Which insurances do landlords really need? Your comprehensive guide for 2025
29 Apr 2025
12
Minutes
Katrin Straub
CEO at nextsure
As a landlord, you bear a significant responsibility and considerable financial risks. Without the right insurance coverage, property damage or disputes with tenants can quickly become existential threats. Find out here which insurance policies you absolutely need as a landlord to rent out with peace of mind.
The topic in brief and concise terms
For landlords, building insurance, homeowner liability insurance, landlord legal protection, and rent loss insurance are essential.
Some insurance costs (e.g., building insurance, homeowner liability) can be passed on to tenants, while others (e.g., legal protection, loss of rent) are tax-deductible.
A regular review and adjustment of insurance coverage, along with good documentation, are essential for landlords.
The Essential Foundation: Understanding Building Insurance for Landlords
The Residential Building Insurance is the foundation for every property owner and thus one of the most important answers to the question of which insurances a landlord needs. It protects the fabric of your rental property from significant financial damages. A burst pipe, for example, can quickly result in costs exceeding €10,000. The insurance typically covers damage from fire, tap water, storms, and hail. Many landlords underestimate the risk of elemental damage such as flooding or heavy rain, which can often amount to six-figure sums. These can usually be insured with an additional module. The cost of residential building insurance varies depending on the size, age, and location of the property, but often starts at around €100 annually for basic protection. An important aspect is the ability to allocate costs: The premiums for residential building insurance can be passed on to tenants as operating costs, provided this is agreed upon in the rental contract. Without this protection, you might, in the worst-case scenario, have to finance the entire reconstruction yourself. This highlights why this insurance is paramount when it comes to protecting your capital investment.
Minimising Liability Risks: Home and Landowner Liability Insurance
As the owner of a rented property, you have traffic safety obligations; for example, you must ensure cleared paths during winter. If an accident occurs because a passer-by slips on ice and gets injured, you, as the landlord, are liable. Therefore, house and landowner liability insurance is essential and answers another part of the question about which insurances you need as a landlord. It covers personal and property damage that occurs to third parties on your property or through your property. The cost of such a policy is often low, starting at around 40 euros per year. Especially important: Your personal liability insurance is not sufficient for rented properties. In the case of condominium owner associations (WEG), this insurance is usually arranged centrally through the property management for the entire building. The contributions to house and landowner liability can also be passed on to the tenants. This protection safeguards you against potentially ruinous compensation claims, which can quickly exceed several tens of thousands of euros.
Legal certainty in tenancy: Landlord legal protection insurance
Disputes with tenants are unfortunately not uncommon and can result in significant costs. Whether it's about unpaid rent, a disputed service charge statement, or damage after moving out – a legal dispute is often lengthy and expensive. Landlord legal protection insurance covers attorney, court, and expert fees. Annual premiums start at around 250 euros. This insurance is an important component when considering which insurances a landlord needs to protect themselves against the financial consequences of legal disputes. An average eviction process can incur costs of 2,000 to 5,000 euros, excluding legal fees. Unlike building or liability insurance, the costs for landlord legal protection cannot be passed on to tenants. However, they are generally deductible as advertising expenses on the tax return. Our expert tip: Ensure you have a sufficient coverage limit and check if mediation is included in the insurance coverage to resolve conflicts out of court.
Protection against payment defaults: Rent default insurance
Rental nomads or tenants unable to pay pose a significant financial risk for landlords. The rental loss insurance, often referred to as squatters insurance, steps in when rental income ceases. Estimates suggest that annual rental losses in Germany amount to around 2.2 billion euros. This insurance not only covers lost rent, including utilities, for a specified period (often up to twelve months) but frequently also costs for renovation or repair following vandalism. Premiums for rental loss insurance start at approximately 99 euros per year. It is important to know that these insurance costs cannot be passed onto the tenant. However, they can be claimed as business expenses for tax purposes. Given the potentially high losses, this policy is a sensible addition when considering which insurances a landlord needs. The following points should be considered when selecting rental loss insurance:
Duration of coverage (e.g., six, twelve, or 24 months).
Amount of deductible.
Coverage of property damage and its maximum amount.
Waiting periods before benefits apply.
Conditions for eligibility (e.g., legally binding eviction order).
A careful review of the contract terms is especially important here.
Special cases and useful additions in the insurance package
In addition to the core insurances mentioned, there are other policies that may be relevant depending on the situation when considering which insurances a landlord needs. If you rent out your property furnished, contents insurance for your inventory is recommended. The costs for this can be passed on to the tenant in furnished apartments. A glass insurance, often an addition to the building insurance, covers breakage damage to building and furniture glazing and costs from about €35 extra per year. For landlords of apartments in multi-family houses, a separate landlord liability insurance can be sensible if the building and land owner's liability of the association does not cover all risks or for damages 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 changes like renovations or new legal requirements. Advice from experts can help identify gaps. Also, remember to ask your tenants for proof of personal liability insurance to safeguard against tenant-caused damages to the rental property. While it's not mandatory for the tenant, it's an important protection for both parties.
Cost Optimization: Apportionability and Tax Aspects
An important aspect to consider when determining which insurance policies a landlord needs is the cost and management thereof. Many landlords are unaware that they can legally pass on part of the insurance costs to their tenants. This typically includes premiums for the building insurance and landlord liability insurance. This requires an agreement in the rental contract, usually through the service charge statement. The ability to pass on these costs can reduce the financial burden for landlords by up to 50 percent, depending on the property and contract. Insurances primarily protecting the landlord's financial interests, such as legal protection or rental income 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 percent. Accurate documentation of all insurance expenses is essential for proper pass-on and tax deductibility. It is worthwhile to examine the details of pass-on eligibility carefully to avoid missing out on financial advantages. Proper management of these costs is an important step towards economic renting.
Expert tips for optimal landlord protection
To ensure optimal protection when considering what insurance landlords need, you should take into account some expert tips. Firstly: Conduct regular risk assessments of your property, at least once a year. Identify potential hazards such as old pipes or loose roof tiles to prevent damage. Secondly: Document the condition of the property and inventory (for furnished rentals) in detail with photos before each tenant change. This can be crucial in case of damage or disputes over deposits and can expedite the processing with insurers by up to 30 percent. Thirdly: Choose insurance sums that correspond to the actual value of your property and potential risks. Underinsurance can lead to significant financial losses in the event of damage. Our expert tip: Ensure that your building insurance includes "sliding new value" coverage to receive full compensation even as construction costs rise. Fourthly: Inform your tenants about existing insurance policies and clarify their duties, such as reporting damage. Good communication can prevent many problems from the outset. These proactive measures ideally complement your insurance coverage.
Your next step towards worry-free renting
More useful links
Das Statistische Bundesamt provides comprehensive information on housing in Germany.
Die Verbraucherzentrale provides detailed information on the necessity of a building insurance for homeowners.
Gesetze im Internet offers the full text of Section 535 of the Civil Code (BGB), which governs the content and main obligations of the lease agreement.
Die Versicherer, the German Insurance Association, provides further information on building insurance.
Haufe highlights the liability risks arising from contracts, particularly lease agreements.
Der Bundesgerichtshof (BGH) provides an important ruling on rental law.
Der Deutsche Bundestag offers access to various documents and search results on rental law through its documentation information system.
FAQ
What insurance is most important for me as a landlord?
The four most important insurance policies are the residential building insurance, the homeowners and landowners liability insurance, the landlord legal protection insurance, and the loss of rent insurance. These cover the largest financial risks.
Do I need to inform my tenants if I don't have building insurance?
Yes, if you choose not to take out building insurance, you are obliged to inform your tenants before signing the rental agreement.
What is the difference between personal liability insurance and homeowner and landowner liability insurance?
Private liability insurance covers damage caused by you as a private individual to others. However, homeowner and landowner liability covers damage caused to third parties by your rented property or land (e.g., a loose roof tile falls onto a car). For rented properties, private liability insurance is not sufficient.
Are the costs for landlord insurance tax-deductible?
Yes, many insurance contributions can be claimed for tax purposes. Apportionable insurances (such as building insurance) reduce income when passed on as operating costs. Non-apportionable insurances (such as legal protection or rent loss) can often be deducted as advertising expenses.
What happens if my homeowners' association (WEG) already has insurance?
In a condominium owners' association, the property management generally takes out residential building insurance and owner’s liability insurance for the entire building. Clarify which risks are covered as a result and whether additional coverage is sensible for your special property or specific landlord risks (such as loss of rent).
Does the homeowners insurance also cover damages caused by squatters?
No, building insurance typically covers damage to the building caused by fire, water pipes, storms, etc. For damage caused by rent dodgers (e.g., vandalism, unpaid rent), you need a separate rent guarantee or rent dodger insurance. Learn more about the <a href="/blog/unterschied-wohngebaudeversicherung-und-hausratversicherung">difference between building insurance and home contents insurance</a>.
