The ongoing COVID-19 pandemic has brought increased levels of stress, anxiety, and depression in many people around the world. Our latest study investigates who may be at greater risk for these psychosocial burdens in order to accurately develop prevention and treatment measures for mental health issues. We investigated two risk groups within the German population: those who were at greater risk of exposure to the virus, and those who were at a higher risk for a poorer prognosis should they contract it. Our results indicated that those belonging to the first risk group were more susceptible to impaired sleep and daytime functioning by the mediating effect of COVID-19-related anxiety. However, greater perceived knowledge about the virus moderated the effect, serving as a buffer to anxiety and stress. Therefore, providing clear, accurate information on prevention and treatment of the virus can serve to reduce anxiety levels and improve sleep, both of which are essential for general well-being.