Smart home insurance: your digital shield for the connected home
23.11.2025
6
Minutes
Katrin Straub
Managing Director at nextsure
A smart thermostat fails, the heating system is overloaded and the result is water damage worth €5,000. Specialist smart home insurance protects you against the new risks of home automation. Find out how to choose the right cover for your connected devices.
The topic in brief and concise terms
A smart home insurance policy closes critical gaps by covering cyber attacks, user errors and surge damage that standard policies often exclude.
Inform your insurer in accordance with Section 23 of the German Insurance Contract Act (VVG) about expensive smart home installations, so you can report an increase in risk and avoid jeopardising your claim to benefits.
Check whether permanently installed components (buildings insurance) and portable devices (contents insurance) are properly insured, and adjust the sum insured to reflect the value of your equipment.
Fact check: The three core benefits of smart home insurance
A smart home insurance policy extends the classic protection of your four walls to include digital risks. It typically covers three core areas that are often missing from standard policies. Firstly: protection against cyberattacks, which can cause damage costing an average of €950 per incident. Secondly: cover against user errors, which can quickly lead to faults in complex systems. Thirdly: compensation for surge damage, which can destroy sensitive electronics often worth over €800. Many users underestimate that even a single incident can exceed the cost of insurance by five times. A good smart all-risk insurance policy bundles these benefits. This cover is crucial, as the number of connected households in Germany has surpassed five million.
Damage analysis: How to avoid coverage gaps with connected technology
The distinction between different types of insurance is crucial in practice for your protection. Not every smart device is automatically covered under a single policy. Correct classification prevents a cover gap of up to 100 per cent in the event of a claim. Permanently installed components such as smart heating controls or built-in alarm systems are covered by buildings insurance. Portable devices, for example smart speakers or your coffee machine, on the other hand, fall under contents insurance. Damage caused by a hacked robot vacuum cleaner that triggers a short circuit is settled differently from a faulty water sensor. A common mistake is setting the sum insured too low, which does not take into account the value of often expensive smart home devices costing between €1,000 and €3,000. The following list shows typical claims and the relevant insurance:
A malfunction of the smart thermostat leads to frost damage to a water pipe (buildings insurance).
Hackers take over the smart lighting control and cause damage from an overvoltage (cyber add-on or smart home policy).
Burglars steal the television after the smart camera has been deactivated (contents insurance).
An operating error damages the software of the central control hub (electronics or smart home policy).
A faulty smart smoke detector triggers a false alarm for the fire brigade, resulting in costs of over €500 (liability insurance).
Analysing your individual equipment is the first step towards comprehensive protection.
Expert knowledge: legal obligations and key contractual clauses
As the operator of a smart home, you have legal obligations, and failing to comply with them can jeopardise your insurance cover. Under Section 23 of the Insurance Contract Act (VVG), you are obliged to notify your insurer of a so-called increase in risk. The installation of a comprehensive smart home system valued at over 2,500 euros usually falls under this. If you fail to disclose the upgrade, the insurer may reduce the benefit in the event of a claim by up to 100 per cent. Therefore, always obtain written confirmation of your notification. Also pay attention to the details in the small print of your policy. Look specifically for clauses that include damage caused by gross negligence, such as the use of standard passwords. A ruling by the Bochum Regional Court strengthened consumer rights by requiring the manufacturer Abus to provide clearer information about security vulnerabilities in a smart door lock. This shows that product security also plays a role. Our expert tip: keep an accurate list of all smart home components, including purchase price and installation date. This documentation speeds up claims settlement by up to 50 per cent.
Cyber threats: How to effectively protect your digital home
The greatest threat to a smart home comes from cybercriminals, who cause millions in damage every year. A successful attack can not only put your data at risk, but also cause physical damage. A specialist cyber insurance policy for private individuals covers the costs of data recovery, device repair and even liability claims if your system is used to attack third parties. The costs of such recovery can quickly exceed EUR 1,000. Many policies also cover the consequences of identity theft, a risk that grows with every connected device. To minimise your risk, you should implement at least three of the following measures:
Separate your smart home network from the rest of your Wi-Fi using a guest network to isolate attacks.
Change all default passwords to unique, strong passwords with at least twelve characters, numbers and special characters.
Enable automatic software updates for all devices to close security gaps promptly.
Disable any unused remote access functions, as these often serve as an entry point for hackers.
Good digital protection is the foundation of any cyber insurance solution.
Special case energy technology: properly insuring photovoltaics and heat pumps
Smart energy technology such as photovoltaic systems or heat pumps places particular demands on insurance cover. A standard buildings insurance policy often only covers basic damage such as fire or storm, but not specific risks such as operator error, animal bites or loss of income. The financial loss caused by loss of income can quickly amount to €200 per month for an average 10 kWp system. A specialised insurance for heat pumps or an all-risk photovoltaic cover is the solution here. Make sure that the policy also covers gross negligence and damage to external system components, which is not the case in over 30 per cent of standard contracts. These policies are often available as an add-on to your home and contents insurance. This ensures that your investment, often worth more than €15,000, is fully protected.
Risk analysis: Find the right smart home insurance
The right protection for your smart home is always an individual decision, depending on your equipment and risk appetite. A simple lighting control system requires less protection than a fully networked security system worth over €4,000. Start with an inventory: list all smart devices and assess their total value. Then check your existing policies for cover against power surges and cyber risks. Often, adding supplementary modules, such as natural hazard insurance for outdoor sensors, is the most economical solution. For expensive individual devices, a dedicated device insurance policy may make sense. As a rule of thumb: once the value of your smart home technology exceeds five per cent of the contents insurance sum insured, a dedicated policy or an upgrade is advisable. Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific optimisation recommendations.
More useful links
Statista offers an outlook on the smart home market in Germany.
Bitkom provides a press release on the spread of smart home applications in German households.
The Federal Statistical Office (Destatis) offers a table on the equipment of German households with smart devices and systems.
The Consumer Advice Centre provides comprehensive information on the topic of smart homes and the intelligent home.
The Consumer Advice Centre Bavaria publishes a press release on the benefits and risks of smart homes.
FAQ
What is the difference between smart home insurance and electronics insurance?
Electronic insurance usually covers individual devices against damage such as operator error, breakage or wear and tear. A smart home insurance policy offers more comprehensive protection, safeguarding the entire connected system, including the software and data, especially against cyber risks, hacking and resulting consequential damage.
Are damages caused by gross negligence also covered?
That depends on the tariff. Modern and high-performance tariffs often include damage caused by gross negligence, such as the use of an insecure password. It is important, when taking out the contract, to look out for the clause “waiver of the defence of gross negligence”, as this is not the case with more than 40 per cent of basic tariffs.
How high should the sum insured for my smart home be?
The sum insured should correspond to the replacement value of all your smart home components. Create a list of all devices (sensors, actuators, central control unit, smart household appliances) and add up the purchase costs. Adjust the sum insured on your contents or buildings insurance accordingly to avoid underinsurance.
Does the insurance also cover me when I’m on holiday?
Yes, the insurance cover applies worldwide and around the clock, so also during your absence. Some plans even offer additional assistance services, where in the event of a claim during your holiday a security service or tradesperson is automatically notified.
What happens if a device causes damage to my neighbour?
If your smart home system causes damage to third parties (e.g. a burst pipe caused by faulty control floods the neighbouring flat), your private liability insurance will usually apply. Check whether it also explicitly includes damage caused by data transmission and networked systems.
Are smart home systems installed by yourself also insured?
Yes, as a rule it does not matter whether the system was installed by a specialist or by yourself. What is important is that the installation was carried out properly. However, in the event of damage that is clearly attributable to a serious installation error, the insurer may reduce the benefit.
