Liability: What does Private Liability Insurance Insure?

If you accidentally or intentionally harm others, you usually have to pay for the financial consequences. Liability insurance will step in in these cases and protect you from the costs. Although this insurance protection is extremely important, there is still a lot of ambiguity and false information: When does liability insurance pay and when does it not? What should a private liability insurance cost at most and is it possible without it? We have compiled the answers to these and other questions for you!

What is Liability?

In everyday life there are always small and large accidents and mishaps in which objects and, in the worst case, even people are damaged. The person responsible must then pay for the costs - this can quickly become expensive and, for example, ruin entire livelihoods in the event of serious accidents with personal injury!

Private Liability insurance protects us from the financial impact of such damage that we unintentionally cause to third parties. This makes it a particularly important “standard insurance”. Together with motor vehicle liability, which protects us from large payments on the road, and business liability, which protects the self-employed in particular from the financial consequences of personal injury and property damage and the resulting financial losses, this creates effective protection if something goes wrong.

How useful is Private Liability Insurance?

Anyone who causes damage to others in Germany must pay for the consequences. This applies to personal injuries as well as those affecting objects or the assets of our fellow human beings. The person responsible has unlimited liability, which means that the amount to be paid can be gigantic, depending on the type of damage.

Because in addition to the costs for items that need to be replaced or repaired, this also includes, for example, treatment costs or claims for compensation for pain and suffering. A brief moment of inattention can result in huge costs that would overshadow our entire lives. However, liability insurance protects us from this. 

Since it is impossible to foresee accidents or to avoid them always and everywhere, private liability insurance is particularly important. The same applies to its counterpart in road traffic, motor vehicle liability insurance. That is why Germany and most countries in the world have already made liability insurance for cars compulsory. However, the private one is still voluntary. 

Change can be worthwhile

Have you been insured for a long time or are you dissatisfied with your current liability insurance? A regular check and – if necessary – a change makes sense. Because the market is constantly evolving and providers are improving their products and adding new services.

Your insurance premiums are also adjusted regularly. This is a completely normal and contractually agreed process that is common to almost all types of insurance. The new costs will be calculated by the provider based on your risk and will be communicated to you in good time. If you are dissatisfied with the result and the new amount seems too high, it may make sense to cancel. You have two options:

You can, without any particular reason, terminate the contract up to three months before the contract becomes viable. If you miss the deadline, your contract will be automatically extended by the agreed period. If your insurance announces that your premium will be increased, but the benefits remain the same, you can cancel your contract immediately or on the date of the increase. If you have decided to switch, you should pay attention to the end date of your previous liability: The protection from the new provider should follow seamlessly so that there are no gaps in your insurance.

What does the Insurance Cover?

Liability insurance protects us from payments for damage that can be divided into three different areas: personal injury, property damage and financial loss. In the event of damage, the three forms can occur individually or together.

Personal Injury

As you could probably already guess: personal injury affects other people who are injured or whose health is impaired by you. A death also falls under this category. The costs that arise are particularly dramatic: hospital stays, compensation for pain and suffering (also for the surviving dependents), treatment costs and others can, depending on the case, run into millions of euros. Liability insurance steps in here and pays for the claims.

Because Section 842 of the German Civil Code specifies the rights of an injured person: they are entitled to have their state of health restored before the event. In addition, compensation for pain and suffering may be added. In particular, when complete healing is not possible and long-term damage remains, things get serious: In such cases, the claims against the person who caused the accident increase massively.

Property Damage

Property damage is also fairly easy to understand: it involves someone else's property that you accidentally damaged or destroyed. In this case, the polluter must pay for the repair or the purchase of an equivalent object, for example. Depending on which items were damaged, this can also cause enormous costs, which liability insurance will cover for you.

It is important to distinguish between the new value and the current value: Many insurers only pay the current value as part of their liability offers, i.e. the amount that an item was still worth at the time of the damage. This price is usually well below the replacement value that an object would cost when it was new in retail.

A special sub-category is "rented property damage", i.e. damage that occurs, for example, to the apartment in which you live. In many cases, you are also covered by liability, because you damage the property of another person - in this case the landlord.

The following applies: With liability and household contents insurance, you are protected against most problems within your own four walls. 

Pecuniary Loss

The third category, financial loss, includes both purely financial damage (“genuine financial loss”) and consequential costs from the other two types of damage (“false financial loss”). As a rule of thumb, damage that is not personal injury or property damage falls into this category. Here, too, the height can be very different. Therefore, it is good that liability protects you from the costs.

In the case of real financial damage, the victim loses money, so your liability insurance has to step in and compensate for the financial damage. False financial losses, on the other hand, always occur in combination with property damage or personal injury. That means: someone was injured here or an object broke. In addition, this resulted in additional costs or financial disadvantages, which now also have to be paid.

Danger! Some liability providers specifically exclude real financial losses or only cover them to a limited extent. At first glance, that doesn't sound particularly dramatic, since the spurious financial losses occur much more frequently. Nevertheless, there can be severe claims due to real financial losses. You then have to pay for them in full yourself. Liability that pays for both types is therefore recommended.

Liability Insurance Pays Here Too

Liability Insurance covers all three types – personal injury, property damage and financial loss. The prerequisite, however, is that we caused it unintentionally. On the other hand, those who act with intent are not protected by private liability. The offers of the individual insurance providers also differ in other additional offers. The following points are often, but not always, included: 

• Whether damage from gross negligence is also insured depends on your liability. While some providers accept such cases without any problems, others specifically exclude them. Some insurers also offer such protection for an additional charge.
• Almost all liability insurance companies pay in other EU countries or even worldwide. On the other hand, there are hardly any offers that are limited to Germany. However, it is by no means mandatory that your liability insurance also pays abroad. Theoretically, restrictions on benefits in other countries are also possible. If in doubt, it is better to check beforehand whether and for how long your insurance cover is also valid when travelling!
• " Key insurance" or "lost key insurance" is an additional protection that some insurers offer automatically or at an additional cost. If you lose your key, the entire locking system of a building may have to be replaced for security reasons. This is especially the case with employers, authorities or institutions that give you a key.
• If you have key insurance, your liability insurance will cover the costs. However, you are left with the expenses for the locksmith if you cannot come into your own apartment, as this does not cause any damage to third parties.
• Most pets are also covered by your liability insurance. If, for example, your cat destroys someone else's expensive item with its claws, the insurance company will step in. However, normal liability does not apply to dogs and horses, they need their own.
• Damage caused by data transmission is covered by liability as standard. Nevertheless, it is worth taking a look at the insurance conditions to be sure. This category includes, for example, damage caused by the accidental transmission of sensitive data or a computer virus that infects others from your infected computer and causes damage.

Additional offers for people who work from home should be viewed critically: If damage occurs while working from home, for example due to data protection violations, the fault almost always lies with the employer. In cases where the employee has acted with intent, liability does not apply anyway. Such a "home office additional insurance" is therefore almost never useful, but is often sold for a high price!

Good to know: If others cause you damage, such as data theft or similar, via the Internet, your liability insurance will not help. In these cases, your household contents insurance also applies.

When does Liability not pay?

• Your private liability insurance does not pay for horses and dogs. If the animals cause property damage, personal injury or financial loss, you will bear the costs. A special dog or horse liability insurance is therefore highly recommended. 
• All claims that fall within the scope of motor vehicle liability insurance must also be processed through this. For example, if you are behind the wheel of your car and cause an accident, your motor vehicle liability insurance will cover the damage - your private insurance does not pay here.
• The situation is similar with professional liability: It is mandatory for some professions, such as doctors, experts or lawyers. This is understandable, since a mistake in these areas can cause major damage and thus costs. In all cases in which professional liability applies, the damage cannot simply be passed on to private liability. 
• Flying with drones has many fans - but not among the insurance companies! Many providers deliberately exclude damage caused by your drone. Before you take off, you should therefore check the conditions of your liability insurance. If drones are excluded, it is advisable to change them or take out special drone liability insurance. 
• Liability insurance is also not responsible for damage caused intentionally. It only pays for costs if they are unintentional, for example due to an accident that was not caused by negligent action.
• Anyone who commits a criminal offense cannot turn to liability in the event of damage. A burglar who breaks down the door to an apartment cannot therefore pass on the cost of the repair to the insurance company.
• If you accidentally injured yourself, your personal liability does not apply. It is only responsible for damage caused to other people. However, if the injury causes permanent limitations, your accident insurance could come into play.
• If there are fines due to damage caused, these will not be covered by liability either. This also applies to a breach of contractual obligations, i.e. to the consequences of breaches of contract.
• Glass damage is a special feature of insurance: Liability covers a broken window, for example, if it belongs to someone else and broke unintentionally. In the rental or holiday apartment, liability covers damage to rented property, but usually excludes glass damage. You need your own glass insurance or household contents insurance that covers such damage.

Typical claims

A large proportion of the cases in which third-party liability kicks in consist of limited property damage. Fortunately, personal injury is much rarer. “Classic property damage” includes, for example, the coffee that you accidentally spill over your neighbor’s laptop in the lecture hall. If you stumble in your friends' apartment and knock over the TV, liability insurance is also required.

Personal injury often occurs on the road, but of course it can also happen elsewhere: You were walking and engrossed in your cell phone. When you accidentally ran onto the street, a car had to brake and a rear-end collision occurred. Your liability not only has to pay for the damage to the cars (property damage), but also cover the treatment and hospital costs for the people affected.

Financial losses can take many different forms. You were out on your bike and accidentally bumped into a passer-by. The woman fell and suffered minor injuries. Liability covers personal injury, of course, but the passer-by had booked an expensive vacation that was due to start the next day. Since she is now unable to do this, she suffers financial loss in the amount of the amount paid. Your liability also pays these costs.

Passive Insurance Protection

Your liability insurance has a great interest in only making a payment in the event of real damage. The companies therefore check the claims of other people very carefully and are prepared to go to court if necessary. In this way you protect yourself from unjustified claims. 

This "passive insurance protection" works almost like legal protection insurance. The insurer takes over the case and represents you in court. Since this includes only very limited options, legal protection insurance can still be worthwhile.

Costs and Tariffs

Liability insurance is offered for singles and families. In many cases, the provider differentiates between couples under and over 60 years of age. Most young people, such as students or trainees, are also insured through their parents' family liability insurance. However, you should rather play it safe and check your liability!

If you need your own liability insurance, the costs are manageable: inexpensive liability insurance that covers the most important points is available for around 40 euros per year. You should budget around 50 euros per year for family liability insurance.

There are of course no upper limits. As so often in life, however, expensive does not automatically mean good! Many high-priced liability offers have the same scope as cheaper products. You should also be careful with particularly low prices: there could be serious defects here that are not visible at first glance.

In any case, before you sign a contract, you should carefully examine your liability insurance and make sure it suits you. In addition to the annual costs, there are other points that you should consider:

High Coverage

Sufficient coverage is the be-all and end-all of private liability insurance! It is also known as the “sum insured” and expresses how much your insurance company will pay in the event of an emergency. The following applies: Everything that exceeds the sum insured, you have to pay out of your own pocket. For this reason alone, the highest possible amount is advantageous.

A sum of 50 million euros has proven to be good protection. It is also important that sufficient coverage is available for each injured person. Ten million euros is a good guideline for your liability. Because it is possible for a single person to suffer extremely high damage. As a result, a low sum insured per person can quickly be exceeded and the costs fall back on you.

Best Performance Guarantee

Prices and conditions for liability protection are constantly changing. It is often only in the event of a claim that you realize that your insurance is no longer up-to-date. In this case, a best performance guarantee can help: With it, the insurer guarantees that in an emergency it will behave like the best provider on the German market. 

To do this, you have to prove that another insurer in the same price range performs better. Your own liability will then also apply these conditions. This guarantee can affect all aspects of your insurance: Your insurance company refuses to cover a claim, but a competitor covers it? Short proof and you will get the better protection.

However, the best performance guarantee only applies to the same quality level. That means: You cannot compare the benefits of your cheap, 40-euro-per-year liability insurance with the 500-euro premium product of a competitor! However, if another provider is better in the same price range, this guarantee will help you further.

This makes the Best Performance Guarantee a pretty useful extra. In an emergency, simple insurance with this additional service is even worth more than comprehensive liability insurance without a top-performance guarantee! If something is missing, you can often improve the conditions with a simple comparison.

Excess

You are probably already familiar with the concept of deductibles from your own comprehensive insurance: if an accident occurs, you have to pay a small part of the costs yourself. In return, your entire insurance is usually much cheaper. In this way, the insurance companies ensure that customers do not accept damage lightly. The fact that they always have to make a small contribution should strengthen their sense of responsibility.

In liability insurance, however, a deductible is rather unusual. If you do, then values ​​between 100 and 200 euros are considered appropriate. You can also opt for a higher amount and thus lower your annual contributions. Whether this makes financial sense depends on how often you actually need your liability insurance.

What is bad debt Insurance?

Although liability insurance is extremely important, not all Germans have coverage: only about 85% of households have it. If you are the victim of an accident, you naturally want compensation for your damage. However, if the perpetrator is uninsured or has no assets, things can quickly get complicated.

Bad debt insurance comes into play in this case and can help you to get your rights after all: It takes over the payment if the other party cannot afford it. This additional service is quite useful and should not be missing from a good liability insurance. 

Conclusion: Important protection in the event of personal injury

A private liability insurance is an important protection for every private person. It pays for harm we unintentionally cause to others. This includes property damage, i.e. destroyed or damaged objects, financial loss and personal injury. The latter can have particularly dramatic consequences!

Because in Germany there is no upper limit for claims arising from such claims. In the worst case, millions of dollars may be needed to restore a victim's health and compensate for pain and suffering and loss of earnings. Liability protects us from such situations that could otherwise spell our financial ruin.

The liability insurance market is quite large. The individual offers differ significantly in terms of costs and services and also offer various additional functions. In any case, you should value a high level of coverage and the best performance guarantee. A deductible and extras such as key insurance, on the other hand, depend on you and your circumstances.