Whether it's after a minor pileup, an unjustified dismissal or a dispute with your tenants - to make sure you're not only right, but also get justice, you often need help from a lawyer. But good legal advice is expensive – especially if the dispute cannot simply be settled, but ends up in court. Luckily, there is coverage for this in the form of legal insurance.
The key points
- What legal insurance in Germany covers for you
- What does deductible mean in my legal insurance contract?
- Our recommendation for a combination of private legal insurance
- Landlord coverage: Support in case of rent arrears, rental nomads and more
- Builders’ coverage: Protects you when you’re buying or building your home
What legal insurance in Germany covers for you
There is no one legal protection insurance that covers absolutely all cases, rather there are insurances for special topics (e.g. special occupational groups) or insurances that cover the most usual cases. The four most common modules of a legal protection insurance are:
Housing and property (“Wohnungs- und Grundstücks-Rechtsschutz”)
Then there are also some more specific types you can get coverage for
As a landlord (“Vermieterrechtsschutz”)
As builder/buyer of a new build property (“Bauherrenrechtsschutz”)
In general, legal insurance will assist you with figuring out what your initial chances are and will also recommend a lawyer that has the necessary expertise in whichever field is needed. And they will send you a confirmation that they will cover the costs for your lawyer and also potentially additional costs when you have to go to court.
What does deductible mean in my legal insurance contract?
Usually, it is advisable to have a deductible (“Selbstbeteiligung”) agreed upon in your contract. The amount depends on your coverage and can range from 150 € up to 1.000 €.
Deductible means that in the event of a legal dispute you will have to pay the first 150 or 1.000 € out of your own pocket and the rest is covered by the insurance company.
In case you win your legal case and a judge orders that your costs have to be covered by the opposing side you generally will get a refund on your deductible.
We recommend you to choose insurance with a deductible because on the one hand it helps to reduce the premium costs and on the other hand some coverage is only possible with a deductible.
Our recommendation for a combination of private legal insurance
For your general legal insurance, you can imagine it just like building blocks. You can combine them to create insurance coverage according to your wishes and needs.
It is advisable to start off with the Private coverage and then add on any of the additional coverages mentioned above. As a stand-alone solution, you can take either Private or Traffic. The Job and Housing part are usually only available in combination with Private coverage.
What is included in these four “building blocks”?
Private: The coverage for Private legal insurance usually includes various areas of your private life. For example, contracts between you and a company where you purchased a product or service. But also tax matters fall into this area, such as when your so-called "Werbungskosten" are not accepted by the tax office. It also covers the use of a lawyer to claim damages after an accident where someone else was at fault. Or if you want to sue for your right for a place in Kindergarten. To name just a couple of examples.
A special additional coverage included in the private area is the so-called “erweiterter Strafrechtsschutz” – this means the insurance will also give coverage against criminal charges. Legal protection is given for the defense against the accusation of negligent matters as well as intentional offenses.
These processes can get quite costly and having insurance for it can save quite some funds. Note: In case you are convicted of having committed the offense, the legal coverage will be nullified and all the costs covered by the insurance company have to be paid regardless.
Job: As the name already suggests, the Job module covers you for any legal matters that could arise from your employment. Like fighting against an unwarranted termination of your contract, having a conflict about your job reference letter (“Arbeitszeugnis”) or when you have gotten a warning letter (“Abmahnung”) that wasn’t justified.
Traffic: Also fairly simple: This covers you either as a private driver of a car for example, as a passenger on public transport or even as a pedestrian. Possible legal cases could result from the classical speeding ticket to something accident-related.
Property: This either covers you as a tenant or as the owner of a property. General legal cases could result from issues with the property management, you have issues with the utilities bill, or it could be some legal case within the ownership community.
Landlord coverage: Support in case of rent arrears, rental nomads and more
Landlord coverage is a specific stand-alone solution that helps you as a landlord to protect yourself against legal disputes with your tenants.
Coverage can start with a credit check at the tenant selection stage and some tariffs also include assistance with a handover protocol.
You also have additional support through a phone hotline if you think a legal case could develop for all kinds of different reasons like multiple late payments on the rent, differences on who should pay for certain repairs, or if you have issues with the repairs themselves done through a handyman.
Furthermore, this legal insurance can assist with receivables management. So you can get this taken care of by a specialized service and take personal emotions out of it.
Builders’ coverage: Protects you when you’re buying or building your home
Builders’ coverage (“Bauherren-Rechtsschutz”) makes sense if you are either buying or planning to build a new property.
In Germany there are also only two providers that even offer this very specific coverage:
ARAG – as a part of the normal coverage and covers up to 20.000 EUR in legal fees
ÖRAG – specialized insurance covers up to 100.000 EUR in legal fees
Note: Both insurances need to be closed before the notary appointment and in the case of ARAG you have a waiting period of six months before the coverage becomes effective. From our experience in this case: you either signed a contract with ARAG a long time ago, or we would have to rely on the ÖRAG solution.
What is so special about this coverage?
As mentioned above, most legal insurers do not even offer this coverage. So there is also no choice on who to go with when deciding on the coverage. On the other hand, this also suggests that the likelihood of a legal case arising from a newly built property is rather high. Otherwise, we would have more choice in coverage.
Coverage examples can be quite vast: From a late delivery of the property to quality issues in the build, or even planning mistakes from the architect's side.
All these things can get very costly very fast and reach a 6-figure amount in dispute fairly easily. And also lawyers and courts calculate their fees based upon the dispute value.
In the case of this legal insurance for builders, you also have a higher deductible than mentioned at the beginning. The deductible is either 400 €, or 1.000 € and will be reduced by 150 € if you consult a lawyer recommended by the legal insurer. So, in the end, it is 250 € or 850 € you have to pay on your own.
Builders’ coverage is limited to a maximum of five years. Though after five years of being at the notary not much should come up anyway anymore. Most legal cases are happening during the building phase, or at the point when the property is finished and you can move in.