Comparison Motor Vehicle Insurance – Germany vs. USA

USA-Germany-Vergleich

Driving a car is fun and it’s also necessary, regardless whether it’s on German or American highways. Unfortunately, driving cars also has its drawbacks: Much too often, unwanted incidents, which can range from a simple scratch in the paint or a collision to more serious traffic accidents involving damage to the people in the car, happen.


Quickly, the question of who is supposed to cover for such damage arises – especially when one is foreign to a country or when one wishes to switch from one system to another. Motor vehicle insurance is probably one of the most important kinds of insurance, in Germany as well as in the USA, because it also covers claims of third parties in traffic. Of course the systems are rather different from each other, and it is exactly those differences that you wished to be informed about.

Even short-term or medium-length stays, be they for private or business reasons, can hold important surprises for US-citizens in Germany or the other way around when it comes to compulsory insurance, discount grants, premiums and no claim discounts. This is why, on these pages, you will find basic information about insurance systems in both countries as such, as well as about what you need to consider when it comes to discounts, transfer of discounts, extent of coverage and additional insurance in Germany or the US.

Classification into the systems concerned

The classification into a foreign insurance system always depends on the extent to which years driven and discounts awarded in one’s own country are transferrable. Depending on complexity and compatibility of the system and also responsiveness of the insurance companies, a classification based on previous no-claim discounts can be obtained generally. In the following paragraph, you will learn how US citizens are classified in Germany and vice versa.

Classification for Germans who become US-citizens in the USA

If one decides to immigrate to the USA and finally, become a US citizen, one should know that where motor vehicle insurance is concerned, there is no obligation for US insurance companies to adopt no-claim discounts awarded in Germany. Often, insurers in the USA are not familiar with the German system. This is why, before moving, it is useful to find US insurance companies represented in Germany, since their brokers will be most likely to be familiar with the German insurance system. Depending on goodwill and knowledge of the insurants it might be possible to transfer previous discounts partly or even fully.

Classification for US citizens who become Germans in Germany

Also for US citizens who wish to adopt the German citizenship, there is no guarantee that years driven safely in the US and consequent discounts have to be adopted by German insurance companies. German insurants do not always know the US motor vehicle insurance system. A confirmation from the previous insurants can be very helpful and can, provided the insurants are accommodation enough, contribute to German insurance companies taking into account years driven safely as US-citizen.

Flagge Deutschland

The German Motor Vehicle Insurance System

Motor vehicle insurance in Germany is basically constructed so that for every vehicle registered in Germany, there must exist liability insurance. This is a compulsory insurance without which no vehicle can be permitted. For cars that are registered abroad, other temporary regulations apply, depending on length of stay and origin.Motor vehicle liability insurance is used to protect third parties in case of accidents and covers the legally prescribed insurance minimum. There are still other options open to car owners in Germany who wish to insure their cars in a more comprehensive way: third-party, fire and theft insurance policies comprise coverage for damage to one’s own car following accidents, vandalism, natural catastrophes, theft, damage caused by game or even glass shattering because of rock fall, at different co-payment rates. Depending on co-payment, but also on the number of years driven without accident, payment rates for liability insurance as well as third-party, fire and theft insurance vary, sometimes to significant extents. Regardless of the type of damage covering, the payment type of the insurance holder (monthly, quarterly, biannually or yearly), the classification according to car classes, the age and gender of the driver as well as the place of residence or the registration district all play an important part in determining how high the insurance premium to pay will be.

Of course, all insurance companies offer discounts, for example, a garage discount if the car is placed in a garage. Often, there are also discounts available depending on the number of kilometers driven (infrequent drivers’ discounts), on the number of drivers (partner discounts), or for families with children (family discounts). Not every insurance company offers the same amount on each discount; thus, it is useful to gather information from the insurance company first.

Car classes in Germany

Car classes refer to a yearly classification of types of vehicles by insurance companies, depending on statistical probability of damage. Depending on whether one chooses to insure one’s car with the legally determined minimum (car liability insurance) or whether one wants an extension of insurance coverage (third-party, fire and theft insurance), there can be differences in the classification. The German Insurance Association (GIA) yearly publishes a register of car classes, which all insurance companies are bound to in order to ensure better comparability for insurance holders.

No-claim discounts in Germany

Apart from the car type class, the no-claim discount also plays a big part in determining the amount of insurance premium to pay. The no-claim discount depends on the time spent driving without accidents during the time as an insurance holder. Therefore, the longer one drives and the longer one drives without accidents, the cheaper the premiums become. For debuting drivers, this means paying the highest premiums, often 240% of the overall contribution rate. The cheapest premiums are paid by drivers who have driven many years without being involved in an accident.When a small accident happens, one is not automatically moved down in the classification. This impending punishment may only happen in the next insurance year, but it can be avoided. Either one pays small damages out of one’s own pocket and does not involve one’s insurance policy or one has a so-called discount-saver: If one pays a small surcharge on the insurance premium, the insurance company will show itself to be obliging and takes care of small incidents without raising the insurance premium for the next year.

If one wishes to switch car insurance, no-claim discounts can be transferred to the new insurance without losses.

Prerequisites for motor vehicle insurance

In order to get motor vehicle insurance, one has to fulfill certain criteria, in Germany as well as in the USA. In the following paragraphs, you will learn what those are in detail.

Prerequisites for motor vehicle insurance in Germany

If one wishes to get a car insurance in Germany, one has to prove one owns the vehicle tob e insured. The minimum age to arrange an insurance agreement is 18 years, since this is when one is unrestrictedly contractually capable in Germany. The insurance holder does not necessarily have to be a German citizen, but their insurance company has to be able to show they are represented in Germany.Careful: In order to be able to buy a car in Germany, one needs a valid driving license. For the transcription of U.S. driving licenses, you should reckon in about two to three weeks. Depending on what state the driving license was awarded in, it may be necessary to pass a theoretical or even a practical exam in a German driving school. Exact information about this can be obtained at German registration offices, for example.

Prerequisites for motor vehicle insurance in the USA

In order to be able to get one of the many types of insurance in the USA, the insurance holder often has to prove they are in possession of a driver’s license. The permission to drive in America, however, is given only then when one can provide proof of a permanent residence in the U.S.A for at least three months.Other insurance companies also provide coverage when one provides an international driving license; however, this means an accordingly high premium surcharge. Especially young people under 21 will need to pay high surcharges, and the same goes for insurance holders over the age of 65. Since in most states one basically has to be insured even before getting into the car, it is important to be insured with a US insurance company represented in Germany before even leaving Germany.

Flagge-USA

The US System

Since traffic regulations in the USA aren’t part of federal law, but are in the hands of each state on its own, the states don’t only differ in how they award driving licenses, but also regarding motor vehicle insurance. Many of the states have similar liability insurance regulations to those in Germany. In some of those states, car owners may have to pay a yearly fine of several hundred dollars if they are not insured.The biggest insurance companies, Allstate, Progressive, Geico and State Farm, offer rates similar to those of the German system. They usually distinguish between ‘standard cover’ and ‘extra risks cover’, the basic insurance package and one that covers a greater number of risks. Depending on the rate, there is often the option of getting legal protection, passenger insurance etc. Furthermore, US insurance companies also make a distinction between bodily injury and material damage, and the insurance holder can choose what he wants to be covered to which extent. Therefore, one is not obligated to first insure damage to third parties and then damage to oneself.

The general estimate of the insured sum is in no way comparable to the standards common in Germany. Especially considering the huge claims for compensation made in the USA, one will understand that what with such broad coverage, premiums are accordingly high. Recurring talks have been led about introducing tags, valid for the duration of one year, which insurance companies should hand out to identify insured road users.

Compulsory / Mandatory State Insurance

When one reads about the U.S. motor vehicle insurance system, one encounters the terms “compulsory state insurance” or “mandatory state insurance” more than once. This labeling already says something about the regulations of motor vehicle insurance here: In most states, at least basic car insurance, which in its main features is similar to the German one, is compulsory. This obligatory insurance (third-party risk insurance) covers, like the German car liability insurance, damage done to third parties up to the amount of 50.000 U.S. dollars. This is noteworthy especially since costs for accidents involving bodily injury, in which a person loses their life or suffers from consequential sanitary damage can easily go over the one million margin – it is not for nothing that the German law prescribes obligatory insurance with a coverage of at least 7.5 million Euros. Consequently, this means that in the USA, where good medical care is expensive, everything which cannot be covered by those 50.000 dollars needs to be paid out of one’s own pocket, which of course someone who causes an accident will not always do willingly and sometimes not even voluntarily. This is how the many lawsuits concerning bodily injury, in which high amounts of indemnification are usually agreed upon, can be explained.If one cannot bring proof of insurance as a car owner, a fine of over 500 dollars impends; if the offence is repeated, the fine doubles and one loses one’s driver license or, in extreme cases, a custodial sentence is decided upon. Even so, statistics show that a good 15% of drivers are not insured. Unlike in Germany, in fact, when buying and registering a car, proof of insurance must not necessarily be provided. This leads to those people who cannot afford the high premiums driving without insurance protection.

In the two states New Hampshire and Wisconsin there is no obligation to have insurance. Because of the regulation in these states, but also because of the large number of non-insured drivers in other states, it has been suggested to draw up a database which gathers together all insured and non-insured drivers. Other suggestions have included setting up an unsatisfied judgment fund, which should help with bodily injury if the person causing the accident was not insured or was insured insufficiently.

No Claims Bonus and other discounts

Just like in the German system, the insurance holder is rewarded for getting through traffic without having caused any accidents themselves. However, unlike in the German system, this discount can quickly be removed, if, for instance, small damage has to be paid for by the insurance company. If one wants to prevent this, one has to pay higher premiums in order to have the insurance company pay for small damage while leaving the no-claims bonus intact. This regulation is comparable to the German discount saver regulation.Often, the bonus is personalized, meaning it is only valid for the insurance holder themselves. Other bonuses include premium discounts for experienced drivers, as well as a discount when one installs an alarm system. A discount is also available when one can prove attending regular driving lessons, such as safe driving training or training for defensive driving. Also, discounts are awarded if for instance, parents of young adults up to 25 years of age are members of the same insurance company. Furthermore, having repair jobs done at authorized repairers can at least lead to a more lenient removal of discount points.

Driving record

The driving record in the USA is approximately that which in Germany the central traffic register in Flensburg represents. It is saved at the registration office or at the driving license office in question. Depending on number and severity of breaches, points which strain the personal register are awarded. The difference to Germany is that the higher the number of points in the driving record, the higher the motor vehicle insurance premium. Since insurance companies can request personal registers without problems, all listed offences influence the premium payments to be made.

Insurance Service Office

The Insurance Services Office (ISO) releases information for property and liability insurers in the USA and rates different types of vehicles with a number of points between 3 and 27. Amongst other things, depending on statistics and points awarded regarding theft, price for replacement parts etc., car classes resembling the German ones are created. Many insurers use this classification as a basis to calculate their premiums, they are, however, not obligated to do so.