private, profession, traffic or residental disputes
Legal liability insurance in Germany
Does setting up an insurance to cover legal expenses make sense? “Before the court and on the high seas one is in God’s hands “. No-one knows in advance how a law suit will end. Car drivers or employees can assert their rights without fear of the costs if they have the right expenses insurance coverage at hand. In Germany this is known as “Rechtsschutzversicherung” (a wonderful word to remember for your next game of Scrabble!)
Whether at work, in traffic or amongst your neighbors, wherever people encounter each other, differences of opinion or even heated quarrels can quickly arise. Before you know it, you can find yourself facing legal action. And that is not only annoying but can also quickly become expensive. Alongside the fees of your lawyer, various other costs can also be accrued, such as for the court fees itself as well as for any required legal experts, referees and witnesses.
In contrast, those who have effective legal expenses insurance are well positioned – not only in legal but also in financial terms. The legal expenses insurance assumes for you the costs of a legal dispute, so that you don’t have to worry about the financial aspects in addition to the irritating legal altercation itself.
Having such an insurance and letting the other side in a quarrel know that you have it at the ready can often already help to reduce the risk of a legal dispute being taken to court, a mediation out of court can then become a much easier solution for both sides, saving you time and stress.
What does a legal insurance cover?
This insurance covers the legal costs you incur in disputes in the insured legal areas. You can choose between different contract packages:
- Private legal protection: dispute with neighbour or phone company for example
- Professional legal protection: everything with regards to your employment, like notice or reference
- Residential legal protection: problems with the landlord (or tenant)
- Traffic legal protection: Disputes after an accident
Some legal risks are also inherently covered by other insurance policies
: If someone makes a claim for damages against you, your private liability insurance
will take care of defending or settling it. Even if it comes to a lawsuit, you don't have to pay the legal expenses for it.
Same happens in the case of disputes as a motorist after a traffic accident, this is a case for the liability insurance within your car insurance coverage
. Members of automobile clubs often receive initial advice on traffic law, too. Legal protection insurance is never an all-round carefree package.Many areas of law
, like disputes with the immigration authorities or the tax authorities cannot be insured
by the insurance companies, others are excluded in individual tariffs. In addition, if a conflict already existed before the contract was concluded, it is usually excluded from protection.
Please note: often the insurance contracts come with a waiting period of several months before a coverage steps in for legal expenses. If you already face a legal dispute, setting up an insurance is usually too late for the insurance to cover the costs.
Is legal insurance worth having in Germany?
About half of all households in Germany have legal expenses insurance. Many people therefore rely on this insurance for legal advice, to help them enforce their rights. For example in the event of trouble with their employer, the authorities or their landlord.
For many people, a legal dispute is stressful in itself. The fear of legal fees and court costs makes the worries even greater. Legal protection can at least relieve these financial worries. Even if this insurance - unlike 3rd party liability insurance and occupational disability cover - is not among the very important insurances, it is often very useful. The following examples illustrate the costs that can be incurred by people without legal protection insurance.
Example 1: Increase of rent
A tenant receives a rent increase of 100 euros, which he considers illegal. He wants to defend himself, if necessary in court. If the tenant loses the case, legal costs of € 1,000 – € 1,500 can be incurred.
But: If it is only a matter of seeking protection for tenancy law issues, tenants can join a tenants' association (Mieterschutzverein). That is with approximately 50 to 100 euro per year (depending upon city) more favorably than an appropriate legal expenses insurance.
As a member of the association, you receive free advice on problems relating to your rental property, such as rent increases or incorrect utility bills. Another advantage is that you receive support immediately after joining the association, whereas a legal expenses insurance policy has a waiting period of three months.
Example 2: Legal action against layoff
An employee wants to defend herself against a dismissal for operational reasons. Even if she wins her action for protection against dismissal, she has to pay her own legal fees of around € 1,500 – 3,000. This is a special feature of labor law in Germany: If a dispute is settled in the first instance, each side pays its own attorney's fees. In addition, there may be court costs. These are paid by the loser alone.
But: If it is only about employee rights, as a member of a trade union you can use the legal protection of the trade union if a dispute revolves around the employment relationship or it is about problems with social security. This protection is included in the membership fee. However, many professions no longer have unions in Germany.
Example 3: Used car purchase
The buyer of a used car wants to return the car. He claims that the car was an vehicle involved in an accident and that the seller concealed this fact. If the car cost € 20,000 for instance and the "transaction reversal" lawsuit is lost, the buyer pays several thousands in legal fees and court costs. Anyone who has taken out legal protection insurance with the traffic legal protection module does not have to bear these costs themselves.
What can you get from a legal insurance?
Which is the best legal protection insurance? A recommendable tariff is characterized by the fact that it covers legal assitance fees and court fees in as many life situations as possible and has only a few exclusion clauses (this is what makes a good legal protection insurance).
If you want legal protection in your capacity as a tenant or owner of a property, you can add the "residential" module to the basic legal protection package or take it out as an individual policy. In most cases, this costs extra.
Legal protection for tenants and property owners
If you are also looking for legal protection as a tenant or property owner, you will need to add it at an additional cost. Legal protection for tenants and owners can also be taken out individually with some providers. Those who do not need the large legal standard protection package for private, professional and traffic can therefore book only this module and save on premiums.
Traffic legal protection as a separate policy
If you only want to insure yourself for traffic, you need a pure traffic legal protection policy. If you want to be insured primarily for legal problems related to the car and road traffic, you can also take out traffic legal protection as an individual policy.
Legal protection for the professional sector
Legal protection for trouble around the profession is usually not offered as an individual module. Here, however, the disputes are often also very high/expensive, so it can quickly pay off. It is especially worthwhile if you a foreign to the German employment laws and have no sufficient knowledge about your rights as employee.
Premium variations for families and companies
Especially with insurance that covers different areas of life, it is important that the insurance protection can be adjusted to one’s personal situation. Therefore, couples who are married or cohabiting can take out a joint family legal expenses insurance policy. Unmarried children also benefit under certain conditions from family legal expenses insurance until they turn 25.
Tradesmen, entrepreneurs and freelancers gain legal and financial support in disputes related to their professional work with business legal expenses insurance. This insurance can be taken out not only for individuals but also for entire businesses.
To sum up
Do you need a legal protection insurance?
Whether and to what extent a private legal protection insurance is worthwhile depends on your personal situation. Ask yourself if there are areas of your life where legal trouble could come your way. Do you commute to work by car every day and feel a bit uncertain with the speedy German traffic and local traffic rules? Then it may be worthwhile to take out traffic coverage, for instance.
Or are you expecting trouble and layoffs at work and have little knowledge of the local employment laws? Then you might want to add employment coverage to your insurance policy.
A secluded single person without an employment or a car, on the other hand, does not need protection in these areas. There might still be the need for coverage regarding disputes with neighbors, though.
In addition, there is the question of how you assess the risk of getting into a legal dispute in the foreseeable future for yourself personally. First of all, as a foreigner coming to a country where some rules or laws are not known to you, you are more prone to simply stumble into a legal situation without much of an ill will or negligence on your side to begin with than mere locals.
And then: How do you live your life here? Do you tend to push the speed limit or do you always stay within it? Is your workplace safe and your employer friendly? Do you have a good relationship with your neighbors? Do you expect to be able to settle disagreements without litigation?
The less likely it is that you will need a lawyer or even have to go to court, the less you will need legal expenses insurance. In that case, it may be a better solution to set aside some money separately for possible litigation.
If, on the other hand, you want to be covered regardless of these considerations, you should take out legal expenses’ insurance. By protecting you against high costs, it ensures that you can enforce your rights even against financially strong opponents, such as large companies.
Finally: since so many Germans have legal protection insurance, they unfortunately also like to go to court very quickly even for the simplest kind of disputes. Something to bear in mind now that you live in Germany.