Payment protection insurance: the week many people do not know about

Two rules decide almost everything here: the insurance contract may only be concluded one week after the loan agreement, and a voluntary policy does not appear in the effective rate at all.

One week apart — or it is void

Under § 7a (5) of the Insurance Contract Act (VVG), an insurer may only conclude a payment protection insurance contract relating to a general consumer loan agreement if the policyholder made their contractual declaration no earlier than one week after the loan agreement was concluded. The legal consequence is stated right alongside: if the insurer breaches this rule, the payment protection insurance contract is void. So if the loan agreement and the policy were signed at the same appointment, it is worth looking closely at both dates.

• No earlier than one week after the loan agreement
• Applies to general consumer loans
• If breached, the insurance contract is void
• Compare the dates of both contracts

With group contracts you are not without rights

Payment protection insurance is often arranged as group insurance, where the bank is the policyholder and you are only the insured person. That sounds like fewer rights, but it is expressly regulated. § 7d VVG provides that the policyholder of a group contract has the obligations of an insurer towards the insured person — and that the insured person has the rights of a policyholder, in particular the right of withdrawal.

Why the effective rate often does not include the policy

Under § 16 (3) PAngV, the annual percentage rate includes the interest and all other costs that are payable in connection with the loan agreement and known to the lender. Subsection 4 number 2 expressly excludes the costs of insurance and other additional services that are not a condition for granting the loan at all or on the terms offered. Voluntary payment protection insurance therefore lies outside the effective rate. This has an awkward consequence for comparisons: two offers with an identical effective rate can differ in what you actually pay — if one of them comes with a policy on top. So compare the total amount payable including all add-on products, not just the percentage.

• Policy required for the terms offered: included in the effective rate
• Voluntary policy: not included
• Add the premium to the total amount payable separately
• Ask for the price without the policy

Tying ban and what changes from 20 November 2026

Under current law, the lender may already not make an instalment loan conditional on payment protection insurance (§ 492a (1a) BGB). If it also offers the loan without a policy, it may set different terms with and without the policy. The Act transposing the EU Consumer Credit Directive (BGBl. 2026 I No. 139) extends the tying ban for contracts from 20 November 2026 to all other financial products and services (§ 492a (1) BGB). For general consumer loans, § 492b (1a) BGB then only allows the lender to require a payment or savings account whose sole purpose is repayment, providing the funds or serving as additional security.

Two further changes concern how the contract is concluded: if add-on services are offered as a package, the lender must explain whether they can be terminated separately and what the consequences are (§ 491a (3) BGB). And a pre-ticked box is not enough; you must clearly declare that you want the add-on service (§ 492 (1a) BGB). For health questions, the following applies from the same date: a cancer illness whose treatment ended at least 15 years before you made your contractual declaration is not a circumstance you must disclose for payment protection insurance relating to a general consumer loan, and the insurer may not use these data (§ 157 (2) and § 213a VVG).

The questions to ask before signing

Payment protection insurance can make sense if a loss of income would seriously put the loan at risk and no other protection is in place. But it is a separate product with its own terms — and with exclusions that may apply precisely when it matters. So check above all which events are covered at all, which waiting periods and health questions apply, how pre-existing conditions are treated and what the policy costs in total over the term. And ask explicitly for the loan offer without the policy.