If you cause an accident in Germany, you can be sued by the victim. If the victim wins, you will have to pay reparations1. A lawsuit like that can easily ruin you.

Liability insurance (Haftpflichtversicherung) protects you from these damage claims. If you cause an accident, your insurance company will pay the legal fees and the reparations.

If you lose your apartment key, you might have to pay to replace all the locks in the building. Your liability insurance usually covers that.

For more details, see this guide.