Unpaid Rental Insurance

Insurance for non-payment of rent in Spain

For a few years now, insurance for non-payment of rent from their lessors has become popular among real estate owners in Spain who lease their properties. For many, it has become an essential tool, as a way to guarantee their income, not have surprises in the future and in some way, guarantee the profitability of the investment made. It should also be noted that this tool is not only positive for the landlord, but also favors the tenant to a certain extent, since it allows access to rent properties to people, who, even though they are solvent, do not have the ability to obtain the guarantees required by the owners of the real estate.

In general terms, this type of insurance provides protection to the landlord against non-payment by the tenants, but also, prior to the lease, the insurance company carries out an economic feasibility study of the future landlord, in such a way that once the risk, if you conclude that there are risks of default, the contract will not materialize. From APE Asesores de Propiedades en España, we recommend that our clients take out this type of insurance, as it helps all parties to guarantee the profitability of their investments and also work in a safer way.

WHICH INSURERS PROVIDE THIS SERVICE IN SPAIN

Given that the hiring of this type of insurance has become more and more popular, and that there is also an upward trend in the rental of properties in Spain, every day there are more insurance companies that offer this type of insurance. These are contracted through multi-risk policies within the home branch of the insurer, offering solutions to protect the owner designed to guarantee the collection of the rent.

In Maar Agecy, we fully know the coverage of these insurance policies, and we work indistinctly with each of them, depending on the requirements of our clients.

INSURANCE CONTRACTING REQUIREMENTS IN SPAIN

Taking into account that the insurer will be responsible for paying the rent in the event of non-payment, as is natural and as we discussed above, the first thing the company will do is an analysis of the financial solvency of the potential lessor. The approximate ratios used by insurers to validate the lessor are 40% -45% of monthly income with respect to the rental value. In addition, the insurer usually requests a series of documents that prove the tenant’s solvency. Among other documents, the last two payrolls are usually requested, type of contract with the company in which they work, or if they are people who work as independent, they usually ask for the latest VAT returns and the last income statement. It is also common for them to review the delinquency files, which in Chile for example we call DICOM.

WHAT COVERAGES DOES THIS TYPE OF INSURANCE OFFER?

The main coverage that rental policies have are the following:

  • Rent payment in case of non-payment by the lessee up to the maximum established in the conditions of the contract.
  • Defense and protection of the interests of the landlord against future legal conflicts that may arise, evictions, etc …
  • Claim for damage or material damage that the tenant may have caused.

HOW DOES INSURANCE WORK?

Once the insurance is contracted, the landlord must immediately notify the insurance company when the landlord fails to pay the rent or any of the aforementioned circumstances occurs. From that moment on, the procedures of the insurer begin, as regards the claim for debts and eviction.

In the case of eviction, when the landlord finally recovers the home, it must be taken into account that the times depend on the court that processes the eviction. Likewise, depending on the insurance company that has been hired, the owner may begin to collect the unpaid monthly payments from the moment he notifies it or will have to wait for the justice to decide.

WHAT IS THE PRICE OF THIS INSURANCE?

As a general rule, and taking into account the price of the different insurance companies that offer this insurance in Spain, the average value is between 3% and 5% of the Annual Income of the property.

The insurance will be contracted on behalf of the owner, and although the law does not clarify who must pay it, as a general rule it is paid by the landlord, although there are also cases of paying it jointly between the landlord or tenant, or even sometimes only the tenant, especially in cases where the tenant requires insurance as a guarantee or guarantee for the lease. In addition, there are policies that carry a complementary Civil Liability insurance for the tenant, in which it guarantees the payment of compensation to third parties for damages.

If you need more detailed information on these insurance policies, please contact APE Property Consultants in Spain.

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