Why should condominium owners take out insurance?Link to this section
Do you own a condominium and are part of a homeowners' association? As a member of a homeowners' association, you benefit from basic insurance coverage for the shared property. However, additional insurance is essential for your personal protection and that of your apartment. We'll give you an overview of the insurance coverage you absolutely need and should have as a homeowner to avoid unpleasant surprises and protect your investment.
Compulsory insurance for your condominiumLink to this section
As already mentioned, there are insurance policies that you, as a homeowner, are required to take out by law. However, these are usually covered by the homeowners' association. As a homeowner, you should ask your property management company for details on the insurance policies, the coverage offered for your property, and the applicable premiums.
1. Building insurance
Building insurance with fire insurance is one of these mandatory types of insurance for condominiums. Although the German Condominium Act only refers to building insurance as fire insurance, it typically also covers water damage, storm damage, and hail damage.
Building insurance is a joint insurance policy of the homeowners' association, which means that you, as the owner, do not have to worry about it. Your share of the building insurance is automatically included in your statement. You pay the building insurance automatically as part of your House money .
By the way, damage to the building itself is not covered by building insurance. Residential building insurance is for this case.
2. TheHomeowner's liability insurance
In addition to building insurance, homeowner's and landowner's liability insurance is another mandatory insurance policy, also listed as mandatory under Section 21 of the German Condominium Act (Wohnungseigentumsgesetz). You don't have to take out this insurance yourself. It should also be taken out by your property management company for the homeowners' association. You also pay homeowner's and landowner's liability insurance automatically as part of your maintenance fee. The premiums for this insurance are usually not very high.
This homeowner's liability insurance covers damages caused to passersby, for example, by black ice, an unlit stairwell, missing fire alarms, or falling debris during a storm.
Our tip:A good property management company must transparently disclose which insurance policies have been taken out for the building and under what terms. It also makes sense to review the premiums from time to time and, if necessary, discuss them at the owners' meeting. Your property manager should generally seek the assistance of external, professional insurance brokers to review your policies for cost-effectiveness and completeness.
Ralph checks all current insurance policies of your homeowners association free of charge upon requestand can obtain cheaper or better offers for you if necessary. All too often, when taking over a new homeowners' association, we find that the insurance is either overpriced or insufficient. We can often save homeowners' associations considerable costs through our affordable framework agreements.
Other, possibly useful insurances for your condominiumLink to this section
Essentially, you don't have to worry about anything if you're part of a condominium association. A proactive property management company will review your condominium association's insurance policies without request and provide you with the active contracts. However, there are other types of insurance that, while not required by law, are often beneficial for the condominium association as a whole or for you as an individual condominium owner.
1. Natural hazard liability insurance for condominiums
If the condominium is at risk of flooding, landslides, or avalanches, the homeowners association should discuss whether liability insurance for natural hazards is desirable. However, this cannot be purchased individually; it must cover the entire building. A good property management company can quickly assess the cost-benefit ratio and make a sound recommendation.
However, insurance against natural hazards is relatively expensive. And not every home is exposed to this risk, so such insurance isn't always worthwhile.
2. Home contents insurance
Home contents insurance typically covers damage caused by break-ins, power surges, loss or damage due to theft, or water damage from the dishwasher or washing machine. Whether you're an owner or renter, home contents insurance for your apartment is indeed recommended in most cases. You are free to decide how much and how much you want to cover, and what you want covered.
The insurance coverage extends not only to your apartment but also protects your belongings in the basement and garage. Should you have to temporarily leave your home due to damage, your home contents insurance may also cover the costs of accommodation, cleanup, and storage of your belongings.
Our tip:Generally speaking, if you don't keep expensive furniture and belongings in your home, you don't need expensive home contents insurance. However, home contents insurance is often worthwhile for homes with an increased risk of burglary (this varies by area; ground-floor apartments are most at risk).
3. Home liability insurance
Do you rent out your condominium? Then apartment liability insurance might be a good option as a supplement to your personal liability insurance. Let's say you or your tenants cause a fire that spreads to the neighboring apartment. Or you're forced to replace the entire locking system because the keys were lost. This can be quite expensive for large condominium associations.
4. Legal expenses insurance
Whether legal expenses insurance is worthwhile for homeowners is questionable, because unfortunately, depending on the insurance company, many of the most urgent matters are often excluded. Should friction arise within the homeowners' association that you wish to legally contest, legal expenses insurance often does not cover it. It's important to read the fine print of the contract to determine whether this is the case.
However, there are special legal protection insurance policies for property owners that cover precisely these cases. However, these are generally very expensive. Insurance that specifically covers you against legal disputes with your tenants is often available separately and may be advisable.
Landlord legal protection offers comprehensive protection for rental properties. These services include, for example:
Initial legal advice:Telephone advice from lawyers on legal questions relating to the tenancy agreement.Coverage of legal costs:Covering the costs of your lawyer, court fees and expert witnesses.Fast dispute resolution:Support in out-of-court dispute resolution to avoid legal disputes.Foreclosure:Covering the costs of enforcing your claims through bailiffsHelp with rent arrears:Support in collecting rent arrears.Additional protection:Optionally, insurance against rental losses can be taken out to protect against financial risks.
5. Rent loss insurance
Which brings us to the next possible insurance option: rent default insurance. If you had to take out a large loan to pay for your condominium and rely on rental income to repay it, protection against payment default makes perfect sense. This not only covers your rental income, but also your utility costs. However, it's important to read the fine print carefully, as some exclusions may apply.
6. Residual debt insurance
Repayment insurance provides protection in the event that the buyer and borrower can no longer service the real estate loan, for example, due to job loss or serious illness. The insurance coverage steps in and pays the remaining loan installments. In addition to payment insurance, term life insurance, occupational disability insurance, or accident insurance also offer protection against financial risks associated with real estate.
7. Advisory board liability insurance
Supporting a condominium association through a management advisory board is beneficial, but it can also pose a certain risk for the board itself. Should the management advisory board make a mistake—for example, when reviewing an annual statement—and cause damage to the condominium association, the management advisory board can be held personally liable. In such cases, advisory board liability insurance covers the costs of legal disputes and potential claims for damages.
Condominium insurance: Is it tax deductible?Link to this section
The question of whether insurance premiums for your condominium are tax deductible depends largely on whether the apartment is used by the owner or rented out.
Owner-occupied condominium:For a condominium occupied by the owner, insurance premiums are generally not tax-deductible as special expenses. This applies, for example, to homeowners insurance.Rented condominium:For a rented condominium, the costs of insurance, such as building insurance, homeowner's liability insurance, or legal expenses insurance, can be claimed as business expenses or advertising expenses. However, the requirements and exact tax treatment depend on the individual circumstances and should be clarified in each individual case with advice from a tax advisor.
Which insurance can owners pass on to their tenants?Link to this section
As a landlord, you can pass certain insurance costs on to your tenants. The cost of repairing storm damage to the property's roof is usually covered by the building's insurance. Since this insurance is apportionable, the corresponding costs can be passed on to the tenants. This also applies to homeowner's liability insurance.
In contrast, the costs of a legal dispute with tenants covered by landlord legal protection insurance must be borne by the landlords themselves.
What happens to the insurance when the property is sold?Link to this section
If the entire building is sold, the building insurance automatically transfers to the new owner. If an apartment in an apartment building is sold, the existing building insurance remains in effect for the entire building.
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