What is rental deposit insurance?
Rental deposit insurance is an alternative to paying a deposit. Find out what this means, and what the advantages and disadvantages of rental deposit insurance are.
16.01.2023
iStock/mediaphotos
1. What is rental deposit insurance?
Rental deposit insurance is a type of guarantee. It is an alternative to paying the deposit on a rental property into a bank account. This means you don’t have to pay thousands of francs as a deposit. With the insurance, the landlords receive a guarantee certificate.
This means the insurance pays open invoices directly to the landlord. It acts as a guarantee for landlords that they will receive money – for example, for outstanding rent or tenant damage.
Still haven’t found a suitable home?
Haven’t found your dream apartment yet? You’ll find Switzerland’s largest property marketplace at Comparis.
2. How does rental deposit insurance work?
You can take out rental deposit insurance with insurance companies and banks. The insurance company becomes liable for the rental deposit. For this you pay:
an annual fee
in some cases, a flat-rate sign-up fee
in some cases, additional administrative fees in the event of a claim
in some cases, additional stamp duties
Note: rental deposit insurance is not a substitute for liability insurance. Rental deposit insurance only pays out for tenant damage and rent due. After that, the insurance company will reclaim the amount.
Do all landlords accept rental deposit insurance?
Not all landlords accept rental deposit insurance instead of a deposit paid via bank transfer. Many will also only accept certain providers. Ideally, you should check with the administration beforehand.
3. Rental deposit insurance: costs at a glance
A study by Comparis shows that the premiums and fees of different providers vary greatly. Annual premiums amount to 4-5% of the deposit amount. Sign-up and administrative fees vary from one provider to another.
For example, your rental deposit is 6,000 francs. This means you’ll pay between 250 and 315 francs per year. This equates to several thousand francs for a long-term tenancy. If the tenancy is terminated, the money will not be refunded.
4. Cancelling rental deposit insurance: when is it possible?
You can usually cancel your insurance at any time. Overpaid premiums are usually refunded on a pro rata basis. Conditions vary from insurer to insurer.
Good to know: you can’t cancel your insurance on your own. You also need the consent of your landlord. The landlord must release the guarantee or send it back to the insurance company. Only then can you cancel your insurance or switch to simple rental deposit via bank transfer.
5. Rental deposit insurance: what are the pros and cons?
| Advantages of rental deposit insurance | Disadvantages of rental deposit insurance |
|---|---|
| They can bridge financial difficulties. | You won’t get the premiums back. |
| The money for the rental deposit is not tied up. | Unlike the a standard deposit, you don’t receive any interest. |
6. Security deposit account or rental deposit insurance: what makes sense?
Rental deposit insurance is only useful in the event of financial difficulties, for example if you’re still waiting to get your rental deposit back on your last home and are unable to finance a second deposit.
If you have enough money available, it’s better to open a deposit account. The reason: in the most expensive case, the insurance eats up more than half of the rental deposit over a period of ten years. In the best case, you’ll receive interest on your rental deposit.
This article was first published on 09.11.2017
