Rental deposit insurance for businesses

What many entrepreneurs and business founders underestimate is not just the cost of rent but also the cost of the deposit for the rented property. And this deposit can quickly amount to a five-figure sum, depending on the size of the premises. Unlike the private sector, deposits equivalent to six months’ rent are common in the commercial sector. This is money that many young businesses simply do not have on hand. And even if they do, they would much rather use it to advance their product development, set up a distribution structure or invest in marketing measures.

But what can be done? Without a rental deposit, no lease agreement can be signed. And without a lease, there are no premises to drive the business forward. This is where rental deposit insurance comes in. With rental deposit insurance, the one-off deposit payment to the landlord is eliminated. Instead, an annual premium is agreed upon with an insurance company. The landlord receives a surety certificate from the insurance company as security and waives the physical deposit.

If the tenant can no longer pay the rent or if there is damage to the property, the insurance covers the costs up to the deposit amount stipulated in the contract. The insurer then claims the money – usually in instalments – from the policyholder, i.e. the tenant. This offers advantages for both parties: the landlord has security and receives money quickly in the event of a claim, while the tenant preserves their liquidity.

Let us take a start-up renting office space at a monthly rent of CHF 3,000. With a commercial deposit of six months’ rent, that amounts to CHF 18,000 that would be blocked in a restricted account. With rental deposit insurance from goCaution, you instead pay an annual premium of approximately 5–6% of the deposit amount – roughly CHF 900 to CHF 1,080 per year.

This means CHF 18,000 remains freely available and can be invested in the business – whether for staff, marketing, inventory or technology. Particularly during the start-up phase, this capital can make the difference between success and failure.

Businesses should be clear about what commercial rental deposit insurance covers and what it does not. It covers “only” the rental deposit. Entrepreneurs and traders should therefore also take out business liability insurance. This covers damage caused to third parties, compensation claims and financial losses.

Contents insurance for inventory and furnishings is also advisable – as rental deposit insurance exclusively covers the landlord’s claims arising from the lease, not the protection of your own property.

The exact amount of the premium depends on several factors: the deposit amount, the creditworthiness of the business and the contract duration. As a rule, the annual premium is approximately 4.5 to 6.5% of the deposit amount. These costs can be booked as operating expenses.

Surety bond insurance is therefore an attractive alternative to the rental deposit account and, particularly for companies still in the start-up or growth phase, an important pillar on the road to success. With goCaution, you can take out your commercial rental deposit insurance conveniently online – and deploy your liquidity where it delivers the greatest benefit.