Building insurance: Who covers the costs – tenant or landlord?
3 Apr 2025
6
Minutes
Katrin Straub
CEO at nextsure
The question of who bears the cost of building insurance affects millions of tenants and landlords in Germany. Unclear regulations can quickly lead to financial discrepancies. This article sheds light on the responsibilities and demonstrates how costs can be distributed fairly and in accordance with the law.
The topic in brief and concise terms
The landlord takes out the building insurance but can pass on the costs to the tenants through service charges if contractually agreed.
The basis for the apportionment is § 2 No. 13 of the Operating Costs Ordinance (BetrKV); the principle of economic efficiency must be observed.
Tenants have the right to inspect the insurance policy and to review the service charge statement within twelve months, raising any objections if necessary.
Understanding the cost distribution of home insurance
The responsibility for taking out residential building insurance primarily lies with the property owner. They initially also pay the insurance premiums. The annual costs for a single-family house with one hundred square meters can range between two hundred and seven hundred euros.
However, these costs can be passed on to tenants under certain conditions. This is a common practice, but it must be clearly stipulated in the rental agreement. Without such an agreement, the landlord bears the costs alone. The distribution is then usually done via the annual service charge statement. It is important for tenants to know that they must bear a part of these costs if it is contractually agreed.
Key Points on Cost Coverage
Here are the most important points regarding who pays for the residential building insurance:
The landlord takes out the residential building insurance and pays the premiums.
The costs can be passed on to the tenants if this is agreed in the rental contract.
The allocation is made via the service charge statement.
The legal basis is § 2 number 13 of the Operating Costs Ordinance (BetrKV).
Tenants have the right to inspect the insurance policy.
Not all insurance costs can be passed on; pure landlord risks, such as rent default insurance, are excluded unless the rent default is part of the building insurance.
These quick facts provide an initial orientation in the complex field of insurance costs. The following sections delve deeper into these aspects with practical examples and legal details.
Accurately apply the legal basis for allocating insurance costs
The most important legal source for the allocation of operating costs, including building insurance, is the Operating Costs Ordinance (BetrKV). Specifically, § 2 number 13 BetrKV lists the “costs of insuring the building against fire, storm, water, and other elemental damage” as allocable incidental costs. This regulation provides the basis for landlords not bearing the premiums alone. Insurance against elemental damage may also fall under this category.
For the allocation to be lawful, it must be explicitly agreed in the rental contract. A general reference to the BetrKV often suffices. In the absence of such a clause, the landlord shoulders the costs. Costs must be clearly and comprehensibly listed as “insurance” or “building insurance” in the service charge statement; a generic term like “other incidental costs” is inadequate. Tenants have the right to inspect the insurance policy and payment receipts to verify the accuracy of the statement and compliance with the principle of economic efficiency. This principle obliges the landlord not to conclude unnecessarily expensive insurance. Exceeding typical market costs by more than twenty percent may be deemed uneconomical.
The correct application of these legal provisions is crucial for a conflict-free tenancy.
Correctly structuring the allocation of residential building insurance in practice
In practice, the allocation of residential building insurance costs is usually based on the proportion of the living area. For instance, if an apartment has eighty out of a total of four hundred square meters of living space in the building, the tenant of this apartment bears twenty percent of the insurance costs. This distribution key must be mentioned in the rental agreement, or if no arrangement has been made, it follows from § 556a BGB, which also stipulates living area as the standard.
A landlord who owns a house with three apartments (one hundred square meters, two of fifty square meters each) might distribute the costs accordingly: fifty percent for the large apartment, twenty-five percent for each of the smaller ones. It is important that only the actual, chargeable costs are passed on. Costs not eligible for allocation include, for example, those for pure rent loss insurance or the landlord's personal liability insurance. An exception is the rent loss insured in the building insurance due to damage to the building; according to a BGH ruling (VIII ZR 38/17), these costs are eligible for allocation. Landlords are advised to closely examine the necessary insurances.
The following documents should be ready for transparent allocation:
The current insurance policy.
A clear overview of the chargeable cost shares.
The exact billing period.
Proof of premium payments made.
Careful documentation and clear communication help to avoid misunderstandings regarding service charge settlements.
Expert knowledge: Rights, obligations and recent rulings on cost coverage
Both tenants and landlords have specific rights and obligations concerning building insurance. Tenants are allowed to review the insurance policy to verify the appropriateness of the premium and the correct allocation. If a tenant finds that the insurance is disproportionately expensive – for example, more than twenty percent above the average of comparable tariffs – they can lodge an objection. The deadline for objecting to the utility bill is twelve months after receipt.
Landlords are required to observe the principle of economic efficiency. This means they are not allowed to take out overpriced insurance and pass it on to the tenants. They must also disclose the costs correctly and transparently in the utility bill. Our expert tip: Landlords should regularly review and if necessary adjust their building insurance conditions to ensure market-appropriate premiums. This is particularly relevant because while the question "Do you need building insurance?" is usually answered with yes for the owner, cost allocation is flexible.
An important judgment of the Federal Court of Justice (BGH, Az. VIII ZR 38/17) confirmed that costs for loss of rent, covered as part of building insurance, may be passed on to tenants. This differs from a separate loss of rent insurance, the costs of which must be borne by the landlord themselves. For homeowners' associations, taking out fire insurance, usually within the framework of comprehensive building insurance, is even legally required (§ 19 Abs. 2 Nr. 3 WEG). Knowing such details, as well as the difference between building and home contents insurance, benefits all parties involved.
Identifying cost factors and optimization potential in residential building insurance
The cost of a residential building insurance is influenced by various factors. These include the sum insured, the size and the year of construction of the building, the construction method, and the location of the property. A house in a region with a high risk of natural disasters will tend to have higher premiums. Annual costs for a single-family home can indeed range between two hundred and seven hundred euros or more. The optional additional cover, such as extended natural hazard insurance, and the amount of the deductible also play a role.
Landlords can often achieve significant savings through careful comparison of different offers without compromising coverage. This ultimately benefits the tenants too, as only economic costs are allowed to be passed on. The cheapest rate is not always the best, but a good price-performance ratio is crucial. nextsure is happy to assist you in analysing your existing insurance situation and identifying potential for optimisation. A change of policyholder or cancellation after a house purchase are also situations where a re-evaluation is sensible.
By proactively dealing with cost factors and regularly reviewing coverage, both landlords and tenants can ensure that the building insurance serves its purpose without placing undue strain on finances.
Your next steps for optimal home insurance
The question "Who pays for the building insurance?" is now comprehensively answered. It becomes clear that a clear contractual agreement and knowledge of the legal framework are crucial. For landlords, this means correctly apportioning the costs and observing the efficiency requirement. For tenants, it's important to know their rights and carefully check the utility bill. A well-chosen building insurance policy protects the property's value and provides security in unforeseen events. The costs for this can be fairly distributed if all parties act informedly.
To ensure your insurance coverage is optimally tailored to your needs and property, and that you do not pay more than necessary, an individual analysis is recommended. Use the expertise of professionals to review your current policy or find the right protection for your situation. Such advice can help you optimise costs while ensuring comprehensive protection.
Request an individual risk analysis now: Get your insurance situation reviewed for free and receive concrete suggestions for optimisation.
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FAQ
Who is responsible for taking out the residential building insurance?
The owner of the property, typically the landlord, is generally responsible for concluding the residential building insurance.
What does the principle of economic efficiency entail in home insurance?
The cost-efficiency requirement obliges the landlord not to take out an overpriced building insurance, the costs of which are passed on to the tenants. The premiums should be in line with market standards.
Are the costs for elemental damage insurance apportionable?
Yes, the costs for insurance against natural hazards (such as flooding, earthquakes) can be passed on to the tenants as part of the building's property insurance in accordance with § 2 No. 13 BetrKV, provided it is agreed in the rental contract.
What happens to the building insurance when there is a change of ownership?
When selling a property, the existing residential building insurance usually transfers to the new owner. However, they have a special right of termination. You can find more information in our guide on <a href="/blog/wohngebaeudeversicherung-eigentumerwechsel-musterbrief">changing ownership of residential building insurance</a>.
What are the average costs of a home insurance policy?
The annual costs for a detached house of approximately one hundred square meters in Germany average between two hundred and seven hundred euros, but can vary significantly depending on the region and scope of services.
What is the deadline for objecting to the service charge statement?
Tenants have twelve months after receiving the utility bill to review it and file a written objection with the landlord if any errors are discovered.
