What You Need to Know About Personal Liability Insurance

Mishaps happen. It’s easy to accidentally knock over a friend’s expensive vase or lose a key. And even the most cautious can’t always avoid causing major accidents, like those in traffic. That’s why having the right insurance is crucial. Because you are responsible for your unintentional actions and liable for any resulting compensation claims. To protect yourself from these potential financial burdens, which can sometimes reach into the millions, you can secure personal liability insurance. This article explains which damages are typically covered, when coverage does not apply, and what to look out for when signing a policy.

Key Points to Know

  • Personal liability insurance protects against high compensation claims and financial ruin due to personal injury, property damage, and financial loss—for just a few euros a month.
  • The insurance covers costs if you damage a third party without intentional misconduct or breaking rules/laws.
  • Everyone should have this insurance. For couples, a joint policy makes sense regardless of marital status or living arrangements. However, damage caused to each other by couples is not covered. Children are insured under their parents’ policy until the end of their first education or training.

How to proceed

  • The health insurance contribution consists of two components: the general contribution rate and the additional contribution.

  • The general contribution rate is 14.6% of the assessable earnings. This rate is legally fixed and applies to all statutory health insurances.
  • In addition to this contribution rate, health insurances may levy an additional contribution. This can be used to finance additional services of the insurance.
  • The contributions, i.e., the general contribution rate and the additional contribution, are borne half by the employee and half by the employer.
  • Example: A health insurance fund levies an additional contribution of 1.5%. Thus, the total contribution rate is 14.6% + 1.5% = 16.1%. Employees must bear half of this, i.e., 8.05% of the assessable earnings.

Why You Need Personal Liability Insurance

Personal liability insurance is sensible for everyone. You are liable with all your assets up to your personal attachment exemption limit for any damage you cause. This only guarantees a minimum subsistence level of living and is related to your personal income and the number of dependents you support. Therefore, the exemption amount can vary.


Particularly with personal injuries, compensation claims can financially ruin you—for instance, if you’re liable for someone’s medical and hospital treatment and subsequent rehabilitation costing thousands of euros. Or worse, if the injured party can no longer work, you might have to cover the lost earnings.

In such cases, personal liability insurance provides protection and covers the claims of the opposing party for you. Thus, it’s beneficial to always be insured, although it’s not legally mandatory in Germany.

In contrast, many other insurances are less sensible and often just a cost without real financial benefit, such as mobile phone insurance, since a broken phone does not threaten your financial existence and does not necessarily need to be insured.

What Is Personal Liability Insurance?

Commonly referred to simply as liability insurance, it is arguably the most important voluntary insurance in Germany. It covers a variety of compensation claims made against you. Intentionally caused damages are not included.
As it is personal liability insurance, you are only protected as a private individual. It does not cover damages you cause professionally.


According to §§100 and 101 of the Insurance Contract Act (VVG), the insurer is also obliged to defend against so-called unjustified compensation claims. This means the insurance first checks whether the claims made against you are legitimate. If they are not, the insurance defends you against these claims. It thus acts as a type of passive legal protection insurance, which you don’t have to pay extra for.

Why Is Personal Liability Insurance So Important?

You can usually settle small amounts of damage without any issues, such as replacing a broken cup, which doesn’t pose a financial challenge. Spilling coffee over a friend’s laptop hurts more financially but is still manageable out of pocket.


However, larger sums can quickly threaten your existence, especially if people are injured, resulting in high costs for medical and hospital treatments, which you must cover up to your personal attachment limit.
For example, if you dash across a red light to catch a bus, causing a car to swerve, hit a lamp post, and the driver to suffer multiple fractures, you’re liable not just for repairing the post and car, but also for any medical treatments. If the driver cannot work for the next three months, you’re responsible for covering his lost wages after six weeks. And then there are the necessary rehabilitation measures that may extend over several years, quickly accumulating a massive amount of costs.
If you’re not among the wealthiest, such a brief moment of inattention could alter the rest of your life. With liability insurance, however, you get off with a figurative scratch because it covers the costs for you.

What Damages Does Personal Liability Insurance Cover, and What Does It Not?

Personal liability insurance covers compensation claims for property damage, personal injury, and financial losses you cause.
It does not cover:

– Claims without a legitimate claim for compensation.
– Damages intentionally caused by you.
– Damages that can be covered by other liability insurances.

A prime example is motor vehicle liability insurance, which covers damages you cause with your vehicle. Other exceptions include professional indemnity, pet owner liability, and property owner liability insurance.

Personal Injury

Personal injury typically refers to physical injuries, such as accidents during sports or as a pedestrian or cyclist.

Another example is if you breach your duty to ensure safety as a property owner and someone slips on the sidewalk in front of your property because you didn’t salt or clear snow.

Mental impairments of others are also covered, such as anxiety disorders that may develop after a car accident. However, personal injuries to your partner, if you are insured together, are not covered.

Property Damage

Property damage includes damage or devaluation of items.

A classic example is a broken window from playing ball. Other items found in a home, from the dining table to the television and other furniture, also fall under this category.

Newer insurance contracts may offer the option to cover damages caused by personally operated drones or the unintentional transmission of computer viruses, which can occur simply by plugging in a USB drive.

The loss of private and foreign house keys is now also included by almost every provider.

Acts of Kindness

However, if you damage something while helping a friend move, you are generally not liable for compensation. Here, the insurance would argue that the claim is unjustified. However, insurance coverage for such a scenario is easily addable.

Financial Losses

Financial loss includes all damages where the victim suffers a financial disadvantage that does not fall under personal or property damage.

For example, the insurance pays if you fell a tree in your garden that falls on a neighbor’s car, and they miss their flight to go on holiday. The costs for the taxi to the airport and for rebooking the flight would be a legitimate claim for compensation.

Who Does Private Liability Insurance Cover, and Who Does It Not?

There are generally two different tariffs in private liability insurance.
In the single tariff, only the insured person is protected. In the family tariff, spouses, partners of a registered life partnership, unmarried partners in a household, and children until the end of their first education or training are also insured.

However, children up to the age of seven are not covered. In Germany, they are considered by the legislator to be incapable of guilt until this age and therefore cannot be held liable for their actions. Parents cannot be held accountable in this case, even if they have neglected their supervisory duties. To insure the damage case nonetheless, for example, to not strain friendships, the clause “damages by children incapable of tort” should be included in the contract, which is always possible without any problems.

Since there is a separate liability insurance for dogs and other pets, these are also not included in private liability insurance for individuals.

When Does Liability Insurance Pay, and When Does It Not?

Liability insurance generally always pays when an item, person, or property is damaged by you as a private individual, and this damage is listed in the contract conditions.

• The insurance generally does not pay for:

• Intentionally caused damages

• Damages from criminal acts

• Damages from breaches of contract

• Injuries to your own body

• Errors in your profession

• Damages that are covered by motor vehicle liability insurance

In cases of damage under the influence of alcohol or drugs, the insurance does not always pay. Many insurances have exclusions in their contracts for these cases, whereby they reduce or even exclude the services and may take the insured to recourse. Incidentally: If you deceive the insurer about an intentional act, you commit fraud, which is punishable in Germany.

The insurance coverage is also always at risk if you acknowledge your guilt without the consent of the insurance. Therefore, you should never sign an admission of guilt in a traffic accident – even if you are aware of your guilt.

What to Look Out For in Liability Insurance

When choosing liability insurance, you should first look at the scope of services and then at the price. Because a low fee is often associated with less protection.
Specifically, before concluding a private liability insurance contract, always check the following criteria:
Coverage amount – What damage amount is insured
The coverage amount is the amount the insurance will cover in the event of damage. Anything beyond that, you must pay. Therefore, it makes sense to set this number as high as possible and not risk a lower coverage amount for a few euros a year.

Coverage Amount

The minimum coverage amount should be no less than 10 million €. Even better are 50 million €, to be prepared for a damage event involving multiple people. Make sure that in this case, at least 10 million € per person is entered and not in total.
Additionally, the insurance coverage should apply worldwide. This is usually the case as long as the stay abroad does not last longer than a year. Holiday trips and study stays are thus included.

Fallback coverage

If the other person cannot pay Fallback coverage means that your private liability insurance also applies if you, as the insured, have suffered damage, but the other person is insolvent and has not taken out liability insurance themselves.
This criterion is a must to secure the incurred damage sum in any case.

Best Performance Guarantee

Always the best possible liability insurance
This means that your insurer must provide the service that another insurer offers, even if they themselves do not cover it in the contract. This clause is particularly interesting if your insurer does not want to pay, but you find exactly this service with another provider.
The Best Performance Guarantee does not apply to damages that go beyond statutory liability, such as damages caused by children incapable of committing a tort.


Worthwhile in most cases The self-deductible in liability insurance is a good way to lower your contribution. The idea behind it is simple: you take over small damage sums up to 200€. This reduces the insurance premium, and you save money. The insurance is then used only for its intended purpose, namely for larger damages starting from 200€. In some cases, such as if you are employed in the public sector, the difference between a tariff with and without a self-deductible may be negligible. Always compare both tariff proposals beforehand.

Children and Favors

What else belongs in the insurance
Under the law, children up to the age of seven cannot be held liable for damages – parents are not liable either. Often, however, as a parent, you want to cover such damage cases to maintain peace with friends or neighbors. Therefore, children incapable of committing a tort should be included. There is also the possibility to cover so-called favor damages. These are the damages that occur, for example, during a friend’s move.
An additional insurance for borrowed items is also advisable. This way, a borrowed bike that gets stolen will be replaced.

How Do I Find the Right Private Liability Insurance?

The right private liability insurance does not exist because different factors are important for everyone. Most insurance providers offer private liability insurance in their portfolio, and some may feel well-served by a proven provider. In recent years, Insure-Techs, similar to Fintechs in the banking sector, have changed the market. You should therefore weigh your personal interests. Are you among those who prefer to be well-insured and pay a few euros more, or do you prefer a cheap tariff with basic protection? In any case, use the family tariff if possible. It also makes sense to set up an annual payment to lower the contribution – as well as a self-deductible. A contract with a longer duration can lead to lower fees. Combined insurances, such as when liability and household contents insurance are combined, are usually not advisable. Most often, these are a marketing gimmick and serve only to allow the insurance agent to close as many contracts as possible. You are usually better off concluding the policies separately. Our liability insurance comparison offers you a clear selection of different providers.

Is It Worth Switching Liability Insurance?

When switching, you benefit from high competitive pressure within the industry, causing providers to continually add new services or lower prices. Therefore, you should take the time to compare. Especially if you haven’t adjusted your tariff for several years, a comparison is often promising. For example, an old contract may not yet cover damage from computer viruses or drones. The switch is usually possible annually with a notice period of three months. You have a special right to cancel whenever there is an increase in contributions by the insurer that was not initiated by the legislator.

What Other Liability Insurances Are There?

Besides private liability insurance, which covers compensation claims against you as a private individual in many cases, there are other liability insurances. These include:

Motor Vehicle Liability Insurance

This policy covers all costs incurred in an accident. This includes repairs, towing, purchasing an equivalent vehicle in the event of a total economic loss, and the legal costs of the accident opponent.

Pet Liability Insurance

In some states, there is a general insurance requirement for dogs (Berlin, Brandenburg, Hamburg, Lower Saxony, and Thuringia). For horses, insurance is advisable in Germany but not mandatory.

Builders' Liability Insurance

This policy covers personal and property damage on your construction site. Damages due to vandalism or storm are covered by another insurance, the construction performance insurance.

Property and Landowner Liability Insurance

It protects against compensation claims due to neglected traffic safety duties in your rental property or if you live in a condominium community. This includes salting and clearing in winter. If you are the owner of a house in which only you live, private liability insurance is sufficient in case of an event.

Professional Liability Insurance

All damages you cause at work are included here. Especially for self-employed individuals, it offers protection against financial bankruptcy.

Frequently Asked Questions

The liability insurance covers damages that you cause and for which you are financially responsible. Besides private liability insurance, which protects you as a private individual, there are professional liability, motor vehicle liability, or pet liability insurances.

Private liability insurance insures a private individual. This means that whenever you cause damage in private life, whether in sports, at home, or in the house, it covers the damage. It includes only the insured and other people from the household. Liability insurance generally also refers to other policies that cover other areas. These include, for example, pet liability or professional liability. Often, however, private liability insurance is simply referred to as “liability insurance.”
In private liability insurance, both property and personal and financial damages are included. The coverage sum indicates up to which amount the insured is protected. Anything that goes beyond the damage amount in the event of a claim has to be paid out of pocket.
You can generally claim liability insurance on your taxes since it is treated by the legislator as a provision expense. Of course, you must show taxable income for this. In the tax declaration, you enter the annual costs in the “Vorsorgeaufwände” (precautionary expenses) schedule (lines 46-50). However, there are different maximum limits for precautionary expenses, which are often already reached with health and/or pension insurance. Therefore, deducting liability insurance usually only makes sense for low earners or retirees.
The cost of private liability insurance depends on various factors. On the one hand, the chosen tariff – single, couple, family – is decisive. On the other hand, you can reduce the fee through a deductible, a longer contract term, and an annual payment method. You must expect at least 30€ per year, but a good price-performance ratio is usually between 50€ and 80€ annually. Compared to the high costs in the event of damage, however, this is still a trifle.
Liability insurance covers legitimate claims for damages that another person makes against you. Unjustified claims are defended by it, thus acting as passive legal protection insurance. However, legal protection insurance covers the costs that arise for you to pursue your legal interests. This is the case if you are harmed, the other person or insurance does not want to pay, and you need to consult a lawyer or the case goes to court.

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