Signed the contract but didn’t understand it?
Court reprimands insurers: Customers must understand contracts
July 22, 2026 – 1:26 p.mReading time: 2 minutes
Insurance contracts are full of technical terms that not everyone immediately fully understands. However, the insurer must clarify this – otherwise he may have to bear the consequences.
Insurance German is a language in itself that overwhelms many customers. When signing the contract, it is not clear to every policyholder what terms such as progression, obligation or underinsurance waiver actually mean. In the worst case, this can have serious consequences if the insurance company does not provide what the customer expects in the event of a claim.
However, customers do not have to be insurance specialists before signing a contract. Instead, the insurer must provide information about crucial technical terms and ensure that the customer understands them. The Higher Regional Court has now confirmed this Stuttgart in a current decision (Az: 7 U 22/25).
New value versus current value
In this specific case it was about an agricultural farm that a father had passed on to his children. The father had taken out fire insurance, which replaced the new value of the farm. After the father’s death, the heirs contacted the insurer to have the insurance contract transferred to them. In the following consultation, the contract was finally changed to an insurance policy that only insured the current value of the building.
New or current value: these are the differences
With New value This refers to the value that you have to pay on the day of the damage in order to replace a similar new item. How much this item originally cost is irrelevant.
The value refers to the value of something after a certain period of use. A certain amount is deducted from the new value, depending on the age and wear and tear of the insured item. Since determining the current value individually is too time-consuming, insurers deduct certain flat rate percentages from the new value.
Although insurance against current value is cheaper, it usually insures a significantly lower amount than insurance against new value.
Two years later, a fire destroyed parts of the farm. According to the contract, the insurance paid the current value. However, this was around 40 percent lower than the new value of the farm. Money was therefore missing for reconstruction – much to the annoyance of the community of heirs, who felt that they had been badly advised and sued.
Heirs win in court
Successfully. Both the regional court and subsequently the Stuttgart Higher Regional Court saw a breach of the insurer’s duty to provide advice and agreed with the heirs. The community of heirs did not know the difference between new and current value. Even if these are relatively basic terms, the insurer cannot simply assume that the policyholder knows these terms. This applies both when concluding a contract and when simply changing the contract.
If the insurer initiates a contract change in the person of an employee, it must explain the differences to its customers in detail and ensure that they are understood. Appropriate advice must be documented by the insurer.
In this specific case, the insurer would have had to explain the differences between new and current value insurance. Since he failed to do this, he violated his duties and now has to compensate the new value of the burned farm. The judgment is final.
