Arguments for and against rental deposit insurance

The advantages for the tenant are obvious: they do not have to dig deep into their own pocket and come up with the usually four-figure sum. The landlord is still covered. Because in the event of damage to the apartment or outstanding rent payments, the insurance steps in. Anyone moving into a new apartment can quickly find themselves in a liquidity squeeze. After all, the move itself usually costs money. On top of that, the deposit for the new apartment often has to be paid before the landlord has returned the deposit from the old one. Suddenly, several thousand francs are missing from the account. If you do not want to knock on your parents’ door to ask for money in this situation, rental deposit insurance is ideal.

And most landlords take the rental deposit very seriously. Often, the keys are only handed over once the deposit has been received in the landlord’s account or the surety certificate from the rental deposit insurance has been presented. If this does not happen, the landlord may even terminate the lease and look for a more financially capable tenant. However, some landlords are open to negotiation and will agree to instalment payments. By the way: if you pay the landlord the deposit in cash, be sure to have them confirm receipt in writing.

With rental deposit insurance, you typically pay a modest annual premium. This goes not to the landlord but to the insurance company. What the landlord receives is a surety certificate. This provides security in the event of a claim. In such a case, the insurance covers the damage up to the maximum deposit amount and pays the money to the landlord. The insurance then recovers the money from the policyholder, i.e. the tenant. Repayment to the insurance company is usually possible in instalments.

Anyone with sufficient savings who can pay the rental deposit without difficulty may be financially better off than with rental deposit insurance, as they save the annual premium. On the other hand, nobody knows whether they might need the deposit money, at least temporarily, in two or three years’ time. But even then, it is possible to replace an existing rental deposit account with rental deposit insurance during the tenancy. This creates additional liquidity should the need arise.

Not all landlords are familiar with rental deposit insurance. It is a relatively new product on the insurance market. Some landlords may therefore decline the insurance and prefer to have the deposit held in a traditional restricted account. In any case, you can show the prospective landlord the pre-confirmation of your rental deposit insurance at the apartment viewing, demonstrating that you have made provisions and take the deposit matter seriously. This may even convince sceptical landlords.

Rental deposit insurance is not just for private individuals. Businesses can also opt for such insurance. In the commercial sector, deposits are often significantly higher. In addition, the annual premium can be claimed as an operating expense.

The fact is that more and more people are coming to appreciate the benefits of rental deposit insurance. This is increasing both awareness and acceptance among landlords. For additional liquidity, it is always worthwhile. Also read our cost comparison between rental deposit insurance and a bank deposit.