Rental deposits: security for the landlord, but a financial burden on the tenant. Many tenants do not want their money tied up for years in a blocked account – or simply cannot afford it.
Rental deposit insurance is an alternative. It is also suitable for cases where the rental deposit for a new home is due before the deposit from the previous home has been returned. comparis.ch has put together everything you need to know about rental deposit insurance.
How rental deposit insurance works
The rental deposit insurance or rental deposit guarantee is set up with an insurance company or bank. The tenant pays a registration fee and a yearly premium. In return, the insurance company becomes liable for the amount of the rental deposit due to the landlord. However, rental deposit insurance should not be confused with liability insurance. Payments made by the insurance company on behalf of the tenant in the event of a claim must be repaid.
Advantages and disadvantages of rental deposit insurance
According to a survey by comparis.ch (not available in English), the main reason people opt for rental deposit insurance is a lack of financial resources. In other words, rental deposit insurance is most often chosen by people who do not have enough money available for a rental deposit, or who need the money for other reasons. However, there are other reasons for choosing it – as well as reasons not to:
Advantages of rental deposit insurance
- There is no need to raise funds for a rental deposit. This means that
- cash is freely available for other purposes, or can be set aside in reserve.
- If the rental deposit for the old apartment is not returned promptly, the additional financial burden of a second deposit on the new home can be mitigated by choosing rental deposit insurance.
Disadvantages of rental deposit insurance
- Over a number of years, fees and premiums could amount to several thousand francs.
- The premiums are non-refundable.
- Any damage claims made when handing over the apartment will only be covered by the insurance company temporarily, and must later be repaid.
Different providers charge different premiums
Premiums and fees vary greatly between providers. As a rule, the annual premiums amount to four to five per cent of the deposit; accession premiums, administration fees in the event of a claim, and the maximum amount of the deposit to be covered vary according to provider. Therefore, it is well worth getting several quotes and breaking down the cost based on the deposit amount before deciding on a provider.
But please note: not all landlords accept rental deposit insurance in place of the classic rent-based rental deposit. Many will also only accept certain providers – so it is worth asking in advance exactly what will be accepted.
So, when is rental deposit insurance a good idea?
In a nutshell, rental deposit insurance could be ideal for tenants who
- do not want to have their cash tied up in a blocked account;
- would like to spend their money on other things or do not have enough cash available;
- are waiting to get their rental deposit back on their last home and are unable to finance a second deposit.
Looking for a new home? Use the property search at comparis.ch for the best overview: