RENT GUARANTEE – WHAT YOU NEED TO KNOW

2 September 2024 By: Index Caution

Navigating the insurance industry can be challenging for the average person. Whether it’s property, auto, or health insurance, disparities in coverage and costs are common, even for the same level of protection. The same applies to rent guarantee insurance. Fortunately, a comparison tool now allows for informed decisions when evaluating various offers.

Firstly, it’s important to note that all rent guarantee insurance providers offer the same coverage, simplifying the tenant’s choice. The comparison site, www.indexcaution.ch brings together the leading players in this rapidly growing sector, including Swiss Caution, Firstcaution, Web Caution, Smart Caution, GoCaution, Axa, Zurich, and Helvetia.

SERVICES

As mentioned, the services are identical across all insurers. The main purpose is to cover the three months’ rent required by landlords, allowing tenants to retain their liquidity for other uses. Additionally, the amount deposited with the landlord generates little to no interest and remains frozen until the end of the lease, often until the tenant vacates the property.
Rent guarantee insurance ensures the tenant fulfills their obligations under the lease agreement with the property management or landlord. Insurers cover any debts owed by the tenant to the landlord, such as unpaid rent or damages to the property identified during the move-out inspection.

RATES

Typically, the cost of such insurance includes not only the insurance premium but also various fees, such as registration, certificate modification, collection fees in case of non-payment of premiums, deductibles in case of a claim, and annual management fees. The premium rate generally ranges between 3.5% and 5% of the rent amount, depending on the company.

The variety of possible fees led to the creation of the site www.indexcaution.ch which allows users to compare the actual costs of rent guarantee insurance over 1 year and 5 years within a minute. This comparison reveals that annual premiums and fees can vary significantly—up to 30%—depending on the insurer chosen.

COMPLEX PRICING

Recently, some guarantee companies have introduced new factors into the calculation of annual premiums and fees. These include:

• Lower fees during the first year of insurance to attract new customers (a form of price dumping), followed by higher fees in subsequent years.
• Loyalty discounts after several years of insurance.
• Discounts based on age (e.g., 25 or 30 years old) for the first year’s premium and/or subsequent years.

This new approach by some guarantee companies can confuse tenants when it comes time to choose their next rent guarantee. We recommend prioritizing the following criteria when making your decision:

• The premium rate starting from the second year of insurance.
• The fees charged by the guarantee insurance companies.

The comparative table below clearly highlights these differences.

While such differences may seem surprising, they are explainable. Just as EasyJet disrupted airline pricing, technology has enabled newer companies to implement streamlined and automated processes that significantly reduce costs. Everything is completed in less than 24 hours, with certified service and no need to visit any office.