Buildings insurance: understanding and optimising comprehensive protection for your home
04.04.25
8
Minutes
Katrin Straub
Managing Director at nextsure
A storm blows your roof off, a burst pipe floods the basement – damage to your home can quickly become ruinously expensive. Find out what buildings insurance covers and how you can protect yourself from unexpected costs.
The topic in brief and concise terms
Buildings insurance protects against the financial consequences of damage caused by fire, escape of water, storm and hail to the building and permanently attached parts.
Natural hazard insurance is an important add-on cover against natural risks such as flooding, heavy rain and landslides.
Make sure you have a variable new-for-old insurance policy, include cover for gross negligence, and review your policy regularly.
Buildings insurance: the key benefits at a glance
Residential building insurance is essential for homeowners to protect themselves against the financial consequences of damage to their own home. It usually covers the costs of repairs up to the complete rebuilding of the building. Insured parts of the building include the roof, masonry, foundations, as well as permanently installed elements such as heating systems or sanitary installations. The insurance covers a wide range of risks.
Core benefits: What is covered as standard?
The basis of every residential building insurance policy usually consists of three core perils that are covered. This basic cover protects against the most common and often most expensive causes of damage to a building. It is important to know the exact terms of your policy, as there may be slight differences depending on the provider.
Fire, water damage, storm and hail: The cornerstones of cover
The basic perils against which residential building insurance protects are fire (fire, lightning strike, explosion, implosion), escape of water (burst pipes, frost damage) and storm (from wind force seven or eight, depending on the policy), as well as hail. In the event of storm damage, for example, which tears off the roof, the insurer covers the repair costs. Consequential damage, such as rain entering after storm damage, is also often covered. The residential building insurance is therefore fundamental protection for your property.
Practical examples: When does buildings insurance pay out?
To make the benefits more tangible, concrete real-world examples help. Imagine a burst pipe in your kitchen flooding not only it, but also the floor below. The costs for drying out and replacing the flooring can quickly amount to several thousand euros. Another scenario: a severe storm blows off parts of your roof and damages the guttering. Here too, the buildings insurance steps in and covers the repair costs. These examples show how quickly significant financial damage can arise, which without insurance cover could threaten your very existence.
Typical claims and cost coverage
Buildings insurance covers a wide range of claims. Here are some typical situations in which you can expect cover:
A fire, caused by a technical fault, destroys parts of the living room; the insurance pays for windows, doors and flooring.
After heavy rainfall and storms, the basement is flooded; the costs of pumping out the water and drying are covered.
A lightning strike causes a power surge that damages the permanently installed heating system.
Leaking mains water from a defective washing machine damages the parquet flooring in the utility room.
Hailstones smash roof tiles and cause water ingress into the roof structure.
It is important that parts permanently connected to the building are insured, as opposed to movable furnishings, which are covered by contents insurance.
Extended protection: useful add-ons to know
In addition to the basic risks, there are further risks that are not automatically included in every policy, but can often be covered as optional add-ons. One of the most important extensions is natural hazard insurance. This covers damage caused by natural events such as flooding (including heavy rainfall), backflow, earthquakes, subsidence, landslides, snow pressure and avalanches. In view of the increasing number of extreme weather events, this add-on has become indispensable for many homeowners; often it is available for just a few euros more per month.
Natural hazards and further optional cover
Cover against natural hazards is particularly important in at-risk regions, for example along rivers or in areas with heavy snowfall. But even outside these zones, heavy rainfall can cause significant damage. Other optional components may include:
Glass breakage insurance for building and furniture glazing.
Cover for drainage pipes on and outside the insured property.
Inclusion of outbuildings such as garages or garden sheds, if these are not already included in the basic cover.
Insurance for photovoltaic systems, solar systems and heat pumps.
Check carefully which of these additional benefits make sense for your individual situation. Combined protection can often offer advantages.
Expert knowledge: What you should know about the sum insured and terms and conditions
A key aspect of buildings insurance is the sum insured. Today, index-linked reinstatement cover is standard. This ensures that, in the event of a loss, the costs of rebuilding a similar house at current prices are reimbursed, thereby avoiding underinsurance. The premiums are adjusted annually in line with construction price trends. Look out for the so-called waiver of underinsurance in your policy; this guarantees you full cover up to the agreed sum, even if the actual value of the house is higher than originally assumed.
Insurance conditions in detail: what should you look for?
Besides the sum insured, the specific insurance conditions are crucial. Here are some points you should note:
Gross negligence: Many modern tariffs also provide cover for damage caused by gross negligence, for example if you leave a lit candle unattended. This is an important point, as otherwise the benefit could be reduced.
Deductible: A deductible can reduce the premium, but it means that in the event of a claim you bear part of the costs yourself. Weigh up the cost and benefit here; a deductible of no more than 500 euros is often recommended.
Clear-up and demolition costs: These costs should be sufficiently covered, as they can be considerable after a major loss.
Hotel costs/loss of rental income: If your house becomes uninhabitable, the insurance should cover the cost of alternative accommodation or loss of rental income for a certain period.
Our expert tip: Review older policies regularly. They often no longer meet current needs, or newer tariffs offer better benefits on comparable terms. This is especially advisable if you take over the insurance after buying a house.
Costs and obligations: What affects the contribution and what do you need to bear in mind?
The cost of buildings insurance depends on several factors. These include the location of the property (risk zone for natural hazards), the year it was built and the construction method, the living area, and the building’s features and fittings. The selected level of cover and any excesses also play a role. For example, a detached house with 180 square metres, built in 2020, in Coburg can be insured from around €539 per year (including natural hazard cover). It is important to know that the costs can be passed on to tenants.
Duties of the policyholder and conduct in the event of a claim
As the policyholder, you have certain duties (obligations). These include keeping the building in proper condition and heating it sufficiently in winter to prevent frost damage. In the event of a claim, you must report the damage without delay and take measures to minimise the loss (e.g. in the event of a burst pipe, turn off the main stopcock). Document the damage carefully with photos. Keep damaged items until released by the insurer. Special considerations apply to landlords, as they do when the policyholder is not the owner.
Understanding legal aspects and recent rulings
In insurance law, new judgments are continually being handed down that may be relevant for policyholders. For example, in August 2024 the Regional Court of Kassel ruled that the breakage of a drainage pipe in the garden does not constitute damage caused by water escaping from pipes within the meaning of buildings insurance (case no. 5 O 1901/23). Such judgments make clear how important a precise understanding of the insurance terms and conditions is. Another judgment of the Federal Court of Justice (BGH, case no. V ZR 69/21) of 16 September 2022 concerns the excess in homeowners' associations: this must be borne jointly, even if the damage occurs only in the separate property.
Important clauses and court rulings on buildings insurance
The insurance terms and conditions often contain specific clauses whose meaning should be understood. Here are some examples and relevant legal aspects:
VAT: A clause stating that VAT will not be reimbursed if the policyholder is entitled to deduct input tax or VAT has in fact not been paid is generally permissible.
Expert determination proceedings: Even if the terms provide for expert determination proceedings to establish the amount of the loss, a declaratory action against the insurer may still be admissible.
Leaky joints: The Regional Court of Cologne has ruled that leaky joints in a shower do not constitute damp damage covered by the policy under buildings insurance.
Limitation period: The insurer may be barred from relying on a limitation period if it has, over a prolonged period, evaded its obligation to pay in breach of good faith.
Our expert tip: If anything is unclear or there is a dispute with the insurer, legal advice may be worthwhile. Many firms offer collections of current judgments on buildings insurance to hand.
Choosing the right buildings insurance requires a careful analysis of your own needs and a comparison of the offers. The cheapest tariff is not always the best one. Look for a balanced value for money and insurance cover that suits your property and risk situation. Check your policy at least every five years and adjust it if necessary to reflect changed circumstances, for example after modernisations or extensions. A glass insurance policy may be useful depending on the fittings.
Request an individual risk analysis now: Have your insurance situation checked free of charge and receive concrete suggestions for optimisation.
More useful links
Wikipedia offers a comprehensive overview of residential building insurance and its key aspects.
The insurers (German Insurance Association) provide detailed information on residential building insurance.
FAQ
What exactly does buildings insurance cover?
It covers damage to the residential building itself as well as to permanently attached parts (e.g. heating, windows, doors, fitted kitchens, sanitary installations) caused by insured perils such as fire, water escaping from pipes, storm and hail. Outbuildings such as garages can also be insured.
Are damage caused by heavy rain and flooding always covered?
No, damage caused by heavy rain, flooding, backwater and other natural hazards is generally not included in basic cover. For this, you need additional natural hazards insurance.
What is the difference between contents insurance and buildings insurance?
Buildings insurance covers the building itself and permanently installed fixtures. Contents insurance, on the other hand, covers damage to movable household items such as furniture, clothing and electrical appliances.
Does buildings insurance also pay if I caused the damage through gross negligence?
Many modern policies also provide cover in the event of gross negligence, for example if a lit candle was forgotten. Older contracts or basic policies may provide for reductions in benefits here. Check your policy terms and conditions.
What should the deductible be?
A deductible can lower the insurance premium. Experts often recommend a deductible of no more than €500. Consider carefully which amount you can comfortably cover yourself in the event of a claim.
Do I need buildings insurance?
There is no longer a legal obligation in Germany. However, if you finance your house with a loan, banks usually require proof of buildings insurance as security.
