Receive a payout from your contents insurance claim: How to get your compensation
31 May 2025
5
Minutes
Katrin Straub
CEO at nextsure
Damage to household contents is frustrating enough. Discover here how to proceed to receive a payout from your household insurance and what pitfalls to watch out for in the process. We explain the key steps and your rights as a policyholder.
The topic in brief and concise terms
A payout for the household insurance claim is possible, often as a settlement without direct repair evidence, and the insurer's first offer should be critically reviewed.
Household insurance usually covers the replacement value; however, if a payout is made without actual new acquisition or repair, deductions (e.g., VAT) may apply, or only the actual costs incurred will be reimbursed.
Court rulings (e.g. OLG Cologne) emphasise that insurers are often only obliged to reimburse actually incurred costs, which makes purely notional billing at full replacement value difficult.
Understanding the Basics of Household Contents Claims Payouts
If a loss occurs to your household contents, home contents insurance is your point of contact for financial compensation. Generally, the insurance covers the damage by covering repair costs or providing a replacement. However, there is often a desire to have the home contents insurance claim paid out. This option is fundamentally possible but subject to conditions. Insurers can offer a settlement after assessing the damage, which does not require proof of repair. Note that initial offers can often be lower; it is worth inquiring further here. The basis is usually the new-for-old principle, which covers the replacement value of new, similar items. This is an important aspect you should be aware of in the context of your home contents insurance. The exact regulations and how you proceed are crucial for a successful payout.
Payout options: Repair, replacement or financial compensation?
When dealing with household damage, you generally have two options. First: You can have the damage repaired or procure an equivalent replacement item. The insurance will then reimburse the costs upon presentation of the relevant invoices. It is important that the replacement is of the same type and quality; improvements are usually not covered. Second: The insurance offers a settlement amount, allowing you to receive a payout for the household insurance claim without submitting an invoice. This flexibility comes at a price, as the offered amount can be negotiable. For a smooth claims report with your insurance provider, precise documentation is essential. This paves the way for clarifying the form of compensation.
Quick Facts: The Essential Information on Damage Payouts at a Glance
Here are the key points to consider if you want a home contents insurance claim paid out:
Payment possible: Insurers may offer a settlement, often without proof of repair.
Replacement value principle: Generally, the value for a new acquisition of similar items is replaced.
Documentation: Photos, receipts, and a detailed damage report are crucial.
Observe deadlines: Report the damage immediately to avoid jeopardising your claim.
Review offer: The insurer's first offer is not always the final word.
Actual costs: Court rulings often emphasise that only actual incurred costs must be reimbursed, complicating fictitious billing.
These points form the basis for further proceedings and detailed clarification with your insurer. Understanding the difference between building and contents insurance is also helpful in this regard. Next, we will take a closer look at the practice of claims settlement.
Practice Part: Damage report and negotiation with the insurance company
To receive reimbursement for household insurance claims, a correct damage report is the first step. Thoroughly document the damage with photos from different angles and keep damaged items as well as purchase receipts. Report the damage to your insurer immediately; many providers have deadlines of only a few days for this. A complete damage report includes a description of the incident, photos, and, if necessary, cost estimates. For example: In the case of water damage caused by a faulty washing machine (a typical situation for household insurance coverage), take photos of the machine, the water leak, and the damaged furniture. Submit everything along with the purchase receipts of the affected items. The insurance company will then review the case and inform you whether a repair, replacement, or payment of the damages is appropriate. Be prepared for inquiries and keep all documents ready. Communication with the insurer is crucial for a prompt settlement.
Replacement Value vs. Current Value: What Does Home Contents Insurance Really Pay?
Contents insurance is a replacement value insurance. This means that in the event of a claim, it reimburses the amount necessary to replace damaged or stolen items with new, equivalent ones. For example, if your five-year-old couch is destroyed by fire, the insurance does not pay the original purchase price or the current depreciated value (value with wear and tear), but the price for a comparable new couch today. This is a major advantage of contents insurance. For technical devices, the new price for a comparable device "according to type and quality" is paid. If items are no longer available as new, such as antiques, the replacement value is set. The depreciated value, that is, the new value minus an amount for age and wear and tear, is more relevant for liability insurance. Understanding this regulation is important when considering whether contents insurance can be deducted for tax purposes. The exact basis for calculation is therefore an important factor in the payout.
Fictitious billing: opportunities and limitations in household insurance
The option to have a home contents insurance claim paid out without repair or new purchase is referred to as a fictitious settlement. While this is commonplace in some insurance sectors such as motor liability, there are important restrictions in home contents insurance. Several court rulings, including from the Cologne Higher Regional Court (Ref. 9 U 241/10) and Plettenberg District Court (Ref. 1 C 218/10), have concluded that home contents insurance companies must basically reimburse only the costs that have actually been incurred and proven. A purely fictitious settlement based on a cost estimate is therefore often not readily possible. If no repair or new purchase takes place and the insurer agrees to a payout, only the net amount (excluding VAT) is often reimbursed, since VAT has not accrued. VAT is often subsequently reimbursed only upon presentation of an invoice for the actual replacement or repair. The option of a fictitious settlement should therefore always be critically discussed with the insurer. This is especially true in the case of damage by burglary and theft. The legal basis for this can be found in the next section.
Expert Depth: Legal Foundations and Recent Judgments
The Insurance Contract Act (VVG) forms the legal basis for household insurance. Your rights and obligations as a policyholder are regulated there, as is the insurer's obligation to perform. According to § 81 VVG, you have certain duties in the event of a claim, such as prompt reporting and the obligation to mitigate damage. Violations can lead to reductions in benefits. The aforementioned judgments (OLG Cologne 9 U 241/10, AG Plettenberg 1 C 218/10) are relevant for the practice of claims payout. They reinforce the principle of specific damage calculation, according to which only actual costs incurred are to be reimbursed. This greatly restricts the possibility of a fictitious settlement at full replacement value without proof. Our expert tip: Always clarify in writing with your insurance company in advance which proof is required for a payout and whether a payout without repair/replacement (possibly minus VAT) is possible. In case of uncertainties, consulting can be useful to avoid inadvertently encountering problems due to gross negligence. Clear communication prevents misunderstandings.
Checklist: How to proceed correctly with the damage payment
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More useful links
Wikipedia provides general information on home contents insurance.
The NRW consumer advice centre offers guidance on how to report home contents insurance claims even without complete documentation.
The consumer advice centre explains the significance of the value of household contents for home contents insurance.
The portal Gesetze im Internet from the Federal Ministry of Justice makes Section 30 of the Insurance Contracts Act (VVG) available regarding pre-contractual disclosure obligations.
Also on Gesetze im Internet you will find Section 28 VVG, which governs the consequences of breaching pre-contractual disclosure obligations.
Section 254 of the Civil Code (BGB) concerning contributory negligence is accessible on Gesetze im Internet.
The Insurance Ombudsman provides an independent arbitration service for disputes between policyholders and insurers.
The GDV (German Insurance Association) provides statistics on the development of claims in home contents insurance in Germany.
FAQ
What happens if I don't report the damage immediately?
A delayed report may lead to a reduction or even loss of entitlement to benefits if it makes it more difficult to determine the damage or if obligations have been breached.
Do I always have to submit invoices for the payout?
Not necessarily for an initial severance payment. However, for full replacement value compensation, particularly including VAT, invoices for the new acquisition or repairs are usually required.
Can the insurance company refuse to pay out a claim?
Yes, for example, if the damage is not insured, obligations have been violated (e.g. late reporting, gross negligence), or in the case of attempted fraud.
How is the value of a very old item determined?
The replacement value principle also applies to old items, meaning the price for a new, similar item is used. If an item is no longer available new (e.g. an antique), the replacement value of a comparable item is determined.
What is the difference between a severance package and a notional settlement?
A settlement is a lump sum offered by the insurer for quick resolution, often without detailed evidence. Fictional billing specifically refers to payment based on an estimate without actual repair, which is legally more complex.
Will I be fully reimbursed if I organise the repair myself?
If you carry out the repair yourself, the material costs are usually reimbursed. The reimbursement of fictitious labour costs is often difficult and depends on the insurer and the conditions. Be sure to clarify this in advance.
