial to pay attention to the exact design of the basic abilities insurance product and to make sure that it meets your individual protection needs.

What it is about:

A recent ruling by the Bundesgerichtshof (BGH, German Federal Court of Justice) of 11 December 2024 (Az IV ZR 498/21) has sparked discussions about the classification of basic abilities insurance (GFV). The BGH ruled that products such as Axa's Unfall-Kombirente, which include benefits for the loss of basic abilities, serious illnesses and the need for long-term care, are considered property and casualty insurance (Sachversicherungen) and can therefore be terminated with ordinary notice. This raises the question of whether GFVs should also be classified as property and casualty insurance, in which case insurers would have an ordinary right of termination.

Background

Axa had cancelled the accident insurance policies of many policyholders. However, these were not classic accident insurance policies but Unfall-Kombirente policies, a special form of insurance that combines several risks, including:

• accident insurance,
• benefits for the loss of basic abilities (similar to basic abilities insurance),
• cover against serious illnesses (dread disease),
• need for long-term care.

Why was there a court case?

The court case came about because Axa terminated these special combination products with ordinary notice, thereby unilaterally ending the contractual relationship. Affected customers considered this inadmissible, as they assumed that such policies should be treated like life insurance, where ordinary termination by the insurer is not possible.

Point of dispute in court:

• Axa's view: the insurer regarded the Unfall-Kombirente as property and casualty insurance, in which the insurance company has an ordinary right of termination
• Customers' side: the customers argued that the policy was more similar to life insurance or income protection, in which a right of termination by the insurer should be excluded.

The BGH's decision:

The BGH ruled in favour of Axa and confirmed that the Unfall-Kombirente can be classified as property and casualty insurance. Ordinary termination by the insurer is therefore legally permissible.

Significance of this ruling:

The ruling caused uncertainty because it raised the question of whether other products such as basic abilities insurance (GFV) could also be considered property and casualty insurance. In that case, insurers would also have the right to ordinary termination, which would call into question the promise of security these products make.

What KiS does:

We have always pointed out that basic abilities insurance is NOT income protection. In most cases, the insurance also pays out when, in the event of occupational disability, a specific basic ability (for example: smelling, tasting, hearing, walking, etc.) is impaired.
Our product providers all offer basic abilities insurance under the umbrella of life insurance – this is subject to the German Insurance Contract Act (Versicherungsvertragsgesetz), §177 (1). The right of termination for property and casualty insurance therefore does not apply. Exceptions: all basic abilities insurance policies we have taken over. For these, we clarify this on a case-by-case basis Click here for an overview of the matter More information also from Hellberg Versicherungsmakler Click here for the ruling of the Bundesgerichtshof (BGH)

Conclusion

There is no such thing as a jack of all trades. The AXA product was very special because it combined several insurance products – which then led to problems, whereupon the insurer cancelled its customers' contracts. Think about what you need.

It is important to think carefully about the protection you intend to have and to get detailed advice.