Which insurance policies do landlords really need? Your comprehensive guide for 2025
29.04.25
12
Minutes
Katrin Straub
Managing Director at nextsure
As a landlord, you carry a great deal of responsibility and significant financial risk. Without the right insurance cover, damage to the property or disputes with tenants can quickly become a threat to your financial security. Find out here which insurance policies you absolutely need as a landlord so you can let your property with peace of mind.
The topic in brief and concise terms
For landlords, buildings insurance, property owner’s liability insurance, landlord legal expenses insurance and loss of rent insurance are essential.
Some insurance costs (e.g. building insurance, homeowners' liability insurance) can be passed on to tenants, while others (e.g. legal expenses cover, loss of rental income) are tax-deductible.
Regular review and adjustment of insurance cover, as well as good documentation, are essential for landlords.
The essential basics: understanding buildings insurance for landlords
The buildings insurance is the foundation for every property owner and therefore one of the most important answers to the question of which insurance policies a landlord needs. It protects the fabric of your rental property from significant financial damage. A burst pipe, for example, can quickly cause costs of over €10,000. This insurance usually covers damage caused by fire, escape of water, storm and hail. Many landlords underestimate the risk of natural hazards such as flooding or heavy rainfall, which can often run into six-figure sums. These can usually be covered by an additional option. The cost of buildings insurance varies depending on the size, age and location of the property, but often starts at around €100 per year for basic cover. One important aspect is recoverability: the premiums for buildings insurance can be passed on to tenants as operating costs, provided this is agreed in the tenancy agreement. Without this protection, in the worst case you would have to finance the entire rebuild out of your own pocket. This makes it clear why this insurance comes first when it comes to protecting your investment property.
Minimising liability risks: home and property owners' liability insurance
As the owner of a rented property, you have a duty of care; for example, in winter you must ensure that paths are cleared. If an accident occurs because a passer-by slips on black ice and is injured, you, as the landlord, are liable. Buildings and property owners’ liability insurance is therefore essential and answers another part of the question of which insurance a landlord needs. It covers personal injury and property damage caused to third parties on your property or by your property. The cost of such a policy is often low and starts at around €40 per year. Especially important: your private liability insurance is not sufficient for rented properties. In the case of owners’ associations (WEG), this insurance is usually taken out centrally via the property management for the entire building. The premiums for buildings and property owners’ liability insurance can also be passed on to tenants. This cover protects you against potentially ruinous compensation claims, which can quickly exceed several tens of thousands of euros.
Legal certainty in tenancies: landlord legal expenses insurance
Disputes with tenants are unfortunately not uncommon and can cause significant costs. Whether it concerns unpaid rent, a disputed utility/service charge statement or damage after move-out, legal proceedings are often lengthy and expensive. A landlord legal expenses insurance policy covers legal fees, court costs and expert fees. Annual premiums start at around €250. This insurance is an important building block when considering which insurance policies a landlord needs to protect against the financial consequences of legal disputes. An average eviction process can cost between €2,000 and €5,000, excluding legal fees. Unlike building or liability insurance, the costs of landlord legal expenses insurance cannot be passed on to tenants. However, they are usually tax-deductible as business expenses on your tax return. Our expert tip: make sure you have sufficient cover and check whether mediation is also included in the insurance cover, so that conflicts can be resolved out of court.
Protection against payment defaults: rent loss insurance
Tenants who default on rent or are unable to pay pose a significant financial risk for landlords. The rental loss insurance, often also referred to as tenant default insurance, steps in when rental income fails to materialise. Estimates suggest that annual rent losses in Germany amount to around 2.2 billion euros. This insurance covers not only the lost rent including service charges for a certain period (often up to twelve months), but frequently also the costs of renovation or restoration after vandalism. Premiums for rental loss insurance start at around 99 euros per year. It is important to know that these insurance costs cannot be passed on to the tenant. However, they can be claimed for tax purposes as business expenses. Given the potentially high losses, this policy is a sensible addition when asking which insurance landlords need. The following points should be considered when choosing rental loss insurance:
Duration of benefit coverage (e.g. six, twelve or 24 months).
Amount of the excess.
Cover for property damage and its maximum amount.
Waiting periods until benefits become payable.
Requirements for the insured event to occur (e.g. a legally binding eviction order).
Careful review of the contractual terms and conditions is particularly important here.
Special cases and useful additions to the insurance package
In addition to the core policies mentioned, there are other policies that may be relevant depending on the situation when considering which insurance you need as a landlord. If you let out your property furnished, contents insurance for your furnishings is advisable. The cost of this can be passed on to the tenant in furnished flats. Glass insurance, often added to buildings insurance, covers breakage damage to glazing in the building and furnishings and costs from around €35 extra per year. For landlords of flats in multi-occupancy buildings, separate landlord liability insurance may be useful if the WEG's building and landowners' liability insurance does not cover all risks or for damage within the rented unit. Our expert tip: Review your insurance cover regularly, at least every two to three years. Adjust it as needed to reflect changed circumstances such as renovations or new legal requirements. A consultation with experts can help identify gaps. Also remember to ask your tenants for proof of private liability insurance to cover damage to the rental property caused by the tenant. This is not mandatory for the tenant, but it is an important safeguard for both parties.
Cost optimisation: recoverability and tax aspects
A key aspect when considering which insurance policies a landlord needs is the costs and how they are handled. Many landlords do not realise that they can legally apportion part of the insurance costs to their tenants. This typically includes premiums for buildings insurance and landowner’s liability insurance. The prerequisite is an appropriate agreement in the tenancy contract, usually via the service charge statement. The ability to apportion these costs can reduce the financial burden for landlords by up to 50 per cent, depending on the property and the contract. Insurance policies that primarily protect the landlord’s financial interest, such as legal expenses insurance or rental income protection insurance, cannot be passed on to tenants. However, these can usually be claimed as business expenses in the tax return, which can reduce the tax burden by the individual tax rate, for example 25 per cent. Accurate documentation of all insurance expenses is essential for correct apportionment and tax deductibility. It is worth checking the details of apportionability carefully so as not to give away any financial advantages. The correct handling of these costs is an important step towards running a property profitably.
To ensure the best possible protection when considering which insurance a landlord needs, you should take a few expert tips into account. First: carry out regular risk assessments of your property, at least once a year. Identify potential sources of danger such as old pipes or loose roof tiles to prevent damage. Second: document the condition of the property and the contents (in the case of furnished lettings) in detail with photos before every tenant changeover. This can be crucial in the event of damage or disputes over deposits, and can speed up dealings with insurers by up to 30 per cent. Third: choose sums insured that correspond to the actual value of your property and potential risks. Underinsurance can lead to significant financial losses in the event of a claim. Our expert tip: when arranging buildings insurance, make sure it includes 'index-linked reinstatement value' so that you also receive full compensation if construction costs rise. Fourth: inform your tenants about any existing insurance policies and explain their obligations to them, for example regarding reporting damage. Good communication can prevent many problems from the outset. These proactive measures are the ideal complement to your insurance cover.
Your next step to hassle-free letting
Choosing the right insurance is a decisive factor for the long-term success and security of your rental business. It is not only about which insurance landlords need, but also about finding the protection that suits your individual needs. A careful analysis of your specific risks and requirements is essential. nextsure supports you as a digital insurance portal in finding tailored and easy-to-understand insurance solutions. We offer comprehensive advice on niche insurance and individual protection solutions. Use our expertise to protect your property optimally and minimise financial risks. Request your personalised risk analysis now.
Request a personalised risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for improvement.
More useful links
The Federal Statistical Office provides comprehensive information on housing in Germany.
The Consumer Advice Centre provides detailed information on the need for buildings insurance for homeowners.
Laws on the Internet provides the full text of Section 535 of the German Civil Code (BGB), which governs the content and main obligations of the tenancy agreement.
The Insurers, the German Insurance Association, provides further information on buildings insurance.
Haufe highlights the liability risks that can arise from contracts, in particular tenancy agreements.
The Federal Court of Justice (BGH) provides a relevant ruling on tenancy law.
The German Bundestag provides access to various documents and search results on tenancy law via its document information system.
FAQ
Which insurance policies are most important for me as a landlord?
The four most important types of insurance are building insurance, homeowners’ and property owners’ liability insurance, landlord legal protection insurance and loss-of-rent insurance. These cover the greatest financial risks.
Do I have to inform my tenants if I don't have buildings insurance?
Yes, if you decide not to take out buildings insurance, you are obliged to inform your tenants of this before they sign the tenancy agreement.
What is the difference between personal liability insurance and house and property owner liability insurance?
Private liability insurance covers damage you cause to others as a private individual. Property owners' liability insurance, on the other hand, covers damage caused to third parties by your rented property or your land (e.g. a loose roof tile falls onto a car). For rented properties, private liability insurance is not sufficient.
Are the costs of landlord insurance tax-deductible?
Yes, many insurance contributions can be claimed for tax purposes. Apportionable insurance policies (such as buildings insurance) reduce income if they are passed on as operating costs. Non-apportionable insurance policies (such as legal expenses or loss-of-rent insurance) can often be deducted as advertising expenses.
What happens if my homeowners' association (WEG) already has insurance policies?
In a condominium owners' association, the property management company usually arranges building insurance and property owners' liability insurance for the entire building. Clarify which risks are covered by this and whether additional cover makes sense for your separate property or specific landlord risks (such as loss of rent).
Does buildings insurance also cover damage caused by problem tenants?
No, buildings insurance typically covers damage to the building caused by fire, water damage, storm, etc. For damage caused by rogue tenants (e.g. vandalism, unpaid rent), you need separate loss-of-rent or rogue tenant insurance. Find out more about the difference between buildings insurance and contents insurance.
