What is it?

Financial liability insurance, or a very long word in German: “Vermögensschadenshaftpflichtversicherung”. It is designed to protect you from the legal and financial ramifications of causing financial loss/damages to third parties. This insurance is particularly relevant for professionals like financial advisors, consultants, and accountants, whose advice or service errors could lead to financial losses for their clients.

With numerous providers in Germany offering a range of policies, understanding the scope and limits of your coverage is essential for managing professional risk effectively.

What are the benefits?

Unlike other forms of insurance, the benefits here are highly specialized and can often be tailored to your professional requirements. You may find features such as legal defense costs, protection against slander or libel, and even coverage for loss of documents in some policies.

Given the complexity of financial transactions and the regulatory landscape, it’s very important to make sure it aligns with the specific risks associated with your profession.

Professional errors

• Coverage: This is designed to cover financial losses arising from professional mistakes, negligence, or failure to meet contractual obligations.
• What’s not covered: Losses that arise from deliberate fraudulent or criminal activities are not covered.
• Premiums: Cost depends on the scope of your professional activities and the policy limits you choose as well as your annual revenue.

Legal defense

• Coverage: Provides for legal fees, court costs, and other defense expenses in the event you’re sued for a covered financial loss.
• What’s not covered: Fees for lawsuits that revolve around non-financial or excluded matters.
• Premiums: Usually included as a standard part of most financial liability insurance packages.

Third-party cyber liability

• Coverage: Some policies offer protection against financial loss caused by cyber events, like a data breach affecting a client.
• What’s not covered: Losses due to poor cyber hygiene or outdated security measures.
• Premiums: An optional add-on and priced accordingly.

The German insurance market for financial liability is highly competitive, and you may qualify for discounts if you have multiple business policies or a track record of few or no claims.

Who is it for?

This insurance is a must-have for professionals who deal directly with clients’ financial matters, in many cases you are even legally required to have one (for example, we as an insurance broker have that obligation). Whether you’re a solo practitioner or part of a larger firm, the financial and reputational stakes can be high. Premiums will vary based on your experience, the size of your clientele, and the nature of the services you provide.

Young professionals and small firms should not underestimate the importance of this coverage, as even a single liability claim can be financially devastating, which is why this insurance is incredibly important and highly recommended for many professions.

Did you know?

~ 88%

Percentage of reported claims that fall within the scope of financial loss liability insurance. [1]