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Life Insurance in Spain: The Complete Guide for Expats

You're planning your move to Spain and wondering what will happen to your German life insurance policy, whether you need a new one, and how accident insurance works on the island. The good news is that the Spanish insurance market offers suitable products for life insurance in Spain for expats and German-speaking brokers know the pitfalls. The less good news: an existing German policy can become a source of problems — through residency clauses or tax shifts — without you noticing straight away. This guide explains what happens to existing policies when you move, what products the Spanish market offers, how accident insurance works here, what you need to be aware of from a tax perspective, and where the most common mistakes lie.

Life Insurance in Spain: A Guide for Expats

Would you like a thorough review of your insurance situation before you move?

What happens to your German life insurance when you emigrate?

The first instinct of many expats is: "I'll simply keep everything as it is." With life insurance, this sometimes works — but not always. The crucial point is the residency clause in the policy. Many German policies require the policyholder to have their habitual residence in Germany, the EU, or at least the EEA. Since Spain is an EU member state, an existing policy generally remains valid when you move from Germany to Mallorca — but you should have the exact wording in your policy terms checked carefully.

Two scenarios become more critical:

  1. Endowment life insurance policies with a savings component — different tax rules apply as soon as you are liable to tax in Spain (→ see "Tax implications" below for more details).
  2. Income protection insurance (Berufsunfähigkeitsversicherung) — strictly speaking, this is not a life insurance policy, but it is often combined with one; the conditions for claiming benefits may change if the occupational profile no longer applies abroad.

Please note: Anyone who is considered tax-resident in Spain (generally after more than 183 days of residence per calendar year) must pay Spanish tax on payouts from a German endowment life insurance policy. The German rules on half-taxation after twelve years no longer apply automatically.

Term life insurance in Spain: products and providers

In the Spanish market, term life insurance is known as "seguro de vida de riesgo" or simply "seguro de vida temporal". It works in essentially the same way as in Germany: you pay a monthly or annual premium, and in the event of death — or, with certain policies, disability — the nominated beneficiary receives the agreed lump sum.

German-speaking insurance brokers have been active on Mallorca and throughout Spain for many years, comparing the offerings of the major Spanish insurers on your behalf. Among the providers on Mallorca known for specialising in expats are the following:

Broker / Provider Specialisation Contact point
Iberia Versicherungsmakler Mallorca / Balearic Islands Palma de Mallorca
Bohemia Mallorca Term life & accident insurance Mallorca Mallorca
C1 Broker All of Spain, expat specialist Canary Islands / nationwide
Göring Versicherungsmakler Spain, multilingual Spain
INOV Expat All of Spain, multilingual Barcelona and others

Important: These brokers operate independently and compare multiple insurers — this is generally preferable to taking out a policy directly through a bank (more on that shortly).

Typical cover components of a Spanish term life insurance policy

Component Meaning
Muerte (Tod) Core benefit: lump-sum payment to beneficiaries upon death
Invalidez absoluta y permanente Payout in the event of total and permanent incapacity to work
Enfermedades graves Early payout upon diagnosis of a serious or terminal illness
Doble capital accidente Double the sum insured in the event of accidental death
Repatriation Coverage of costs for repatriation of the deceased

Mortgage protection insurance: compulsory when buying property in Spain?

If you are buying a property in Mallorca or elsewhere in Spain with a mortgage, the financing bank will in practice frequently require proof of a term life insurance policy as additional loan security. This is not a statutory requirement, but many banks impose it as a contractual condition.

Please note: In Spain you are not obliged to take out the insurance with the bank itself. You can take out a separate policy with an independent broker — this is generally cheaper and offers better terms. The bank must accept it, provided the sum insured and the term meet their requirements.

According to German-speaking expat brokers in Spain, taking out a policy directly with an independent insurance broker is in many cases cheaper than the bank's own product. Specific premium examples can vary considerably depending on age, state of health, and the sum required — make sure you obtain several quotes.

Accident insurance in Spain: what it covers and who needs it

Accident insurance (in Spanish: seguro de accidentes) is voluntary in Spain — but it is particularly relevant for certain groups:

  • Self-employed individuals (autónomos): Anyone working in Spain as self-employed does have access to the social security system, but the statutory benefits in the event of an accident are limited depending on contribution status. A private accident insurance policy can close this gap.
  • Retirees and older emigrants: Those who are no longer in employment frequently have no automatic cover for everyday accidents outside of working life.
  • Sports enthusiasts and active leisure users: Mallorca is well known for cycling, water sports, and hiking — all activities with an elevated risk of accident that some basic policies exclude.

Typical areas of cover under a Spanish accident insurance policy

Area of cover Explanation
Death by accident Lump-sum payment to beneficiaries
Permanent disability due to accident Lump-sum payment according to degree of impairment
Hospitalisation following an accident Daily allowance or reimbursement of costs
Rescue and recovery costs Air rescue, mountain rescue (particularly relevant on Mallorca)
Repatriation Repatriation to the home country

Bohemia Mallorca, Iberia Versicherungsmakler and other locally based brokers offer accident insurance policies specifically for expats resident in Spain – with German-speaking contacts and claims handling in German.

Tax implications: what you need to know as a resident

This is the area that catches most expats off guard – and it can have significant tax consequences.

Term life insurance: inheritance and gift tax

If the policyholder dies and the policy pays out to a beneficiary, Spain levies inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones). The Balearic Islands have their own specific rules in this regard, which may differ from those of other regions.

Please note: In Spain, the death benefit from a life insurance policy forms part of the taxable estate or gift tax base – this differs from Germany, where a death benefit is often tax-free. Have this assessed by a tax adviser on a case-by-case basis.

Whole-of-life / endowment insurance: IRPF relevance

Anyone who, as a resident in Spain, receives a payout from a German endowment or whole-of-life insurance policy – whether as a lump sum or as an annuity – must declare this in the Spanish income tax return (IRPF). The precise tax treatment depends on the structure of the contract and the date it was taken out. Be sure to clarify this with a tax adviser who specialises in expats before you accept the payout.

More on IRPF deductions and tax particularities in the Balearic Islands: IRPF-Abzüge Balearen

Modelo 720: reporting obligation for foreign policies?

Endowment or whole-of-life insurance policies with a surrender value held with a foreign company may fall within the Modelo 720 reporting obligation if the total value of foreign assets exceeds 50,000 euros. The precise rules have changed in recent years – check the current position with a tax adviser.Modelo 720 Meldepflicht

Taking out term life insurance through your bank: a costly mistake?

Many expats, when purchasing a property with a mortgage, simply take out the life insurance policy directly through the bank – because it is convenient and the bank insists on it. This has two drawbacks:

  1. Price: According to expat brokers in Spain, bank-tied life insurance policies are in many cases more expensive than freely negotiated contracts with independent insurers.
  2. Flexibility: A bank contract is often linked to the mortgage; you cannot simply continue it upon repayment or remortgaging, nor adapt it to new needs.

The alternative: you ask an independent broker to put together a quote that meets the bank's minimum requirements — and the bank must accept it. In many cases, this can save a considerable amount over the term of the loan.

Funeral expense insurance: the underestimated aspect

Alongside traditional term life insurance, German-speaking brokers in Spain also offer what is known as funeral expense insurance (seguro de decesos). It covers the specific costs of a burial — in Spain often including repatriation to the home country, funeral arrangements, and bureaucratic assistance for the bereaved.

This type of insurance is culturally very widespread in Spain and is expressly recommended by many expat brokers — particularly when the family still lives in Germany and would have to travel a long way in the event of death.

Insurance cover by residency status: resident vs. non-resident

Situation Key consideration
Non-resident (generally fewer than 183 days per year) German policy may be sufficient; Spanish tax rules apply in a limited capacity
EU resident on Mallorca Spanish policy recommended; check German policy for residency clauses
Self-employed (autónomo) Private accident insurance particularly worthwhile for closing coverage gaps
Retiree with S1 form Health insurance covered via S1; life/accident cover required separately
Mortgage buyer Term life or mortgage protection insurance often contractually required

More on residencia and residency status: Residencia Spain
More on the S1 form for retirees: S1 form Spain

Insurance Cover by Residency Status: Non-Resident, EU Resident, autónomo, and Mortgage Buyer Compared

Most common mistakes regarding life insurance and relocating to Spain

The same mistakes come up time and again in the experience of German-speaking insurance brokers:

  1. Never read the residency clause – The policy continues until problems arise when a claim is made.
  2. Banco policy signed blindly – Simply took the bank's product when arranging the mortgage, without any comparison.
  3. Capital life insurance not reviewed for tax implications – Payout occurs without any preparation, followed by a tax back-payment.
  4. No update of beneficiaries – The ex-partner was listed in Germany; this continues to apply in Spain.
  5. Modelo 720 forgotten – Policies with a high surrender value not declared.
  6. Accident insurance dismissed as a luxury – Autónomos in particular underestimate the risk of loss of income due to an accident.
  7. Funeral cost insurance overlooked – In the event of death, costs arise on Mallorca that can overwhelm bereaved relatives in Germany.

What comes next? Your insurance package for Mallorca

Life and accident insurance are just two building blocks. A complete insurance package for emigrants on Mallorca typically includes:

  • Private health insurance – Required for the Residencia as a non-employed person
  • Motor insurance – Compulsory for all vehicles registered in Spain
  • Buildings and contents insurance – Strongly recommended for property owners
  • Liability insurance – In Spain often included in motor or home insurance, but worthwhile as a standalone policy
  • Term life insurance – For those with a mortgage or family responsibilities
  • Accident insurance – Particularly for active individuals and the self-employed
  • Funeral cost insurance – Particularly relevant for emigrants with family in Germany

Further guides:
→ Health Insurance Spain
→ Private Health Insurance Spain Comparison
→ Liability Insurance Spain
→ Taxes as a Resident

Checklist: Life & Accident Insurance When Moving to Spain

Go through these points before your final move:

  • Have your existing German life insurance policy checked for residency clauses
  • Have your endowment life insurance checked with a tax adviser for IRPF/inheritance tax implications
  • Check whether the surrender value falls under the Modelo 720 reporting obligation
  • Update the beneficiaries on all policies
  • When purchasing with a mortgage: obtain an independent quote before signing the bank's contract
  • Take out accident insurance for autónomo work or active leisure pursuits
  • Consider funeral cost insurance (particularly if family remains in Germany)
  • Have your German tax adviser and Spanish tax adviser coordinate with each other

Conclusion

Life insurance when emigrating to Spain is not something that sorts itself out — but it is far from an insurmountable problem. Anyone who checks in good time which German policies can continue, who keeps an eye on any tax shifts, and who does not blindly sign the bank's policy when taking out a mortgage is in a strong position. The Spanish insurance market offers suitable products for every life situation — and thanks to German-speaking brokers on Mallorca and throughout Spain, you do not have to navigate this alone.

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Official Sources

Can I keep my German term life insurance policy after moving to Mallorca?
In many cases yes, as Spain is an EU member state and most German policies cover the EEA. However, you should have the residency clause in your contract checked — some policies require a German place of residence. In the event of a claim, an undisclosed change of residence can cause problems.
Do I need to take out a life insurance policy when buying a property in Mallorca?
It is not a legal requirement. However, many Spanish banks effectively make mortgage approval conditional on a term life or mortgage protection insurance policy. You can take out this policy with an independent broker — this is usually cheaper than the bank's own policy.
How is a payout from a German whole-of-life/endowment insurance policy taxed in Spain?
As a resident in Spain, you must declare payouts from a German endowment insurance policy in the Spanish IRPF. The German rules on half-taxation after twelve years do not automatically apply in Spain. Have this clarified by a tax adviser before the payout.
What is funeral expenses insurance and do I need it in Mallorca?
Funeral expenses insurance (*seguro de decesos*) covers the specific costs of a funeral, often including repatriation. For expats whose family lives in Germany, it is particularly worthwhile — as in the event of death, considerable costs and bureaucratic effort arise when managed from abroad.
Is personal accident insurance compulsory in Spain?
No, it is voluntary. For the self-employed (autónomos), however, it is particularly advisable, as statutory cover can have gaps in the event of certain accidents. Cover is also worthwhile for physically active expats and retirees.
Do I need to declare my Spanish or German life insurance policy via Modelo 720?
Endowment life insurance policies with a surrender value held with foreign companies may fall under the Modelo 720 reporting obligation if the total value of foreign assets exceeds €50,000. Have the current legal position checked by a tax adviser.
Are there German-speaking insurance brokers on Mallorca for life insurance?
Yes. Among others, Iberia Versicherungsmakler (active on Mallorca) and Bohemia Mallorca specialise in expats and offer term life and accident insurance with German-speaking contacts and claims handling in German.
Why is taking out a policy through an independent broker better than going directly through the bank?
An independent broker compares multiple providers and is not tied to any one bank. According to expat brokers in Spain, bank-owned life insurance policies are in many cases more expensive and less flexible than open-market contracts — and the bank must accept a third-party contract if it meets the requirements.