For many students, the rental deposit (Mietkaution) is the biggest single expense when moving. A rental deposit insurance (Kautionsversicherung) promises to replace this sum with an ongoing premium instead of cash upfront. Whether that makes sense depends on what the law allows, what your landlord accepts and what the insurance actually costs.
Short answer: Under section 551 of the German Civil Code (BGB), the rental security may amount to no more than three times the basic rent for one month. Operating cost advance payments are not counted. A cash deposit may be paid in three instalments. A rental deposit insurance requires the landlord’s consent and causes ongoing costs. Stand: October 2026.
The Most Important Points at a Glance
- The legal upper limit for rental security is three monthly rents, excluding operating cost advance payments (section 551, subsection 1 BGB).
- A cash deposit may be paid in three equal monthly instalments, and the first instalment is due at the start of the tenancy (section 551, subsection 2 BGB).
- A rental deposit insurance can only replace the cash deposit if the landlord accepts it. There is no legal entitlement to this.
- You pay ongoing premiums for the insurance and, if the insurer pays the landlord, you usually have to reimburse that amount to the insurer later.
- A cash deposit stays in a separate account held by the landlord and earns interest that belongs to you as the tenant.
How High Can the Rental Deposit Be?
The upper limit is set out in section 551 BGB. Under it, the security may not exceed three times the rent payable for one month. Operating costs that are shown as a lump sum or as an advance payment do not count. If your tenancy agreement demands a higher sum, the clause is invalid to the extent that it goes beyond the limit.
According to the prevailing interpretation, the limit applies to the rental security as a whole. If you provide a cash deposit and also a guarantee, you should not assume that both amounts are counted separately. Check in your tenancy agreement which total is stated before you choose a solution.
How Does a Rental Deposit Insurance Work?
With a rental deposit insurance, you take out a contract with an insurer. The insurer guarantees your landlord that it will pay if justified claims arise at the end of the tenancy. You do not pay a deposit to anyone. Instead, you pay a premium, which is usually charged annually or as a one-off payment. If a claim occurs, the insurer steps in and then comes to you to recover the amount.
This is where the most important difference lies. The cash deposit is your money, which comes back at the end if there are no outstanding claims. With the insurance, you pay costs that do not flow back to you, and you carry the risk of having to settle a claim later. The model is therefore mainly suited to people who have little liquidity when they move in, but can reliably cover their ongoing costs.
What Does the Switch Cost? A Calculation Example
The costs of a rental deposit insurance depend on the provider, the insured sum and the term. No specific tariff is named here. The following example only shows the logic.
Assumption: The basic rent is 500 euros and the operating cost advance payment is 100 euros. The maximum sum under section 551 BGB is then 1,500 euros, because the 100 euros in operating costs are not counted. A cash deposit of this amount can be paid in three instalments of 500 euros each. The rental deposit insurance would replace the 1,500 euros, but a premium is due for it. Assumption: The annual premium is 60 euros. Over a two-year tenancy, this amounts to 120 euros that do not come back.
| Option | Liquidity at the start | Costs | What remains at the end |
|---|---|---|---|
| Cash deposit in three instalments | Low, but the first instalment is due immediately | No ongoing premiums | The deposit, less justified claims, plus interest |
| Rental deposit insurance | Very low | Ongoing premiums | No refund of the premiums, possible recourse by the insurer |
| Guarantee (parents or third parties) | Very low | No premium, but responsibility for a third party | Depends on the agreement with the person giving the guarantee |
The table shows that the insurance mainly saves money in the short term. Across several tenancies, however, the premiums can add up to more than a properly invested cash deposit that comes back later. So always calculate the total costs over the planned length of the tenancy.
Must My Landlord Accept a Rental Deposit Insurance?
Based on the wording of section 551 BGB, there is no statutory obligation to accept one. Whether your landlord accepts the insurance depends on the tenancy agreement and on negotiations. Some landlords reject it, others expressly accept it. Therefore ask in writing before you sign the contract, and do not pay any premiums before you have a clear answer.
If the landlord agrees, check the conditions carefully. What matters are the amount of the insured sum, the duration of the contract, the rules for termination and what happens if the landlord calls on the insurer. For the basics of the tenancy agreement, see an overview for students (in German).
What Alternatives Are There?
Besides the cash deposit and the insurance, there are other models. A guarantee from parents or other persons is possible, but it ties in a third person. Paying the deposit in instalments under section 551, subsection 2 BGB lowers the initial burden of a cash deposit. If you are looking for an affordable flat, you often save on rent first and therefore also need a smaller deposit. For an overview of flat hunting and costs, see this guide to affordable flats for students (in German).
Frequently Asked Questions
Can the landlord demand more than three monthly rents?
No. Under section 551, subsection 1 BGB, the upper limit is three times the rent for one month. Operating cost advance payments are not included in the calculation. A clause that demands more is invalid to that extent.
Do I have to pay the deposit in one sum?
No, if it is a cash deposit. The tenant may pay it in three equal monthly instalments, and the first instalment is due at the start of the tenancy. Further instalments fall due together with the following rent payments.
Do I get anything back with a rental deposit insurance?
Usually not the premiums. The insurance protects the landlord, and you have no entitlement to a payout as you would with a cash deposit. Once you move out, the contract is settled, provided there are no claims that the insurer has paid.
How is a cash deposit paid interest on?
The landlord must keep the money separate from their own assets. The interest increases the security and belongs to the tenant. The law requires an interest rate that is customary for savings deposits with a three-month notice period, unless something else has been agreed. This also applies in a student residence, because § 549 para. 3 BGB does not exclude § 551 BGB for student and youth residences.
What to Do Now
- Check the tenancy agreement for the amount of the security and the payment terms.
- Calculate the maximum sum under section 551 BGB without operating costs.
- Ask your landlord in writing whether they accept a rental deposit insurance.
- Compare the total costs over the planned length of the tenancy with a cash deposit paid in instalments.
- Only decide once you have the contract, the conditions and the landlord’s consent in writing.
Related Reading
- Understanding your tenancy agreement: what students should look out for (in German)
- Finding an affordable flat as a student: strategy, portals and costs (in German)
- Budget planning during your studies: a monthly budget in three steps (in German)
- Contents insurance in a student residence or shared flat: when it pays off (in German)
- Organising your finances as a student: account, emergency fund and deadlines (in German)
Sources: § 551 Civil Code (BGB): limitation and investment of rental security, gesetze-im-internet.de (Stand: October 2026, retrieved); § 549 Civil Code (BGB): rental of residential space with special rules, gesetze-im-internet.de (Stand: October 2026, retrieved).
Stand: October 2026. This guide is general information, not individual advice.
