Wednesday, August 23, 2023
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What are the requirements to contract rent non-payment insurance?

Delinquent tenants are the number one challenge facing rental property owners. However, there are tools that allow you to avoid this situation and avoid the repercussions in those scenarios in which you come across this problem. Non-payment of rent insurance provides security in situations where rent is not received, but can encompass a wide range of additional coverages. In this article we detail what they are, in addition to the requirements to access this type of protection.

Take out rental non-payment insurance
Although the protection and guarantees vary by insurer, they have to examine the case of non-payment of rent insurance. These are the requirements and coverage that most insurers usually have:

Claims for acts of vandalism
If after an eviction process you find broken or seriously damaged doors, floors or kitchen furniture, an expert will assess the magnitude of the damage and the insurance company will cover the costs of the damage caused, up to a maximum value of 3,000 euros. .

Claims for damages of non-contractual origin
This insurance claims damages that may be caused by third parties to your home or premises, as well as to the goods found in it. For example, humidity problems caused by a neighbor, a crack after a work, among others.

Claim for non-payment of rent
In the event that your tenant stops paying the rent, payment of the debt is guaranteed up to a maximum of 12 months (as agreed in the contract).

Claim in repair and maintenance contracts
For example, if you have made a payment for the repair of any item and it still does not work, the insurer undertakes the necessary actions both amicably and judicially before the company responsible for the repair.

Protection and claim in lease contracts
If your tenant has breached the contract and sublets the property or carries out unauthorized works, the legal expenses derived from the claim process are covered by the insurance.

Defense of rights related to housing or premises
Defense in case of facing problems with a neighbor or with the community of owners.

Defense in criminal liability cases
Where issues have criminal implications, legal costs will also be covered. For example, if the tenant accuses you of having entered the property without her consent.

Legal advice by phone
If questions arise about any conflict or issue that may arise during the rental agreement, such as who is responsible for covering a repair, you will have the assistance of a lawyer to resolve them.

Protection in relation to other insurance
If your home insurance policy does not offer a solution to a particular problem, there are other insurances that will take care of managing claims and finding the optimal resolution for your situation.

Requirements to take out rent non-payment insurance
In order to acquire unpaid rental insurance, one of the requirements is that the insurance company carry out a solvency analysis on the lessee. In other words, they are in charge of the selection and choose the candidate who demonstrates the greatest financial strength. In general, it is considered positive that the total amount of the annual rent does not exceed 40% of the annual income of the tenant.

Additionally, a series of complementary documentation is requested, which varies according to the applicant's personal and employment situation. Below are the necessary requirements for non-payment of rent insurance and required documentation:

  • Employed employees: Last two salary receipts from the tenants and employment contract, copy of the identity document (DNI) and insurance application form, duly completed and signed by the tenants, guarantors and owner.
  • Self-employed workers: Last income tax declaration, last two proofs of payment of social security contributions as self-employed, copy of the DNI and insurance application form, duly completed and signed by the tenants, guarantors and owner.
  • Pensioners: Last proof of pension issued by the Social Security, copy of the DNI and insurance application form, duly completed and signed by the tenants, guarantors and owner.
  • Domestic workers: Updated certificate of work history or, failing that, the last two proofs of payment of Social Security contributions, employment contract and the last two pay slips or, failing that, certificate issued by the employer indicating the amount of the monthly net salary and insurance application form, duly completed and signed by the tenants, guarantors and owner.

What is the operation of insurance against non-payment of rent?
Imagine that you own an apartment in Roses and you choose to rent it out to a young couple. At first, everything goes smoothly, but as time goes by, the couple faces financial difficulties and stops paying the rent. This circumstance can pose an extremely complicated scenario for you as a landlord, especially if you depend on said income to face your own financial responsibilities.

It is at this point that the unpaid rent guarantee insurance becomes relevant. This type of insurance generally guarantees payment of unpaid rents for a set period (such as six, nine, or twelve months) and up to a specific amount, which usually corresponds to the agreed rental value. In addition, most of these policies also usually cover legal expenses in the event that it is necessary to take legal action against the tenants to recover the outstanding payments.

What is looked at in a solvency study?
In a solvency analysis, the income and expenses of the lessee are considered, calculating the remaining balance to meet the monthly payments. In addition, your work history, your employment contract and if you are registered in any record of non-payment are examined.

What is the response time of the insurance against non-payment?
Once the first non-payment occurs, it is the tenant who has to notify the insurer as soon as possible. The advance of unpaid rents is made once the judicial measures are initiated and they are within the period of three months after the first monthly non-payment.

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