What is rental gurantee or security deposit insurance?
Rental guarantee or security deposit insurance in Switzerland is not a classic insurance contract, it simply provides an institutional guarantee (or surety) to the landlord that he will be paid in the event of a claim when his tenant leaves his property or if the tenant does not pay his rent; the rental guarantee policy WILL NOT pay the claim for policyholder, this will be covered by the personal liability insurance contract. Once the insurance company has paid the claim due to the landlord they will claim the corresponding amount from the policyholder.
If rental guarantee insurance pays no indemnities why purchase it?
In Switzerland everyone who rents a property is obliged to deposit three months of rent on a blocked security deposit account with their banking institution. In addition to this large cash deposit one must also pay the first month’s rent upfront. For tenants that do not have sufficient available cash the rental guarantee insurance is the only alternative.
How much does a rental guarantee or surety insurance in Switzerland cost?
The yearly cost is between 4 and 5% of three times the monthly net rent (excluding utility charges and parking) plus an admin fee (depending on the provider) and Swiss federal stamp duty.
For example:
Monthly net rent: CHF 2500.-
Three months’ rent: CHF 7500.-
5% of 7500.-: CHF 375.-
Stamp duty (5%): CHF 18.75
Admin fee: CHF 20.-
TOTAL YEARLY PREMIUM: CHF 413.75
Important: This is a yearly premium.
What deductible should I choose?
No deductible applies to the rental guaranty insurance.
What value or amount is reimbursed in case of a claim?
The amount paid to the landlord is capped at the value of the guarantee. The insurance company will charge the amount paid to the landlord back to the tenant / policyholder, plus administrative fees. The policyholder will be covered by their personal liability insurance at actual value, less the deductible.
Examples of rental guaranty or surety insurance claims in Switzerland made by the landlord
.A damages the walls and floors of his apartment
The tenant leaves a large hole in a wall and damage to the parquet floor. The insurance company will pay the invoice to repair the wall and floor and claim it back from the policyholder. The policyholder will recuperate what he can through his personal liability insurance for the damage done to the property.
.A does not pay rent for two months
The tenant does not pay their rent for two months. The insurance company will pay the unpaid rent to the landlord and claim it back from the policyholder plus the corresponding administrative fees.
Glossary of Swiss insurance terms – Rental guarantee
Personal liability insurance
Personal liability insurance covers any material damages the policyholder causes to a third party, physical injury caused to other people or damages caused to their personal belongings. It also offers passive legal protection, which defends the policyholder in the event of an unfounded personal liability claim.
Swiss federal stamp duty
A stamp duty due on all Swiss insurance policies; the rate at publishing was 5%.
Actual value
The amount required to replace the broken item at today’s price less depreciation, which includes wear and tear and obsolescence.
Deductible or “excess”
The deductible or “excess” is the amount the insurance policy holder will pay out of pocket before the insurance company starts to refund the claim. The deductible can be applied per claim or per calendar year depending on the type of insurance. The lower the deductible the higher the insurance premium, as a low deductible costs the insurance company more when a claim is made.
