Car Insurance: Compulsory for all Vehicle Owners

Whether you own a car, motorcycle, motorhome, scooter, moped, quad, S-pedelec or an e-scooter (link only available in German): All owners of a motor vehicle in Germany must have liability insurance.

Several other insurance products are additionally available. This article discusses the most important ones and explains when you would need which insurance and how to find the right contract.

Motor vehicle liability insurance ("Kfz-Haftpflichtversicherung")

As the owner of a motor vehicle, you are legally obliged to take out motor vehicle liability insurance (link only available in German) in Germany. Even if you are only leasing the vehicle, you are considered the owner and are therefore responsible for the insurance. As owner, you are also responsible for ensuring that the motor vehicle liability insurance applies to everyone who drives the vehicle.

The insurance is intended to ensure that – in case of an accident – the victim is compensated even if the party responsible for an accident is unable to pay or would be economically ruined by the victim’s claims.

You should therefore never drive without insurance cover: In the event of serious injuries, claims can quickly run into the millions – which you will have to pay yourself if you do not have insurance.

Insurance companies offer higher levels of cover than the statutory minimum for a small premium surcharge. We recommend having an insurance with very high cover, preferably 100 million euros. This may sound like a lot, but such sums are common in accidents involving a lot of people.

If you have an accident, your liability insurance will check whether claims by the accident’s victims are justified. It will then proceed in one of two ways:

1. If your liability insurance company considers the claims to be unjustified, it will fend them off at its own expense, if necessary in court. Liability insurance therefore offers so-called "passive" legal protection.
2. If your liability insurance company considers the claims to be justified, it will pay the damage – up to the amounts agreed in the insurance policy.

Amongst others, an insurance company can pay compensation to an accident victim in the form of

• loss of earnings
• compensation for pain and suffering
• a lifelong pension in the event of occupational disability
• material damage (such as repair costs, compensation for a vehicle’s depreciation or as replacement value)
• if the injured party needs a rental car during the repair period or a replacement vehicle until a new car is delivered, this rental car will also be paid for. Instead of receiving a rental car, the injured party can also claim loss of use.

The insurance company cannot refuse to pay even in the event of gross negligence by the person responsible for the accident. However, the insurance company can demand up to 5,000 euros from the driver for the following violations:

• If you have used the vehicle for a purpose other than the agreed purpose (for example, a private vehicle was used commercially as a cab).
• If you were driving without a driver’s license.
• If you were not allowed to use the vehicle (for example, in the event of theft).
• If you were driving under the influence of alcohol or were intoxicated.
• If you participated in illegal car races.
• If you left the scene of an accident without permission (hit-and-run).

However, your insurance will not provide any cover if you for example caused damages intentionally, deliberately and/or unlawfully.

Comprehensive insurance ("Kaskoversicherung")

Two types of comprehensive insurance exist:

Partial comprehensive insurance ("Teilkaskoversicherung") provides cover against fire, explosion, theft (including robbery, embezzlement, unauthorized use), storm (wind forces 8 or higher), hail, lightning and flooding, among others.

Full comprehensive insurance ("Vollkaskoversicherung") additionally covers damage caused by the wilful and malicious acts of others. It also provides cover if you are responsible for an accident and your vehicle is damaged as a result.

We recommend taking out full comprehensive insurance for expensive new cars and for vehicles that are financed or leased on credit. Partial comprehensive insurance may be worthwhile for older vehicles – at least, if you would not be able to afford a new vehicle in the case of a write-off.

Insurance premiums: Where you can save money

The amount of your insurance premium depends on various criteria. The most important are:

• amount of cover – in other words, the maximum amount the insurance company would pay in the event of a claim
• region – where you live can have an effect on your premium (for example, car insurance is often more expensive in cities than in rural areas)
• vehicle class – the type of vehicle you drive
• your occupational group (for example, special rates exist for civil servants and public sector employees as well as for farmers)
• no-claims class – the number of years that have passed since the last accident you settled via your insurance company

Further features can also have an influence on your premium:

• engine power
• how many kilometres you drive per year
• vehicle age
• person(s) that drive the vehicle and their respective age
• private or professional use
• whether the vehicle is parked in a garage
• excess (comprehensive insurance only)

There are a few things you can do to keep the cost of your car insurance low:

1. Novice drivers usually pay significantly less if the vehicle is registered as their parents’ second vehicle.
2. If you have an accident ("Versicherungsfall"), you should check whether it might be worthwhile paying for the damage yourself. If you pay for the repair yourself and do not let the insurance company cover it, you will retain your no-claims bonus. If you know how much it will cost to repair the damage, ask your insurance company how a claim would affect your payments in the following years. You can then decide which option is more beneficial for you.
3. You can check whether a no-claims bonus can be transferred to another driver in your family. This way, for example, a child can insure the vehicle that was previously registered to its parents itself. In addition: the parents then waive their no-claims bonus.
4. If, in the event of a claim, you choose a garage recommended by your insurance company, you will receive lower premiums for comprehensive insurance.
5. The comprehensive insurance premium can also be reduced by paying an excess in the event of a claim.

Please note: If you receive discounts because you have agreed to certain contract conditions, you must of course adhere to them. For example, if you state that you will only drive your car for a few kilometres per year, but then significantly exceed this limit, you must expect disadvantages.

Check when your insurance contract would automatically be extended and compare offers in good time before the cancellation period expires. In most cases, you will not be able to cancel your contract one month before the contract is due for renewal.

How to choose a suitable provider and rate

The differences in premiums and benefits between car insurance companies are enormous. If in doubt, seek independent advice!

Further information on car insurances

• is provided by Stiftung Warentest (link only available in German)
• can be provided by independent insurance advisors – for example, the Federal Association of Insurance Advisors ("Bundesverband der Versicherungsberater:innen", link only available in German) can provide you with contacts
• can be obtained from your local Verbraucherzentrale (link only available in German)