You may have heard a lot about so-called renter's insurance in recent times. But do you know exactly what they are and what kind of problems they protect homeowners against? Well, renter's insurance is becoming an increasingly common option when it comes to protecting a property lease.
It is not surprising, moreover, that in the current climate of uncertainty - particularly as a result of COVID-19 - more and more landowners are seek to insure their real estate to the maximum extent possible. And, of course, to offer reliability and flexibility to both parties, landlord and tenant.
What is renter's insurance?
Renter's or renter's default insurance is a good alternative to renter's default insurance.rotege to owners of rented accommodation against possible non-payments. These insure the collection of the monthly rent of the property, even if the tenant stops paying. In the event that this happens, the landlord must inform the insurance company, which will then take the necessary steps to claiming the debt and initiating eviction. The owner will not have to pay anything additionally.
But it is not only homeowners who can take out this insurance. Tenants also have the option to do so, with the aim of ensuring the continued payment of rent. even if an unexpected event occurs. We are thinking, for example, of a situation of unemployment or disability. But also in other circumstances in which you may need legal assistance for evictions, civil liability or property damage cover.
What does this insurance cover?
The basic coverage is non-payment of rent., with a set maximum. This is the key guarantee of the renter's insurance, but most companies offer additional services to handle claims and the corresponding legal procedures. The aim is for the landlord to have his or her home as soon as possible.
If you want to protect yourself against a possible act of vandalism, it may be more convenient to choose a home insurance policy. to claim for property damage. Broadly speaking, and depending on the company, these are some of the services and guarantees observed in different companies:
- Coverage of unpaid monthly payments
- Compensation for vandalism
- Locksmith costs
- Claims for repair or maintenance
- Legal assistance
- Coverage of supply debts
- Promotion of the property
- Tenant screening, credit history and creditworthiness
- Drafting the contract
- Payment of monthly instalments without waiting for judgement
How is it recruited?
Before agreeing to sign an insurance policy, companies usually conduct a survey on financial solvency of the tenants. The main ratio would be the ratio of rent to monthly income, not exceeding 50%. In addition, they cross-check the profile of the prospective tenant against a database containing the lists of defaulters.
While some companies may require little paperwork, others may be more demanding and require the delivers the following documents, in addition to the DNI:
- Salaried employees: last two payslips and employment contract.
- Self-employed: income tax return, last two Social Security receipts.
- Pensioners: proof of pension.
- Unemployed: certificate of employment and last two pay slips.
The process is usually as follows:
- Information search and selection of insurance: the more services you offer, the higher the price will be.
- Processing of documentation
- Validation of documentation by the company
- Feasibility study
- Tenant approval
- Signing of the rental contract
- Contract validation
- Policy issuance
The order may vary in some cases, but the first steps are immovableThe contract should not be signed until the company has given the tenant the go-ahead.
What is the cost of this service?
The annual cost of rental insurance is around 3% - 5% of the annual rent. An indicative figure would be €500 for a 12-month rental contract with monthly payments of €1,000.
Before choosing a renter's insurance...
The Spanish Renters' Insurance Observatory warns that certain precautions should be taken before taking out a contract:
- Research the company well, The real insurance companies need large reserve funds and are registered with the Directorate General for Insurance and Pension Funds.
- Review coverage, as not all companies include the same elements in the basic package. We have highlighted the importance of protection against vandalism or legal cover.
- All documents in order, The rental contract itself, in particular, must comply with the regulations in force.
- Do not confuse home insurance with non-payment insurance., are independent and do not replace each other.
- Pay attention to renewals, It is common to be overconfident and not renew the insurance in order to save on the cost. However, the risk of rental-related problems still exists and it is not advisable to cancel the insurance before the end of the contract.
- Take out cover for at least 12 months.. According to OESA, this is the minimum time required in case of eviction.
- Beware of misleading advertising, If the company is a "one-stop shop", it is possible to focus on an advertised advantage and neglect all of the above points. Researching the company should be the starting point.
You can take out rent default insurance even if you already have a tenant, as long as they are not in arrears.
We hope all this information will be useful to you when renting your flat. Do you have any questions? You can write us a comment or contact by phone or email.
