What is third party liability insurance (Private Haftpflichtversicherung) and why do you need it?
Third party liability insurance (indemnity insurance) covers damages you are held liable by third parties, protecting the insured person - which is you! - from potential financial ruin when you have to pay those damages.
Why do you need a private liability insurance in Germany?
By law anyone doing damage to third parties is legally obligated to compensate the other person or persons in full for accidental damages encured because of you.
This refers to:
- Damage to other people’s property
- Financial damage
- Injury or damage to persons
Simple cases of a leaking dishwasher or washing machine can already cause several thousand EUR worth of damage in your own apartment to the landlord or with the neighbors below, for which you’ll have to pay for.
Much worse if you cause injury to others while riding your bike or crossing the sidewalk or road with your head in the air, to name just a few typical examples. Even a simple whiplash-injury can lead to hefty bills from health insurance companies of the insured person against you or you’ll may have to cover the loss of income for days, weeks or longer because of that.
Much worse if the injury is severe and perhaps leads to lasting disabilities. Apart from the obvious sorrow and grief for you to be the actual cause of something like that: you can lose everything you own and most of what you will earn in the future in the worst of cases.
Or imagine something you did caused a company or business to shut down for days or weeks and you’ll face the damages of business turnover etc. for the days of lost business.
You think this is unlikely or utter nonsense?
Then just read these true-life cases from the public Expat forum “Toytown Germany” where other Expats write about the expensive claims they were suddenly facing after all kind of incidents and had to pay for the damages.
- In this case someone caused by negligence a tram to make an emergency break in Munich and was consequently facing thousands of EUR in claims.
- In this case someone crashed with her bicycle into a car and is held liable for the damages.
- This is about accidental damage in a hotel for which the guest was held liable.
- This is about claims from a kindergarten for damages caused by a child.
Now, how if there would be an insurance that covers you against all these kinds of accidental damages, pays on your behalf (and your family members) several thousand or, if need be, even millions of Euros to those you caused damage or injury and thus protects your finances from a hard blow or even total loss?
And how about if such an insurance contract only costs somewhere between 50-100 Euro per year? Wouldn’t you rather want to learn more about such an easy insurance coverage solution, or would you choose to wait till not having this insurance bites you in the behind?
How does a third party liability insurance works?
The 3rd party liability insurer pays the costs for damages in the private sector (for your business you need a separate coverage!), including damage caused by negligence and with really good insurances even in case of gross negligence, up to an agreed amount according to the insurance contract (which is why choosing a good insurance rather than a cheap one is really important!).
This is very important, as the total amount you can held accountable for or in worst case be sentenced to for a liability is NOT limited in Germany, and could cost the injuring party - which would be you - all that they have now in savings and values as well as even some of your future earnings if you'd have to pay for a ongoing disability pension for years to come to the injured party, for instance.
So, in a manner of speaking, a 3rd party liability insurance saves your personal financial bacon if and when you are really the one to have caused damage or injury by covering the costs in full (or depending on the insurance terms with a small deductible).
Your legal protection included against unfair or unwarranted claims
But: one of the important benefits of a good third party liability insurance is also your legal representation. If somebody thinks he has a claim against you, he or she will most likely use a lawyer or court to enforce this claim. Without a liability insurance – even if you are entirely guilt-free – you’ll have to fend this off with your own money, hiring lawyers and paying for court fees with uncertain outcome.
If you have a third party liability insurance instead, they will take over the proving or otherwise rejection of false claims on your behalf because it is in the insurance company’s own best interest to beat off or at least reduce the claims as much as possible because they will pay for any just claims in the end.
What is important in a good third party liability insurance and what does it cost?
There are different types of insurances for 3rd party liability. Basic ones only cover more or less standard coverage. Which, in the end, is better than nothing for sure. But with the right advice on your side, it is easy to find a fully comprehensive one without having to pay so much more.
Typicall average yearly costs of third party liability insurance coverage
Let’s start with the costs. A really good insurance will cost between 60-90 Euro for a single person and 80-120 Euros for couples or families, per YEAR! As you can see, we really are not talking about a big expense here, especially considering the potential financial risks for you when being without such an German insurance.
What should a really good 3rd party liability insurance coverage include?
First of all: a solid amount of coverage. The total coverage amount differs among the many insurance plans on the market a lot. Coverage should include a lump-sum insurance sum of at least 5 million Euro for damages to persons and property. Really good ones offer coverage for 10 million EUR or even 50 million EUR.
While this may seem excessive, a serious injury to one or more people caused by you which leaves them disabled or dead can amount to several millions’ worth of claims easily. Or similarly the shutting down of a business because of you for a while (for instance because the business burns down).
Furthermore, they insurance coverage should comprise next to the standard basic coverage especially the following benefits:
Expats are usually quite mobile, jobwise and else. Coverage should therefore be fully valid during limited stays abroad, at least three consecutive years within the EU and one year worldwide. And while you are abroad: Rental of a holiday property, hotel rooms and other stuff abroad should also be included.
Gradual damage coverage, also known as "Allmählichkeitsschäden"
Gradual loss through damages caused by temperature, gas, damp, steam, rain etc. These kinds of damages can become quite costly because they stayed undetected for a long time before the damage is actually recognized. therefore, a high coverage should be included.
Example: the insured person has damaged a waterpipe just slightly while drilling a hole in the wall and water is then leaking from that hole undetected over a long time and thus causes damage to the building’s walls and electrics.
Coverage for computer damages
Damage to third party’s computers should be covered well, too. Example: A computer virus transferred unintentionally / accidentally by you causes damage to a third party’s computer or computer network.
Important notes in coverages for families
Deliktunfähige Kinder: Children under the age of 7 cannot be held legally responsible by law (and neither can their parents be held responsible unless there is a serious breach of adequate supervision of the children in this age). Sounds good at first. But it can mean in consequence that a good friend or neighbor will not get payments from any insurance if your small children caused some damage. In which case you need to decide to lose a friend, anger a neighbor or pay out of pocket.
With this special coverage, you’ll have a couple of thousands from the insurance to pay for the damage nevertheless, giving you peace of mind in such situations. Typical cases for this coverage are the proverbial ball smashing the neighbor’s window or a children’s street-play turning into damage to a car etc.
Important notes in coverages for tenants
Loss of private third-party keys: A loss of keys to an apartment building where you are the tenant can require the entire lock system to be changed, which can cost a lot of money. Therefore, several thousand worth of damage should be covered under this option.
Important notes in coverages for employees
Loss of job-related third-party keys: If your office or factory building uses a sophisticated security system, a lost key may result in large costs for changing the entire system. Therefore, a high coverage should be part of your insurance plan.
Coverage in other special situations
Complaisance or courtesy assistance coverage
In German: "Gefälligkeitshandlungen – unentgeltliche Hilfeleistung", means if, for example, you decided to help a friend or relative move house (without being paid) and drop the proverbial Ming vase or, more likely nowadays: huge flatscreen TV, this is covered with a really good insurance. But beware, many cheap-ones don’t have this kind of necessary coverage!
Forderungsausfalldeckung or loss of receivables
One of those words you need to remember for your next round of Scrabbles with your friends. It covers if someone without third party liability insurance causes damage TO YOU and he or she cannot pay for the damage or injuries you incurred. So suddenly this insurance suddenly also protects you as a potential victim, too. Great, isn't it?
Damages up to the amount of maximum amount of your insurance are usually covered. What you'll need to make this claim, though, is a court decision that finds the other side guilty and awards you such a claim (which is why also a “legal protection insurance” can make sense to have in Germany to strengthen your position in such a case).
The insurance will then pay out the claim to you and go after the other side to recollect it from them. Example: You are accidentally run over from behind by a cyclist on a sidewalk or maliciously attacked and robbed – the insurance covers your compensation claims for injuries suffered and what not. Even if the person responsible is not insured or unable to pay.
Opferschutz or victim protection coverage
We also hold the following coverage – which only very few insurance companies currently offer – as an important piece of coverage for Expats in general, and for those who look somewhat “different” in special.
While Germany is probably not more xenophobic than any other country in the world, hate-crimes because of politics, religion, race, gender, sexual orientation etc do happen and therefore an extra coverage that pays to you if you become a victim of such a hate crime is recommendable as a consequence (and costs only little more).
It is called Opferschutz and includes coverage for legal advice to make your claim at court against known or unknown perpetrators, especially if you are suffering from injuries or even disability as the result of a violent attack.
If courts award you a compensation for your injuries or even a disability pension to be paid by the perpetrator(s) and they can’t honor this for lack of money or sufficient insurance coverage, your own insurance pays for you and triples the monthly pension. Plus, your insurance will pay for up to 10 sessions with a psychotherapist for you.
Why do you need a good advisor for selecting the right third party liability insurance?
All in all, as you have seen from the many areas of coverage described above, you are getting a lot of risk-coverage for very little money. And since the yearly premiums is really not that much, you should definitely aim for quality of coverage foremost and not for getting the cheapest insurance contract.
A difference of only 20-30 Eur per year can make a huge dent in your savings if the cheap plan is missing some coverage that better plans offer for little money more per year.
Since nobody really enjoys reading thru all the insurance small print, as small as this insurance is budget-wise, it makes definitely sense to get an insurance advisor involved who chooses the best currently available insurance coverage from the market for you.
These are typically one-year-contracts and a good advisor will check yearly or at least every few years for you if there is a new development on the market that warrants a change of insurance provider. Plus: an insurance broker will assist you in the claims-process from the first moment to the last – which is worth a lot if it ever comes to that.
To sum up
Final tip from an insurance expert
Always make sure that your content insurance (the insurance that covers damages to your own belongings at home) comes from the same German insurance company that you have your 3rd party liability insurance with.
The reason is this: when you have damages in your home from water, fire etc. there can be a grey-area of what is to be covered through 3rd party liability insurance or content insurance. If you have these insurances with two different insurance companies, you can be caught between a rock and a hard place if they start the “passing-the-blame-game” through claiming that the damage be covered by the other kind of insurance.
If both are with the same insurance company, they will pay from one or the other and thus not complicate the claim settlement unnecessarily.