Liability insurance and the loss of third-party property: How to ensure optimal protection
28 May 2025
11
Minutes
Katrin Straub
CEO at nextsure
An accident can happen quickly, and damage to someone else's property can occur. Without adequate protection, this can become expensive. This article explains how a good liability insurance can protect you from the financial consequences of losing someone else's property and what you need to consider in the event of damage.
The topic in brief and concise terms
A private liability insurance is essential to protect yourself from the financial consequences of loss or damage to third-party property; the coverage amount should be at least ten million euros.
Damage to borrowed or rented items, as well as loss of keys, is not automatically covered by every policy; check your policy carefully and watch out for coverage limits.
Report damages to your insurance company promptly (usually within a week) and document the incident in detail to ensure smooth processing.
Understanding protection against damage to third-party property
A personal liability insurance policy covers personal injury, property damage, and financial losses that you cause to third parties. The loss of someone else's property typically falls under property damage. A classic example is accidentally damaging a friend's phone; in this case, your insurance covers the costs. The coverage amount should be at least ten million euros to cover even larger damages. Many policies also provide coverage for rental property damage or lost keys. This underscores the necessity of comprehensive coverage.
Quick Facts: The Essentials about the Loss of Foreign Property
Here are the key points regarding liability insurance and the loss of third-party property:
Your personal liability insurance covers you if you damage or destroy someone else's property.
Coverage for borrowed or rented items varies significantly between policies.
Loss of keys for rental properties is often, but not always, automatically included.
Report damages to your insurer promptly, usually within a week.
The legal basis is formed by § 823 BGB, which mandates compensation for property damage.
A high coverage amount, with a recommendation of at least ten million euros, protects against high costs.
These points form the foundation for a deeper understanding of the topic.
Case studies: When liability covers third-party property
Imagine helping a friend move and accidentally dropping their expensive vase. This is a typical case for liability insurance. The insurance reviews the claim and covers the cost of repair or replacement up to the agreed amount. Another example: Your child damages another child's bike while playing in the park. Here too, your family liability insurance usually applies. It is important that the damage was not caused intentionally. The importance of liability is evident in everyday situations. The insurance often covers the current value of the damaged item. Next, we'll look at special scenarios such as borrowed and rented items.
Special Case Borrowed and Rented Items: What You Need to Consider
Not every policy automatically covers damage to borrowed or rented items. However, around 77 percent of policies do cover such damages, often with coverage limits, for example, of 10,000 euros. If you borrow a friend's camera for a holiday and it gets lost, your liability insurance can come into play if this is provided for in the contract. A survey found that 41 percent of respondents have lent something that was damaged or lost. For damages to rented property, like a crack in the sink of a rented apartment, liability insurance also covers if this is included. [1,2ä] The price of liability insurance can vary depending on the scope of services. Therefore, check your policy carefully. The loss of keys to a rented apartment is a common special case that is often covered. [3,4ü]
The following points are relevant for borrowed or rented items:
Explicitly check the insurance terms for the inclusion of loans.
Be mindful of potential compensation limits.
Damage to borrowed vehicles is usually covered by the owner's vehicle insurance, not personal liability insurance.
Damage to rented property, particularly to built-in fixtures, is often included. [4ä]
The loss of third-party private keys can incur costs of several thousand euros.
The exact conditions can be crucial, as the next section on claims reporting shows.
Claim Notification and Processing: How to Proceed Correctly
If damage has occurred to someone else's property, you must report it to your insurance company without delay. Most insurers set a deadline of about a week for this. Document the damage carefully, ideally with photos and a detailed description of the events. Do not admit liability or make any payments out of your own pocket before the insurance company has reviewed the case. The insurance company will check if and to what extent you are obliged to make compensation. It takes over justified claims and fends off unjustified demands, which corresponds to a passive legal protection function. Learn more about whether your premium increases after a claim. Correct damage reporting to the insurance company is crucial for smooth processing. Next, let's take a look at the legal background.
Expert Depth: Legal Foundations and Important Clauses
The legal basis for liability for damage to third-party property is found in § 823 paragraph one of the BGB. This section states that anyone who intentionally or negligently unlawfully violates the property of another is obliged to compensate for the resulting damage. Our expert tip: Pay attention to the clause "damage to rented, borrowed, or leased items" in your insurance conditions. This is not included in all basic tariffs. The coverage amount should, as recommended by consumer centers, be at least ten million euros, but 50 million euros is better. In the event of key loss, the costs for replacing a locking system can quickly reach five-figure amounts, which is why good protection is important here. [4ä] Current rulings often confirm the insurers' obligation to perform in clear cases, but may differ in cases of gross negligence or intent. Inform yourself, when exactly a liability insurance applies. Thorough knowledge of your policy is essential.
Optimise coverage amounts and deductibles
An adequately high coverage amount is crucial when taking out liability insurance. Experts advise at least ten to 15 million euros as a lump sum for personal injury, property damage, and financial losses. Some insurers even offer coverage amounts of 50 million euros or more, which costs only a few euros extra per year. A deductible can reduce the premium; an amount up to 500 euros is often considered economically viable. Check if your chosen coverage amount also applies to specific risks, such as rental property damage (recommended minimum 300,000 euros) or key loss (recommended minimum 50,000 euros). [2] A coverage amount that is too low may mean you have to bear part of the damage yourself in the event of a claim. The functionality of liability insurance also includes reviewing the liability question. These considerations help find the right protection.
Exclusions: When Liability Insurance Does Not Pay
Conclusion and Recommendation for Action: How to Secure Yourself Properly
More useful links
Wikipedia provides a comprehensive overview of liability insurance.
Consumer Advice Centre delivers important consumer information on private liability insurance.
Laws on the Internet provides Section 823 of the German Civil Code (BGB) regarding liability for damages.
GDV (German Insurance Association) informs about the conditions for private and commercial liability insurance.
GDV (German Insurance Association) provides the General Insurance Terms and Conditions (AVB PHV) for private liability insurance from 2020.
Federal Court of Justice (BGH) publishes rulings on liability.
Destatis (Federal Statistical Office) offers press releases, like the "Number of the Week".
Laws on the Internet provides access to the entire German Civil Code (BGB).
FAQ
What damage to third-party property is covered by liability insurance?
Liability insurance typically covers damage to property that you accidentally cause to third-party property. This can include the cost of repair or the current value of the damaged item. Examples are a friend's dropped smartphone or a red wine stain on a neighbour's carpet.
Are damages to borrowed items always covered by insurance?
No, not always. While many newer policies include damage to borrowed, rented, or leased movable items, this is not a given. Check your insurance terms or inquire with your insurer. Often, there are maximum compensation limits.
What should I do if I have damaged someone else's property?
Report the damage to your liability insurance immediately, usually within a week. Document the damage (e.g., with photos) and describe the incident precisely. Do not admit liability and refrain from making any payments before the insurance has examined the case.
Does the liability insurance also cover damages in my rental apartment?
Yes, damage to the rental property (so-called rental property damage) is often included in personal liability insurance. This usually concerns fixed parts of the apartment such as sinks, doors, or parquet flooring. Damage to movable, rented furnishings or glass damage may be regulated separately. [1ä,2ä]
What is the compensation for the loss of third-party property?
The liability insurance usually covers the current value of the damaged or lost item. This is the value the item had immediately before the incident, taking into account age and wear. In some policies, a compensation for new value can also be agreed upon.
Is there an excess for damage to third-party property?
Whether there is an excess depends on your individual contract. Many policies are offered with or without an excess. An excess can reduce the insurance premium but means that you will have to cover smaller damages up to the agreed amount yourself.
