Faced with an increase in evictions due to non-payment of rent, in Spain more and more owners are deciding to take out non-payment of rent insurance. These policies cover the monthly payments from the moment the tenant stops paying until the eviction occurs. Likewise, they offer other benefits of interest to landlords such as protection against property damage, coverage of supply costs and even the management of eviction actions and costs.
Faced with this rise in the hiring of insurance to avoid non-payment of rent, some insurers have gone a step further by expanding this insurance with an advance payment service.
Some specialized insurance companies offer this service and it is about offering maximum flexibility to the policyholder, in this case the owner, so that they can advance the collection of rents according to their needs. In this way, as a landlord you can dispose of the money that you are going to receive from the rent of your property before the tenant pays it. This advance, depending on the company, can be requested from 1 to 36 months and as many times as the insured wishes.
This type of plus service allows you to have liquidity whenever you want it. Instead of going to the bank to request a loan when you need a sum of money, you can anticipate the monthly rent of your property without increasing your CIRBE or increasing your debt since it is not a loan as such.
at what price? This varies depending on the insurer.
Some companies offer maximum flexibility and let the insurance buyer decide how and when to return the money without amortization or cancellation costs. Other companies offer this service with a commission generally no more than 15%.
In order to request non-payment insurance and/or a rental income advance, insurers carry out a study of your rental contract and the solvency of the tenant who rents your property. This must present their latest pay slips or employment contract. In the case of being self-employed, you will have to show the annual income statement and the self-employed registration.
Insurers also take into account the credit history of the tenant candidate and also require that their employment contract last more than one year.
When evaluating the risk of non-payment of rent, as a general rule, a tenant will not pass the test if their monthly payment is equal to or greater than 40% of their monthly income.
The non-payment of rent insurance can be paid by both the owner and the tenant, since the Urban Leasing Law does not specify anything in this regard. The two parties must agree by contract who is responsible for this expense. However, the tenant has the right to refuse to pay the insurance and the owner has the right to choose a tenant who does accept the requirement.
Of course, if as the owner you decide that the tenant is going to pay the non-payment insurance, avoid charging it with direct debit since if you stop paying the rent you will also stop paying the insurance. If this happens, the policy will be void and, most likely, you will be left without the protection you need.
