If you earn money on the side with a trade, a craft or a small product business, you are working commercially, even if it feels like a sideline. Taxes are only part of the picture. Damage that occurs during the work can become expensive quickly, and then the question is who pays. Business liability insurance (Betriebshaftpflicht) covers exactly this kind of damage, provided the policy describes your activity correctly.
Kurz beantwortet: No general duty to take out business liability insurance follows from section 823 of the German Civil Code (BGB). That provision governs the duty to pay damages itself: whoever unlawfully causes damage to another must compensate it. Whether business liability cover makes sense for your side business depends on your activity, your clients and the risk involved. Last updated: November 2026.
The most important points in brief
- Under section 823 subsection 1 BGB you must compensate damage you cause to others, whether through negligence or intent, if the act is unlawful.
- Business liability insurance takes over this duty for commercial activities, as far as the policy terms cover them.
- Private liability insurance often does not cover commercial activities. The exclusions are set out in the policy terms.
- The risk rises with proximity to other people’s property, for example when working in homes, on building sites or at events.
- Before you buy a policy, describe your activity in detail and compare the scope of cover.
What does section 823 BGB actually say?
The first subsection reads, in German: „Wer vorsätzlich oder fahrlässig das Leben, den Körper, die Gesundheit, die Freiheit, das Eigentum oder ein sonstiges Recht eines anderen widerrechtlich verletzt, ist dem anderen zum Ersatz des daraus entstehenden Schadens verpflichtet.“ The provision does not require a contract. It attaches to the violation of a protected right. The text is published on gesetze-im-internet.de (in German).
For a side business, this means that not only your clients but also third parties can raise claims, for example if an object you are working on is damaged or someone is injured during your work. Liability can arise whether you act as a student or as a business owner. The decisive point is the infringement of a protected right.
Do you need business liability insurance for your side business?
The table below gives a rough classification of typical activities. It does not replace a check of your specific situation, but it shows where the topic matters most.
| Activity | Typical risk | Classification |
|---|---|---|
| Tutoring pupils at home | Damage to furnishings or property of the family | Check first whether your private liability insurance covers the activity |
| Craft work for clients | Damage to buildings, furniture or vehicles | Seriously consider business liability insurance |
| Selling goods | Damage caused by defective products | Look for product liability in the offer |
| Event jobs with your own equipment | Injuries to third parties and damage to other people’s property | High risk, read the terms closely |
| Consulting, writing, programming | Financial losses suffered by the client | More a professional liability question than business liability |
An important distinction lies between personal injury and property damage on the one hand and pure financial losses on the other. Business liability insurance generally covers personal injury and property damage. Errors in advice that cause a client a financial loss often fall into a different area of insurance.
Why private liability insurance often falls short
Private liability insurance protects private life. Whether commercial activities are covered depends on the terms, and exclusions for commercial work are common there. Anyone who relies on it without checking risks a gap that becomes visible only after an incident.
Read the description of activities in your private liability policy. If it excludes commercial activities, you need a separate solution. This check takes little time and can prevent a costly mistake.
What to look for in the scope of cover
Business liability offers differ not only in price but above all in how precisely they describe the insured activity. Check whether your concrete work is named and whether it matches your plans for the coming months. If the business changes, the cover may otherwise no longer fit.
Also check the sum insured, any deductibles and whether damage to rented items or to objects you process is expressly regulated. Compare the terms directly with the providers. This guide names no tariffs of individual insurers, because offers change and are structured differently.
Worked example: damage during an assignment
Assumption: you assemble a shelf for a client and damage a cupboard worth 1,200 euros. Without insurance, you would have to cover this loss yourself if fault is proven. With a suitable business liability policy, the insurer takes over this duty within the terms, less any deductible.
The example shows the mechanism. Whether compensation is claimed in a concrete case, and how high it is, depends on fault, proof and the terms of the policy.
Beyond insurance, documentation helps. If you record the condition of items before you start, take photos and confirm agreements in writing, you can later show what was already there. That can reduce disputes about damage and helps any insurer assess a claim.
Typical mistakes
The most common mistake is describing the activity incompletely. Anyone who states tutoring as the activity but also takes on assignments at clients’ premises may have a gap. A second mistake is to forget about cover after the start, even though the work has changed.
A third mistake is comparing offers only by price. A cheap policy with narrowly drawn activities helps little if your exact work is not included. Ask for the full terms before you decide.
Frequently asked questions
Am I required to hold business liability insurance as a student?
Section 823 BGB creates no insurance obligation. The provision states when you must pay damages. Insurance is a decision to cover that risk, and it can make sense depending on your activity.
Do clients have the right to ask for proof of insurance?
Whether a client asks for proof depends on the assignment and the industry. Such requirements are often set out in the contract or the tender documents. Read them carefully before you accept.
Is my parents’ insurance enough?
Only if their policy expressly covers your activity. Co-insured children are often limited to private life. Ask the insurer before you rely on it.
Does business liability insurance also cover damage to rented items?
That depends on the policy. Damage to rented items is a separate point that many terms regulate on their own. Check whether such damage is named or excluded, and ask if you work with other people’s equipment.
Do I have to report the insurance to the tax office?
An insurance premium is a question for your bookkeeping and tax return. Whether and how it counts against your income is something to clarify with the tax office or a tax adviser. Keep the contract documents.
What to do now
- Describe your activity in writing, including all tasks, locations and types of clients.
- Check your private liability policy for exclusions covering commercial activities.
- Compare at least two offers using the full terms, not only the price.
- Record the policy details and review the activity description whenever your side business changes.
Related reading
- Gründung neben dem Studium: Förderprogramme und Beratung im Überblick
- Einnahmen-Überschuss-Rechnung für Nebenjobs
- Geschäftskonto als Freelancer im Studium
- Statusfeststellung bei der Rentenversicherung
Sources: German Civil Code, section 823 on liability for damages (gesetze-im-internet.de, in German)
Last updated: November 2026. This guide is general information, not individual advice.
