Financial loss in private liability insurance

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So-called unreal financial losses are often the result of personal injury or damage to property. Let’s say you accidentally damage a self-employed person’s car. First of all, this is property damage. However, the car has to be taken to the garage for repairs. During this time, the owner cannot work. So, she suffers a financial loss which is your fault.

We have compiled the most important questions and information on the subject of "financial loss" for you here.

What does financial loss mean?

A financial loss occurs when someone suffers a direct or indirect financial loss which is your fault. A distinction is made between real and unreal financial losses.

What is a real financial loss?

A real financial loss is when another person suffers a financial loss caused by you.

This is the case, for example, when a financial advisor, tax advisor or lawyer gives false advice. In other words, a real financial loss is not the result of damage to property or personal injury, but an independent incident.

Which damages are real financial losses?

Real financial losses occur mainly in a professional context. Anyone who advises other people as a self-employed person should therefore take out separate pecuniary damage liability insurance. For members of some professions, this is obligatory. These include notaries, tax consultants, lawyers and auditors.

Examples of real financial losses in a professional context:

  • If a tax consultant misses a deadline and the tax office then levies a late fee, the tax consultant is liable for the financial loss incurred by his client.
  • If a proofreader overlooks a transposed number in the artwork for a brochure, the entire edition may have to be reprinted. The client suffers a real financial loss due to the proofreader’s mistake.

Examples of financial losses in a private context:

  • Maybe you park your car and block the driveway of a self-employed person. As a result, the self-employed person is unable to attend a crucial business meeting and also suffers a loss of image. Or he may have to take a taxi to get to his appointment on time. Then you must pay the bill.
  • Something similar can happen if you block an exit or a garage: You might borrow a commercial vehicle to pick up several pallets of pellets. You unload them in front of your neighbour's garage and then return the vehicle to the rental company. During this time, your freelance neighbour may be unable to attend an important appointment, thus forfeiting his fee.

In these and similar cases, you will have to compensate for the damage caused.

What are unreal financial losses?

Unreal financial losses are the result of personal injury or damage to property. If a person is injured through your actions, he or she may be temporarily unable to work.

What kind of damages are unreal financial losses?

Suppose you are riding your e-scooter and accidentally collide with a passer-by. The passer-by is knocked to the ground, breaks his arm in the fall and suffers a head injury. First of all, the incident is personal injury. However, the injured person is an independent craftsman. Due to the injury, he is not able to work for several months. He therefore suffers a financial loss. Since this is a consequence of the personal injury, it is an "unreal financial loss".

Perhaps you have bought a new wardrobe and are transporting it home yourself from the furniture store in your car. When you unload it, you damage a snack bar trailer that is parked right next to your parking space. The injured party first suffers direct property damage. However, he cannot use his trailer until the repairs are completed. You will also have to take responsibility for this loss of earnings.

Does my personal liability insurance cover both forms of financial loss?

Your personal liability insurance covers unreal financial loss resulting from damage to property or personal injury. Real financial losses are also covered as long as they do not arise from: 

  • investment, credit, insurance, real estate or similar economic transactions,
  • non-compliance with deadlines and dates, shortfalls from cash management and payment transactions of all kinds,
  • breaches of duty related to activities in management or supervisory bodies,
  • violations of industrial property rights and copyrights, deliberate deviation from legal or official regulations,
  • other deliberate breaches of duty.

Remember that your personal liability insurance only covers your private life. If you need liability or financial loss insurance for your profession, there is separate insurance for this. 

If you accidentally cause a financial loss, according to the German Civil Code (BGB), you are obliged to make good the damage, just as in the case of personal injury or property damage. Your private liability insurance protects you against the financial consequences of financial loss.

What is the recommended coverage for financial loss?

It is advisable to set the insured sum as high as possible. If the claim is higher than the amount insured, you will have to pay the difference out of your own pocket. With Coya, the highest possible contribution margin is 30 million euros. With this, you are very well covered in case of damage.

Which costs are covered by my private liability insurance in case of financial loss?

Your liability insurance regulates the financial loss incurred. This means that it pays for the financial loss incurred - up to the contractually agreed insured amount.

If it is an unreal financial loss, your private liability insurance also covers the property damage or personal injury incurred, in addition to the financial loss.

Which costs are not covered by my private liability insurance in case of financial loss?

In general, your private liability insurance does not cover any damages in connection with your professional activity. 

If you have caused a real financial loss, which is due to:

  • investment, credit, insurance, real estate or similar economic transactions,
  • non-compliance with deadlines and dates, shortfalls from cash management and payment transactions of all kinds,
  • breaches of duty connected with activities in management or supervisory bodies,
  • violations of industrial property rights and copyrights, deliberate deviation from legal or official regulations,
  • other deliberate breaches of duty, 

your private liability insurance will not cover the damage.

For this, you need separate insurance. If you are a professional, a combination of financial loss liability insurance and business liability insurance is recommended.

What benefits are included in the event of financial loss?

Your private liability insurance covers three areas:

  1. It checks whether the damage claims against you are actually justified.
  2. If this is not the case, your private liability insurance will ward off the claim for damages - if necessary, also in court. The costs for the court hearing, your lawyer and any necessary experts will be covered.
  3. If you are liable for the damage caused, your private liability insurance will take care of settling the claim.

Does my private liability insurance also apply in case of financial loss abroad?

You are insured EU-wide as long as your residence is in Germany. Outside the EU, your insurance cover is limited to five years.

Does my personal liability also pay in the event of self-inflicted financial loss?

If you cause yourself financial damage, your private liability insurance does not apply. If you decide to take out family private liability insurance, the damage that co-insured persons cause to each other is also not covered.

Your private liability insurance will only protect you in the event of claims for damages by third parties. Third parties are persons to whom you have inadvertently caused damage and who are not covered by your insurance contract.

Does my private liability insurance pay in the event of intentionally caused financial loss ?

No. In the case of intentionally caused financial loss, you are personally liable.

What other forms of damage are covered by my private liability insurance in addition to financial losses?

Your private liability insurance also protects you from claims for damages by third parties and financial disadvantages in the case of personal injury and property damage.

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