Smart Home Insurance: Your digital shield for the connected home
23 Nov 2025
6
Minutes
Katrin Straub
CEO at nextsure
A smart thermostat fails, the heating system overloads, and a water damage costing 5,000 euros is the result. A specialized smart home insurance protects you against the new risks of home automation. Discover how you can find the right protection for your connected devices.
The topic in brief and concise terms
A smart home insurance policy closes critical gaps by covering cyber-attacks, operational errors, and overvoltage damage, which are often excluded from standard policies.
Inform your insurer according to Section 23 of the Insurance Contract Act (VVG) about expensive smart home installations to notify an increase in risk and ensure your entitlement is not compromised.
Check whether permanently installed parts (residential building insurance) and mobile devices (household insurance) are adequately insured and adjust the sum insured to the value of your equipment.
Fact Check: The three core benefits of the Smart Home Insurance
A smart home insurance policy expands the traditional protection of your four walls to include digital threats. It typically covers three core areas that are often missing in standard policies. Firstly: protection against cyber attacks, which can cause an average damage of 950 Euros per incident. Secondly: coverage against user errors, which can quickly lead to defects in complex systems. Thirdly: replacement for overvoltage damage, which can destroy sensitive electronics valued at often over 800 Euros. Many users underestimate that a single incident can exceed the cost of insurance by five times. A good smart all-risks insurance combines these benefits. This protection is crucial as the number of connected households in Germany has exceeded the five million mark.
Damage analysis: How to avoid coverage gaps in connected technology
The distinction between different types of insurance is crucial in practice for your protection. Not every smart device is automatically covered by a single policy. Assigning the correct cover prevents a coverage gap of up to 100 percent in the event of a claim. Fixed components such as a smart heating control or built-in alarm systems are covered by the building insurance. Movable devices, such as smart speakers or your coffee machine, fall under the contents insurance. Damage caused by a hacked vacuum robot leading to a short circuit is regulated differently than a faulty water sensor. A common mistake is setting an insurance sum too low, which does not account for the value of often expensive smart home devices between 1,000 and 3,000 euros. The following list shows typical claims and the corresponding insurance:
Malfunction of the smart thermostat leads to frost damage to the water pipe (building insurance).
Hackers take over the smart lighting control and cause surge damage (cyber-add-on or smart home policy).
Burglar steals the television after disabling the smart camera (contents insurance).
A user error damages the software of the central control hub (electronics or smart home policy).
A defective smart smoke detector triggers a false fire brigade alarm, incurring costs over 500 euros (liability insurance).
Analysing your individual setup 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, the neglect of which may jeopardise your insurance cover. According to Section 23 of the Insurance Contract Act (VVG), you are required to report any increase in risk to your insurer. The installation of a comprehensive smart home system valued at over 2,500 euros usually falls under this category. If you fail to disclose the upgrade, the insurer may reduce the payout in the event of a claim by up to 100 percent. Therefore, always obtain written confirmation of your notification. Also, pay attention to the fine print details in your policy. Specifically search for clauses that include damage caused by gross negligence, such as the use of default passwords. A ruling by the Bochum District Court strengthened consumer rights by obliging the manufacturer Abus to provide clearer information about security vulnerabilities in a smart door lock. This indicates that product safety also plays a role. Our expert tip: Maintain a detailed list of all smart home components along with purchase price and installation date. This documentation accelerates claims processing by up to 50 percent.
Cyber threats: How to effectively protect your digital home
The greatest threat to a smart home comes from cybercriminals, who cause millions in damages annually. A successful attack can endanger not only your data but also cause physical harm. A specialised cyber insurance for private individuals covers the costs for data recovery, device repair, and even liability claims if your system is used to attack third parties. The costs for such recovery can quickly exceed 1,000 euros. 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:
Isolate your smart home network from the rest of the Wi-Fi via a guest access to contain attacks.
Change all default passwords to unique, secure passwords with at least twelve characters, numbers, and symbols.
Enable automatic software updates for all devices to promptly close security gaps.
Disable unused remote access features, as these often serve as entry points for hackers.
Good digital protection is the foundation of any cyber insurance solution.
Special Case Energy Technology: Properly Securing Photovoltaics and Heat Pumps
Smart energy technology like photovoltaic systems or heat pumps requires specific insurance coverage. A standard residential building insurance policy often only covers basic damages like fire or storm, but not specific risks like operational errors, animal bites, or loss of earnings. The financial loss from a loss of earnings can quickly amount to 200 euros per month for an average 10 kWp system. A specialised insurance for heat pumps or all-risks photovoltaic coverage is the solution here. Make sure the policy also covers gross negligence and damage to external system components, which is not the case with more than 30 percent of standard contracts. These policies are often available as an additional module to your home insurance. This ensures that your investment of often more than 15,000 euros is fully protected.
Risk Analysis: Find the Right Smart Home Insurance
The right protection for your smart home is always an individual decision that depends on your setup and risk tolerance. A simple lighting control system requires less protection than a fully networked security system valued at over €4,000. Start with an inventory: list all smart devices and evaluate their total value. Then, check your existing policies for coverage against power surges and cyber risks. Often, adding additional modules, such as natural disaster insurance for outdoor sensors, is the most economical solution. For expensive individual devices, specialized device insurance may be advisable. A rule of thumb says: Once the value of your smart home technology exceeds five percent of the household insurance sum, a dedicated policy or upgrade is recommended. Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete optimization suggestions.
More useful links
Statista provides an outlook on the Smart Home market in Germany.
Bitkom offers a press release on the spread of Smart Home applications in German households.
The Federal Statistical Office (Destatis) provides a table on the equipment of German households with smart devices and systems.
The Consumer Advice Centre offers comprehensive information on Smart Homes and intelligent living.
The Consumer Advice Centre Bavaria publishes a press release on the comfort and risks of Smart Homes.
FAQ
What is the difference between a smart home insurance and an electronics insurance?
An electronics insurance policy usually covers individual devices against damages such as operating errors, breakage, or wear and tear. A smart home insurance provides more comprehensive protection, securing the entire interconnected system including software and data, particularly against cyber risks, hacking, and resulting consequential damage.
Are damages resulting from gross negligence also covered?
That depends on the plan. Modern and comprehensive plans often include coverage for damages caused by gross negligence, such as using an insecure password. It's important to pay attention to the clause 'waiver of objections due to gross negligence' when signing a contract, as this is not the case for over 40 percent of basic plans.
What should the insurance coverage for my smart home be?
The insurance amount should correspond to the new value of all your smart home components. Create a list of all devices (sensors, actuators, control units, smart household appliances) and add up the purchase costs. Adjust the sum of your household or building insurance accordingly to avoid underinsurance.
Does the insurance also apply when I'm on holiday?
Yes, the insurance coverage is valid worldwide and around the clock, even during your absence. Some policies even offer additional assistance services, where in the event of a claim during your holiday, a security service or handyman 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 pipe burst due to faulty control floods a neighbouring apartment), your private liability insurance usually covers it. Check if this also explicitly includes damage through data transmission and networked systems.
Are self-installed smart home systems also insured?
Yes, as a rule, it does not matter whether the system was installed by a professional or by yourself. What is important is that the installation was carried out properly. However, in cases where damage is clearly attributable to a gross installation error, the insurer may reduce benefits.
