Last updated on January 6th, 2023 at 05:06 pm
Do you even need professional liability insurance for freelancers in Germany? Some may say yes, absolutely! This post goes into more details and explanation of yet another essential German insurance for freelancers.
Being liable is the German way of life.
Just like private liability insurance, you should seriously consider getting professional liability insurance if you are a self-employed person in Germany! 😉 )
Whether you are a freelance IT expert, management consultant, journalist, photographer or a sole trader that sells goods in Germany: you are autonomous in many ways – but at the same time, you also bear liability.
Professional liability insurance or specifically freelancer liability insurance protects you from a number of risks that could pop up in the course of your boss-free career.
Keep on reading to learn what exactly professional liability for freelancers covers and if it is worth it after all.
This section gives an overview of liability insurance for self-employed who fall under the Freiberufler/ freelancer and sole trader categories.
1) Professional liability insurance for freelancers in Germany
There are a number of coverages for professional liability insurance, but you do not need all of them. I will explain what type of professional liability insurance in Germany might be suitable for the nature of your work with some examples.
1.1) Professional liability insurance for freelancers (Berufshaftpflichtversicherung)
Basic professional liability insurance protects you against financial losses that result directly from your freelance work. This is the most common type of professional liability coverage that most consultants should take out.
Some practical examples:
- You are an investment advisor. Your client demands compensation because your advice caused them financial loss. OR,
- You run social media ads for your clients. You did not set an upper limit to the ad budget and the ad spent is 1000 Euros over the budget. Your client wants you to compensate. OR,
- You are an app developer. One coding error causes the app to collapse for a day and results in a loss of revenue for your client.
If these claims are justified, your professional liability insurance will reimburse you for the loss. If it turns out that the claims are unjustified, your freelancer insurance defends you and pays the costs in court (passive legal protection).
Get a quote for Berufshaftpflichtersicherung for freelancers from Hiscox!
1.2) Business liability for freelancers (Betriebshaftpflichtversicherung)
The business or commercial liability module protects you against personal injury and property damage. This insurance also covers financial damages resulting from property damage or personal injury.
A practical example:
You install glass windows and doors. While working you drop a hammer on the client’s tiled floor leaving a crack. Business liability insurance covers such damages to property.
Business liability insurance for freelancers also includes passive legal protection.
1.3) Contents insurance for freelancers (Inhaltsversicherung)
Every freelancer needs equipment and gadgets to work. With the contents insurance module, you can protect your valuable office equipment or business equipment from damage and theft. Depending on the tariff, you may also get reimbursed for additional costs. Loss of earnings can also be insured with contents insurance in some cases.
A practical example:
You are a freelance filmmaker. You lost your expensive recording gear during a commute. Now you have to temporarily rent replacement equipment to finish a project. In this case, contents insurance can cover your financial costs.
1.4) Cyber insurance for freelancers (Cyberversicherung)
As a freelancer in 2021, you probably use a number of SaaS and digital devices. You communicate with your clients by traditional CMS, e-mail client, Zoom, WhatsApp etc. All of these things are hackable.
The costs for companies due to cyber attacks have increased sixfold in the last 12 months – to an average of 51,200 euros. Businesses operating and serving Germans and EU citizens are also subjected to GDPR so you absolutely need to protect yourself from potential data breaches.
A practical example:
You are a website developer. You create client websites on your laptop and server. A hacker attack, a virus or a DDoS attack can paralyse your system and cause expensive damage to you and your clients. Cyber insurance for freelancers protects you against these complications. Cyber insurance also provides you with experts for data recovery and offers preventive programmes.
Where to get freelancer liability insurance in Germany?
With Hiscox, an EU-wide insurance provider, you can easily generate tailor-made protection for your freelance activity. They have a ‘modular’ system in which you can combine several coverages to provide all-around cover for your freelance work.
Hiscox offers custom-made professional liability insurance for nearly 200 freelance activities – including fairly modern professions such as bloggers, app or software developers, affiliate marketers, influencers, yoga trainers, IT consultants, ghostwriters and many more.
To get an accurate quote click on the link below, then select your freelance profession and get an estimate for your professional liability insurance.
2) Professional liability insurance for sole traders in Germany (online store owners)
Are you a sole trader who runs an online store? Whether you run an eBay or Amazon store or sell handcrafted goods on Etsy or thrifted goods on Facebook, you should consider taking out online shop insurance. Online shop insurance protects your business from all types of unforeseen financial crises.
2.1) Professional liability for sole traders (Berufshaftpflicht)
It is coverage for damages you accidentally inflict on your customer or third parties. That includes copyright and trademark infringements. Violations of data protection laws (e.g. the GDPR) are also covered by this professional liability for online store owners.
A practical example:
The use of an incorrect logo in your online shop violates trademark law. This is followed by a warning from the trademark owner. In this case, professional liability insurance will take effect.
2.2) Business incl. product liability insurance (Betriebshaftpflicht inkl. Produkthaftpflicht)
This business liability insurance includes coverage for claims for damages in the context of personal injury and property damage arising from your professional activities or the products you sell (product liability).
This module also includes passive legal protection. This covers you against unjustified claims by defending against them. Legal fees are covered, even in court.
A practical example:
A buyer is injured because of a faulty or incorrectly marketed product from your online shop – here, the product liability insurance takes effect.
2.3) Business equipment and warehouse insurance (Betriebseinrichtung und Warenlager)
It is a cover for property damage to your equipment (e.g. laptop or smartphone) and to your warehouse. If you have a retail shop, this is automatically covered.
A practical example:
A water leak at your warehouse damages the inventory and disrupts your online business.
2.4) Cyber and data risks coverage (Cyber- und Datenrisiken)
This coverage gives you protection in the event of hacker attacks and technical incidents. You need cyber insurance if your business:
- Accepts credit cards or other digital payment types
- Uses computers and mobile devices
- Keeps medical or financial data
- Stores confidential customer information
In addition to financial protection, some insurance providers such as Hiscox offer you IT experts to support you in the event of an emergency. On request, you can also receive a crisis plan and preventive training for you and your employees.
A practical example:
A hacker hacks your e-commerce store and gains access to customer payment information.
Where to get liability insurance for your eCommerce store?
Hiscox offers comprehensive and modular online shop insurance. This means you can put together your own individual insurance coverage and only pay for what you need.
3) Quick FAQs about professional liability insurance in Germany
3.1) Who needs professional liability insurance in Germany?
All self-employed people who fall under Freiberufler/ freelancer and Gewerbe/ sole trader categories should take out professional liability insurance. You should consider professional liability insurance coverage if you:
- provide a professional service as a self-employed person
- regularly give professional advice to your clients
- a client requires you to have professional liability insurance
3.2) Why do you need professional liability insurance as a freelancer?
Professional liability insurance gives your business protection from the risks you face in delivering your professional services.
A lot of things can go wrong for freelancers –
- Your client may not be not satisfied with your work
- Your advice lead to some financial loss for your client
- You could accidentally infringe copyrights
- Miss important deadlines because of sickness and delay the delivery
For all the above, you are liable as a freelancer, if necessary, for your private assets. Sometimes, the claims for damages can be in the six-figure range.
But even if you are not responsible for the damage, unjustified claims can lead to exorbitant legal costs to prove your innocence. An adequate freelancer’s professional liability insurance covers you here as well.
3.3) What type of liability insurances are necessary for freelancers in Germany?
The most basic coverage that you need is professional liability insurance (Berufshaftpflichtversicherung). Then there are commercial liability, contents or cyber or data, warehouse insurance etc.
You do not need ALL of them.
In most cases, a general type of professional liability insurance can protect you financially throughout your freelancing career.
In some professions though, especially, where you deal with technology or sensitive client data it might be worth adding ‘extra layers’ of protection.
3.4) What much does freelance insurance cost in Germany?
Roughly speaking freelancers can get basic cover for as little as 10 Euros per month (excluding 19% VAT).
The cost of freelancer liability insurance depends on your annual turnover and the sum insured as well as your individual risk situation, which varies depending on your activity and industry. Some providers offer discounts for booking insurance bundles or taking out coverage for 3-4 years at once.
My tip – Never sign a long-term contract in Germany spanning a few years unless you are absolutely 100% sure about the provider and the quality of their service.
3.5) Can freelancers deduct insurance from their taxes?
Yes, the premiums of your professional liability insurance and any other insurances are tax-deductible. These costs are part of your business expenses.
3.6) What happens when you stop freelancing in Germany?
Some providers such as Hiscox have a special right of cancellation (Sonderkündigungsrecht) to terminate a contract.
They ask you to send proof such as ‘Abmeldung‘ of your freelance business. You can get this document from your local tax authority.
3.7) How can the freelancer insurance be cancelled?
Every professional liability insurance provider has a notice period for cancellation. For Hiscox, it is one month to the end of the current insurance period. For other services, it can be three or six months. Please check the cancellation policies to be sure.
Have you ever taken out professional liability insurance for freelancers in Germany? Do you have any recommendations? Let me know in the comments below.
Disclaimer 1: I am not an insurance broker and this article does not constitute professional advice. I recommend these companies based on ease of sign-up and English language correspondence. Just like everything else on this website, I recommend you do you due diligence and read the small print carefully.
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