The 6 types of insurance in Germany that are important for you and your property

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Jan Bandke

Oct 22, 2020
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Finding a mortgage shouldn’t be your only financial consideration when moving into your new home: you should also consider looking into your insurance needs in Germany. After all, you want your home to be secured and your mortgage payments taken care of even in the worst situations. In this article we discuss the six main types of insurance you want to consider for your property and for yourself.

If you are looking for further advice on insurance in Germany, simply reach out to our insurance expert, Jan Bandke.

Building/Home Insurance (Gebäudeversicherung)

Building insurance in Germany is only relevant for house owners because apartments nearly always come with building insurance for the entire apartment building. If you are unsure to what extent your apartment (and notably your kitchen) is covered you can ask the property management company representing the building.

Building insurance covers in particular: fire, explosion, damage caused by pipe failures, storm and hail damage. The scope can be extended to the so-called 'element' insurance for e.g. landslides, or flooding due to heavy rain.

Tip: If you are planning to build a new house, there is also insurance available for the construction phase before the final building insurance starts - the fire bodyshell insurance (Feuerrohbauversicherung). A meaningful addition is construction insurance (Bauleistungsversicherung) for theft damage, for example, the heating pipes that are already installed.

Household Contents Insurance (Hausratversicherung)

Household insurance in Germany is very similar to how it works elsewhere. Household items covered by the insurance are generally everything that is not firmly attached to the building. For example: if you could lift the house and turn it upside down, you can assume that everything that falls out is covered as household items. This includes all furniture, clothing, and household electronics.

Household insurance covers the risks of fire (think of smoke and water damage even when the fire is contained), burglary, storm, and water damage.

Tip: Caution is advised with the kitchen. Sometimes it is part of the household contents, sometimes it is part of the building insurance. It depends on whether it is a simple kitchen unit or whether the kitchen has been planned and installed so individually that its removal is only possible with a considerable loss of value.

Term Life Insurance (Risikolebensversicherung - RLV)

Term life insurance or Risk life insurance in Germany is usually about protecting your family in the event of your death. From time to time, a bank may even require you to take out an RLV as a condition for the mortgage. This is especially likely to happen if you use very little equity or the mortgage is a relatively high amount compared to your income.

The condition for payment is very simple: if the insured person has passed away, the insurance sum is paid to the persons mentioned in the contract.

This coverage indeed makes especially sense for sole income earners with a family. Sole income earners will want to leave their property to their family with modest or no outstanding debts, so that they can continue living in it. 

But it also makes sense if you have two incomes, especially if you have children and not a lot of savings. A financial cushion allows the surviving partner to spend more time with the children and not need to worry about having to sell and move house.

Tip: when you are young this insurance is comparably cheap as your chance of early death is very small (for example if you are 30, you pay on the order of 65 Euros for a 100.000 Euro coverage).  

Personal Liability Insurance (Privathaftpflichtversicherung)

No matter if you own real estate or not, you should always have private liability insurance in Germany. Under German Law, there is no ceiling on the level of damages an individual could have awarded against them in case you cause any personal, or property damages to another person. 

For your peace of mind, and in order not to stress your financial position, even to the point of losing your home, we highly recommend that you have personal liability insurance. As you can imagine, it is quite important to be insured for potentially larger damages.

Sizeable damages can easily be caused in everyday life. Suppose you help renovate the apartment of a friend, and knock him from his ladder, and he sustains a major head injury, has to spend weeks in hospital. Or you cause a skiing accident or for example trip a pedestrian. 

Tip: Go for a high (say 50 million Euros coverage for a family) as it costs only a couple of EUR more than insuring 10 million. You need to insure your dog separately.

Legal insurance (Rechtsschutzversicherung)

Legal insurance in Germany is useful in case you are sued or you need to take legal action due to possible infractions in your legal rights. This may range from you getting fired without proper cause to protecting your legal interests in connection with the construction of a property. 

Having this insurance allows you to get relatively cheap and quick legal advice on the validity of any claims you may--you find a helpful lawyer on your side--instead of having to find one that then bills you extensive sums per hour. 

Tip: You may not be familiar with Legal Insurance, but that we highly recommend. It is cheap compared to the benefit that you may gain, not even considering the peace of mind it may give you. 

Accident Insurance (Unfallversicherung)

Accident insurance in Germany pays if you have had an accident and suffer permanent damage - a so-called invalidity. It can range from the loss of a limb to hearing impairment. Then you will receive a one-time payment, depending on the insurance sum and the severity of the invalidity. 

If you have an accident but do not suffer permanent invalidity, no payment will be made by the insurance company.

The one-time payment will help you to financially reorganize your life. For example, you can easily make your house handicap-accessible with wider doors or a stair lift. Or you can use the one-time payment to at least partially compensate for lost income while you train for a different job and continue to pay your mortgage as usual.

Tip: Accident insurance is especially important for people that cannot function in their jobs without their physical capacity. For more complex and more systematic coverage of health hazards that prevent you from doing your job there is occupational disability insurance, (Berufsunfähigkeitsversicherung), or in short: BU. The BU provides a monthly pension should you no longer be able to work more than 50% for longer than 6 months based on your last job. 

Which Insurance in Germany makes sense for you? 

Not in every case everyone needs every insurance. This depends highly on your personal situation. We will be happy to help you review your situation and discuss which insurance and coverage makes sense for you. We have access to almost all insurers on the German market and with our in-house insurance advisor, we will gladly give you free independent advice.

If you are looking for further advice on insurance in Germany, simply reach out to our insurance expert, Jan Bandke.

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Jan Bandke

Jan is one of Hypofriend’s Mortgage Experts.

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