Usually, financial losses are associated with a professional activity. In this article, you will receive all the important information about pecuniary losses in relation to car insurance.
In these cases there is a financial loss
In order to speak of a financial loss, the damage must not affect either a person or a thing directly. Responsible for a financial loss is the culpable behavior of a third party. Everybody can be affected by a financial loss. In practice, a distinction is usually made between genuine and unreal financial losses. Further information can be found later in this guide.
That does not fall under a financial loss
Property damage is generally defined by insurers as damages that can not be interpreted as personal injury or property damage. Personal injury in this case is the killing of people, physical injury or damage to health caused by an event.
Property damage refers to a specific damage of a thing. Even if damage to property in the sense of a valuable object is damaged by property damage, it is not a financial loss. For example, property damage occurs when a car is damaged after an accident or when things are destroyed or lost. Even if bills or jewelry are destroyed or stolen, it is a property damage.
Criminal background of financial losses
One common cause of financial loss is the deliberate infliction of damage by criminal acts. Fraud or property offenses often lead to financial damage to those affected. In addition, financial losses are also possible if intellectual property is stolen or copyright infringement takes place. Likewise, product or brand counterfeits are the cause of a financial loss.
The financial loss in relation to a vehicle
In motor insurance also the financial loss plays a role. He may arise after an accident as a direct result. For example, a car is less valuable after an accident than before an accident, even if the damage to the vehicle is completely eliminated. This depreciation can be claimed as financial loss to the opposing insurance. It is also possible that the financial loss is a consequential loss, because a person involved in the accident can not work immediately as a result of personal injury.
Real and fake financial damage
The insurance industry distinguishes between so-called “real” and “unreal” financial losses.
- Real financial loss (pure financial loss): A true financial loss occurs when the damage occurs without directly causing damage to a thing or the life or physical integrity of a person. Real financial losses are regulated by a compensation. This damage can be caused, for example, by incorrect advice or the creation of a faulty item from the start. The blockade of important data can also cause financial damage.
- False financial loss : The fake financial loss is usually a consequential loss, which is caused by a property or personal injury. A fake pecuniary loss must therefore be preceded by another loss.
Property Damage Liability Insurance
Consumers usually need special liability insurance to cover a real financial loss. For conventional private liability or professional liability insurance cover mostly only the unjust financial loss.
A real financial loss can quickly become very expensive. For this reason, it is advisable that certain professional groups secure themselves in advance with a financial loss liability insurance.
For these occupational groups a financial loss liability insurance is recommended
In principle, a hedge against pecuniary losses is particularly suitable for professional groups working in an advisory capacity. These include, for example:
- Lawyers: You can cause financial damage due to incorrect legal advice.
- IT consultants: False recommendations in the IT area can cause large financial losses. For example, the loss of computers for production in industrial enterprises is disadvantageous. Likewise agencies without EDP can not work.
- Tax consultant: If a client is wrongly advised in tax matters, very high damage costs can arise depending on the tax volume.
Examples of financial losses
- Real financial loss in the private sector: If a child alarms the fire brigade for no reason, the parents have to pay for the caused financial loss. The costs for the false alarm have to be borne then. Often, such real financial losses are covered by a good personal liability.
- Real asset damage to vehicles: The manipulation of a speedometer, a vehicle was sold more expensive than it was worth due to its age and mileage. The consumer, who has paid too much, thereby suffers a real financial loss.
- Real financial loss after an accident: If a car is provided with spare parts after an accident, can be spoken of a real financial loss because it suffers a loss of value.
- Real financial loss in a professional environment: A bank adviser has advised a customer to invest. However, this advice has led to significant financial losses, which were foreseeable in advance.
- Real financial loss in IT: A programmer has produced a bug in the source code, which has led to sales losses, because customers could not order in the online store.
- False financial loss after personal injury caused by an accident: If two vehicles collided with each other and one of the parties can no longer work for a longer period of time, a financial loss has arisen.
- False financial loss after property damage: If an employee accidentally destroys a PC, whereupon a day can no longer be worked, the result is a financial loss.
Regulation of financial losses
Often it is not clear whether a real or improper financial loss exists. For this reason, the settlement of claims for real financial losses usually complicates. Thus, injured parties must be able to prove exactly which financial loss has arisen. On the other hand, it is examined exactly which behavior was the cause of the resulting financial loss.
For example, how can a financial loss be determined if an injured party could not make an important business appointment because his car was parked? Or how can one determine which exact damage has arisen because a computer program has worked incorrectly? These questions must be answered exactly by the legal departments of the respective insurance companies, so that a correct claim settlement can be made.
With a financial loss liability insurance policyholders have the opportunity to claim damages, on the other hand can be fended off unjustified claims.
Property damage in motor insurance
The minimum financial cover for financial losses for motor vehicle insurance in Germany is 50,000 euros. This coverage only applies to damage that is not related to property damage or personal injury, except for “real” financial losses.
In practice, the coverage levels of car insurers are usually well above the statutory minimum cover. Compared to the minimum cover for property damage and personal injury, the coverage amounts for real financial losses are usually much lower. For example, a minimum cover of 7.5 million is required for personal injury and one million for damage to property.
A real financial loss for the car insurance is for example, if you block the entrance of a neighbor with your car and he therefore missed an important business meeting.
Cover for property damage
If there is material damage after an accident, the insurance of the claimant must regulate it. Usually, an appraiser is initially charged with assessing the damage. If the cost of the repair does not exceed 30 percent of the vehicle’s replacement value, the repair costs are settled. In general, it is also spoken of the 130-percent rule.
If the repair costs exceed 130 percent of the replacement value, insurers reimburse the difference between the replacement value and the residual value. This also applies, for example, if the vehicle is scrapped after a total loss. In this case, the injured party receives a purchase price for the damaged vehicle. This sum is then subtracted from the replacement value.
A car has a vehicle value of 3,000 euros. The expert notes that the repair costs would amount to 4,500 euros. In this case, there is a total loss. The recycler or a workshop pay the injured party another 1,000 euros for the accident car. This “income” deducts the insurance from the 3,000 euro residual value and pays the difference of 2,000 euros.