Liability Insurance: A Small Cost for Huge Protection – What to Look for When Choosing a Policy
Personal liability insurance is surprisingly affordable, yet it’s often considered the most essential coverage you can have. Here’s what you should look for when selecting the right policy.
A moment of carelessness or a small everyday mistake can happen quickly – and often that’s enough to cause immense damage. To ensure you’re not left footing the bill for damage caused to others through negligence, personal liability insurance is a must.
When Does Personal Liability Insurance Pay Out?
Lost the key to your rental apartment? Stepped in front of a cyclist as a pedestrian, causing them to fall and get injured? In such cases, personal liability insurance becomes important. The insurance covers personal injury, property damage, and financial losses to third parties caused by your negligent actions.
But the policy not only covers the financial damage – it also fends off unjustified claims, says Julia Alice Böhne from the consumer advocacy group Bund der Versicherten. Meaning: if someone wrongly demands compensation from you, the insurance can defend you – if necessary, even in court.
The insurer typically also pays for damages incurred while doing voluntary work. “The same applies to damage caused by the unintentional transmission of a computer virus,” adds Elke Weidenbach from the consumer advice center in North Rhine-Westphalia. Because the numerous tariffs from different providers can vary significantly in detail, you should review the contents carefully before signing up. Different policy features may be valuable depending on your situation.
What Coverage Amount Makes Sense?
The coverage amount for personal liability insurance should be at least ten million euros – ideally more – as a flat rate. According to Weidenbach, this is the maximum damage amount the insurer will cover per incident. While that may sound like a lot, it can be reached quickly in serious cases – such as when one or more individuals are injured and become unable to work.
Other Key Criteria When Signing Up
When choosing a policy, make sure it includes “loss of claim” coverage. This protects you if someone else causes you damage but doesn’t have their own liability insurance and can’t afford to pay out of pocket.
For tenants, it’s also important to ensure coverage for rental damage. “Damage caused in rented apartments, houses, or rented movable items should be covered up to at least one million euros,” says Julia Alice Böhne.
According to Julia Alice Böhne, it’s also wise for families to have coverage that includes co-insured persons who are legally incapable of responsibility – like young children or people with dementia.
“In general, when choosing a personal liability insurance policy, you should ensure the terms match your personal situation,” says Weidenbach. For homeowners, for instance, it might be important that damage from solar panels or construction projects is also insured.
What to Do If a Liability Incident Occurs
Make sure to take photos of the damage and accident site – that’s easy to do with a smartphone. Then, write down all the relevant details to clearly document the incident.
Next, report the damage to your insurer immediately. “It’s best to call the claims department first, then submit the damage report in writing using the provided form,” says Julia Alice Böhne.
Important: Avoid admitting fault before the insurer has completed its investigation.
What to Expect in Terms of Premiums
The annual premium for essential personal liability insurance, according to Weidenbach, is typically under 100 euros, depending on the coverage scope. “But, like with all insurance policies, it should be reviewed from time to time,” says the consumer advocate. If your personal situation changes, it’s important to adjust your insurance accordingly.
If your policy is several years old, it may also be worth switching to a more modern tariff. Why? According to the financial advice site Finanztip, many insurers have increased their coverage limits and added new benefits – such as “favor damages”, which occur when you help someone voluntarily and something goes wrong.
If you want to switch providers, you must cancel your current contract three months before the main renewal date. After that, you can shop for a new, more comprehensive policy before the old one expires.
