Default insurance: does it prevent rent arrears?

The economic crisis resulting from the COVID-19 pandemic is wreaking havoc on family economies. One of the main problems it is generating is the inability of some families to cope with rent payments. As a solution, an increasing number of landlords are opting for take out default insurance to avoid late payments.

This relatively new type of insurance has been undergoing a period of increases from 2019%, when they increased by 35 % according to data from the Observatorio Español del Seguro de Impago de Alquiler (OESA) (Spanish Rent Default Insurance Observatory)but in the pandemic season, recruitment has doubled, to the extent that the OESA estimates that in 2021 the 30 % of new rental contracts will include default insurance.

"The COVID-19 crisis has made landlords feel more insecure about possible non-payment."explains Emiliano Bermudez, deputy director general of donpiso. "The volatile context in which we live also makes it very difficult to foresee future delinquencies," he reasons.

For this reason, the expert believes that the best option to avoid situations of default is to take out these default insurances. "It's the best way to make sure that the money is going to arrive.This is the trend that society is following", says Emiliano Bermúdez, who adds that "it is the trend that society is following".

How does default insurance work?

"The insurance against non-payment of rental covers the rent agreed at the time of signing for up to 12 months of non-payment".explains Emiliano Bermúdez. In this way, the landlord secures his monthly rent and avoids situations of default by the tenant.

In addition to non-payment, these insurances offer other coverage. "Once insurance has been taken out," says Emiliano Bermúdez, "it is common to add protection for damage to the home or theft. Which in turn are the main cause of litigation between the landlord and the tenant," he adds.

For the expert, taking out insurance also has benefits for the tenant, as it provides financial relief in the event of not being able to meet the costs of the rent. rent payments. "With comprehensive coverage, the tenant avoid possible unpleasant situations. Like getting on the list of defaulters or even being evicted."He believes.

"Default insurance is a very convenient tool".he thinks. And he predicts that in the future there will be more and more policies in the rental sector. "Just like car insurance, for example, are likely to become a necessary condition for renting over time.", he ventures.