Insurance is not rocket science. In this glossary article, we explain everything you need to know about damage.
In the insurance context, there are different types of damage you can insure yourself against: to people, property or assets.
If you suffer damage, you can get compensation to restore the state prior to the damage occurring.
For example, if a friend of yours drops your laptop and it breaks, you have a right to compensation: they can either repair it or pay you money to compensate for the damage.
If an item is damaged, destroyed or lost, this is a case of property damage. The type of insurance that will compensate you for the replacement of the damaged item depends on whether it was your property or someone else’s and what caused the damage.
For items that belong to you, you can claim compensation from your contents insurance – if an insured risk such as fire, tap water, storm, hail or burglary was the cause. In the case of other people’s property, your private liability insurance usually applies – or your car insurance, if you accidentally damage another vehicle while parking, for example. If your dog damages another person’s property, your dog liability insurance will take care of it.
This is exactly what bad debt coverage protects you from. If you add this option to your personal liability insurance, you are fully covered for all cases.
Your rented flat or house contains permanently fixtures and fittings – including windows, doors, walls, floors, sanitary installations, fitted kitchens and cupboards. Damage to these fixed rented items is called damage to rented property.
From scratches in the parquet to a crack in the sink: If you cause damage to rented property, your personal liability insurance will cover it.
Glass damage, damage to heating or hot water systems, and damage to electrical appliances are excluded.
When a person is injured because someone else acted carelessly, a personal injury has occurred. This can be an injury, a health impairment or even death.
If you are responsible, the injured person can demand that everything be done to restore them to the state of health they had before the accident.
A personal injury can also result in consequential damages, so-called pecuniary damages. For example, if you accidentally injure a person and they are unable to work for some time because of their injuries. Then you also have to compensate them for their financial losses.
Your liability insurance usually covers all these costs. Or it will defend an unjustified claim against you – if necessary in court.
If the personal injury results from a traffic accident that you caused with your car, your car insurance will cover you and pay the costs.
Because personal injuries can run into the millions, it is important that the sum insured is particularly high.
A pecuniary damage is a financial loss that you cause to another person. There are two types of pecuniary losses: consequential economic losses and pure economic losses.
Consequential economic losses result from personal injury or damage to property. These are also called consequential pecuniary losses. For example, suppose you have an accident and damage someone else‘s car – first of all, this is property damage. If, however, they can’t use their car until it is repaired, but are self-employed and thus suffer a loss of earnings, this is a consequential pecuniary loss.
A pure economic loss, on the other hand, is a direct financial loss to a third person without any damage to a person or thing. So, for example, if you are given bad advice and lose money because of it, you can claim compensation from the person who gave you the advice.
Private or professional liability insurance usually covers pecuniary damages. However, some policies exclude pure economic losses.
Natural hazards are damage caused by the action of nature. For example, damage caused by storms (from wind force 8), hail, flooding, high water, earthquakes and landslides, snow pressure or volcanic eruptions.
When natural forces destroy homes and property, repairs can quickly become costly. Depending on the type of damage, either your residential building insurance, contents insurance or natural hazards insurance will pay for it.
Damage to your home or property that occurs as a result of a break-in is called burglary damage.
Examples are broken doors and locks, windows or other traces of devastation left behind after a break-in. The repairs of burglary damage can be quite expensive if many things have to be repaired or replaced.
In the event of a burglary in a rented flat, your household insurance will cover all movable property, electrical appliances or valuables. It also covers damaged house or patio doors, broken hinges or door frames.
If you live in your own flat or home, such damage may also be covered by your homeowners insurance: check whether your insurance also covers damage caused by unauthorised third parties.
Damage that you accidentally cause to yourself or your property is called own damage. This contrasts with third-party damage, i.e. damage to other people’s property or injuries to third parties.
According to the German Civil Code (Bürgerliches Gesetzbuch or BGB for short), you must compensate for damage that you cause to other persons or their property. Personal liability insurance covers these third-party damages: property damage, personal injury and financial loss.
However, as a rule, liability insurance excludes damage that is self-inflicted. This also means damage caused to your property by co-insured persons.
Example: Your partner, who is covered by your liability insurance, drops a pile of your favourite plates. This counts as own damage and the insurance does not apply in this case.
There are dedicated insurance policies for own damage. Especially in the professional sector, such a supplement makes sense in order to reduce your entrepreneurial risk.