If you are renting out your property in Spain, being insured is, without a doubt, the only way to have peace of mind, and the best way to have peace of mind is to take out rental default insurance. The best guarantee is the one that covers non-payment of rent, but the policies cover much more than that. They also offer advice to the owners on any problems related to the tenancy or the tenants and even problems they may have with the neighbourhood associations.
What is a rental default insurance?
It is a legal defence insurance that protects the owner against any problem that may arise with the rental of their property, from non-payment to a disagreement with the tenant over who should pay for repairs. The costs of lawyers, solicitors or fees are covered and, in addition, in the event of non-payment of rent, the insurance company advances the unpaid rents while the case is being handled.
Apart from assuming the monthly payments, the insurance company tries to mediate with the tenant from the first month that they stop paying, warning them of their obligations. And, in situations where it is not possible to reach an agreement, the judicial machinery is set in motion, although the landlords can disengage from the process, which is not at all pleasant. In addition, for added peace of mind, the insurance company will also mediate in any problems that may arise between the tenant and any of his neighbours.
Why take out a rental default insurance in Spain?
First of all, for peace of mind, knowing that if there is any problem, the insurance company will be there to solve it. In addition, their professionals are specialised in rentals, so that any necessary procedures will be carried out as fast and quickly as possible. And, finally, to save money, as a claim for non-payment can mean a significant outlay in addition to the loss of income from unpaid rent. With the insurance, everything is covered.
What should you take into account before taking out a rental default insurance?
Before taking out a rental default insurance, a study of the tenant's solvency should be carried out. It is always better to carry out this study before signing the rental contract, as it will be easier to ask the tenant for this documentation and, if the study is rejected, to find a solution by including more documentation or a guarantor.
What coverage is usually included in the insurance?
Rental default insurances in Spain usually cover the following:
- Advance of rents in case of non-payment, up to 12 months, which start to be paid when the claim is processed, with retroactive effect and without taking into account the first month of excess that the insurance has.
- Defence and claims in the event of breach of contract.
- Compensation for vandalism to the property.
- Costs of lock and locksmith in case of eviction.
- Criminal liability defence
- All lawyer's fees, solicitor's fees and fees included in any management related to the rental.
- The insured also has a telephone service at his disposal to resolve any legal doubts.
What is the price of the rental default insurance?
The price of rental default insurance varies depending on the services contracted by each client, as most companies offer flexible policies that can be adapted to the needs of each landlord. For example, landlords can choose the number of months they want the insurance to cover the rent: usually insurers offer up to 18 months of coverage, although most customers opt for 12 months.
On average, the cost of a rental default insurance will be between 3% and 5% of the annual rent obtained by the landlord.
Requirements for taking out this type of insurance
In order to take out a rental default insurance, a study of the tenant's solvency must be carried out and approved. Tenants may not spend more than 40% of their net income on rent and one of them must be a permanent tenant with a probationary period or have been with the same company for more than one year. Guarantors can be added if the tenant's income or seniority is not sufficient.
Necessary documentation to contract a rental default insurance in Spain
At this point we must specify the type of documents according to professional activity. If the tenants are salaried employees, the documentation requested is:
- last two pay slips
- employment contract
- ID
- application form signed by the tenants.
If the tenants are self-employed they are asked for:
- the last income tax (IRPF)
- the last two payments to Social Security
- ID
- application document signed by the tenants.
And if the tenants are pensioners:
- pension certificate issued by Social Security
- ID
- application document signed by the tenants.
So, if you want to rent out your property in Spain and assure the payment of the tenants' monthly payments, this is the best insurance for your home. It will allow you to forget about any possible problems that may arise because the insurance company's lawyers will be by the landlord's side to claim and defend their rights.