Rental Default Insurance | How do they work?

The most comfortable way to rent a home today is thanks to unpaid rent insurance .

If you want to have the peace of mind of not having future problems with your tenant (unpaid fees, damages, evictions), unpaid rent insurance will avoid these types of problems.

In this article I will explain how they are hired, which insurers do it and what coverage this type of insurance covers.

How Unpaid Rent Insurance works

The demand for rental housing is on the rise.

Cities such as Madrid and Barcelona have increased their rental prices and the supply of rental housing is becoming increasingly scarce. This causes owners who put their homes on the market to demand products that secure their rents and avoid problems with their tenants.

Before it was very common for the owner to demand bank or personal guarantees from the tenant, defaults, evictions and damages can cost, to avoid this an insurance can cover all your needs.

Unpaid rent insurance is a new formula that allows the owner to cover future monthly rent defaults.

Normally an unpaid rental insurance guarantees the following concepts

  • Legal protection for the tenant throughout the process.
  • Cover material damage to the property (if any) once the eviction is completed.
  • Cover the payment of the unpaid months, and advance the months of rent when the eviction begins.

In January 2018, the average rental price of homes in Spain is € 1,168 per year, this represents an increase of 1.28% compared to December 2017.

Among the functions carried out by the insurance (including coverage), is the realization of a filter to the tenant, in which he is not in the Credit Checker , judicial debts, etc.

This filter determines the type of client that can be and what payment guarantees it can offer the tenant of the property.

The cost of contracting Non-Payment of Rent Insurance

The cost of unpaid rental insurance for a tenant is usually between 3% and 5% of the annual rent.

An example from the Mutual Society indicates that for a monthly rent of € 500 the annual cost of insurance would be € 241 / year.

When will we use Default Insurance?

When the tenant begins to have a delay in their payments within 10 days, we will have to notify the lawyer of the insurance company about the incident.

It is very important to know the terms determined by our insurance contract, so the notification of the incident is extremely important so that the fees due are paid to us. The legal department will contact the tenant to clarify the situation and resolve the case amicably.

In the event that an eviction claim has to be filed, the insured may claim from the insurer the total amount of unpaid income so far.

For example, the insurance company FIAT Seguros offers the following coverage conditions:

Payment of unpaid rent:

  • Coverage up to 12 months.
  • Franchise: 1 month.
  • Maximum sum: € 3,000 monthly rent.
  • Advance unpaid income started the eviction process

Vandalism to the mainland committed by the tenant:

  • Damage to the continent caused by acts of vandalism committed by the tenant.
  • Theft of parts of the continent by the tenant.
  • Coverage limit: € 3,000 at first risk.
  • Franchise: € 300.

Insurance Companies that carry out this type of Insurance

I have looked for 3 companies that offer this type of insurance so that you can choose the one that best suits your profile.

In summary , Rental Default Insurance is a fashionable product that gives you security when renting your properties. According to a study by insurance companies, almost 70% of the insured renew it .

Therefore, if we start renting, hiring this type of coverage can save us headaches.

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