Rent deposit insurance: Benefits & how it works!

Last Updated on 2 months by David Bergmann

Are you planning to move within Switzerland or are you about to move into a new home? Then you have certainly already been confronted with the topic of “rental deposit”. In Switzerland, it is customary for tenants to pay a deposit before moving into an apartment, which serves as security for the landlord. However, paying the rental deposit can be a considerable financial burden for you as a tenant. That’s why we want to introduce you to an attractive alternative to the classic rental deposit: Rental deposit insurance. Find out exactly what it is and how it works in the following article!

1. Why choose “rent deposit insurance”?
2. How rent deposit insurance works
3. What to consider, when terminating the contract?
4. When to get rent deposit insurance?

1. Why choose “rent deposit insurance”?

The deposit amount

One of the first questions that arises in a tenancy concerns the amount of the deposit. In Switzerland, landlords often demand a sum of several months’ rent as security in addition to the rent. This can be a big financial burden, especially as there are a lot of costs involved in moving anyway, such as costs for the removal company, new furniture, costs for re-registration, etc. You may also still be waiting for the rental deposit from your old apartment to be repaid.

This is where rental deposit insurance comes into play. Instead of depositing the deposit amount in a bank account, you can take out an insurance policy, which offers the same security but without actually tying up the money.

No administrative effort

Another advantage of rent deposit insurance over the classic rent deposit is the lower administrative costs. With a rent deposit, you have to open a separate account, pay in the deposit amount and keep it safe. In addition, administrative fees may be incurred, which can become significant over time.

With rental deposit insurance, the insurance company takes over the administrative costs. You do not need to open an additional account or transfer money.

Flexibility and termination of the tenancy

Another important point to consider is flexibility. When your tenancy ends, you must first have the money from the rent deposit released again. You are dependent on the favor of your landlord. If you’re unlucky, he or she will withhold the deposit and demand one or two (cosmetic) repairs. That costs time and nerves.

With rental deposit insurance the guarantee ends automatically at the end of the tenancy. This means that the insurance term corresponds to the rental period and you have no further obligations or administrative tasks to take care of afterwards.

If you have found a new rental apartment and then need deposit insurance again for the new landlord, you can take out a new policy at any time.

2. How rent deposit insurance works

• The annual premium

To take out rental deposit insurance, you pay an annual premium to the insurance company. The interest rate is usually between 4% and 5% of the deposit amount. The exact amount of the premium depends on various factors, including the amount of the deposit and your credit rating.

• The credit check

When applying for rental deposit insurance, a credit check is usually carried out. This is used to assess the risk for the insurance company and determine the amount of the premium. The better your credit rating, the lower your premium will generally be.

• The deed of guarantee

Once you have taken out the insurance, you will receive a certificate of guarantee which you can present to your landlord as proof of your rental security. This document has the same legal validity as a cash deposit or a bank guarantee.

• The claim

If there are tenant damages or rent arrears, the rental deposit insurance will step in. In the event of damage, the landlord can make a claim to the insurance company to cover the costs incurred. This offers both you as a tenant and the landlord additional security.

3. What to consider, when terminating the contract

As with any contract, there are a few points you should bear in mind when taking out rental deposit insurance. Even if it is annoying and time-consuming, you should definitely read the small print beforehand:

• Amount of the rental deposit: Is regulated by law and may not exceed three months’ gross rent including ancillary costs.

• Amount of the annual premium: As mentioned, this is usually between 4-5%. Depending on the deposit amount, one percentage point can make a considerable difference.

• Security deposit insurance is optional: Taking out rental deposit insurance is always voluntary and may not be demanded by the landlord.

• Administrative costs: Ideally, there are no administrative costs, but some insurance companies charge a small fee (e.g. CHF 20) for the work involved.

• Fee in the event of a claim: Some insurance companies charge a deductible in the event of a claim. You should therefore make sure you find out in advance whether a fee will be charged and how much it will be.

• Premium refund: Some insurance companies also charge a fee when the rental deposit is canceled. Some only refund the annual premium from the second or third year onwards, but without a fee.

We recommend our partner AXA a renowned insurance company that also offers rent deposit insurance. With AXA, you can order a rental deposit guarantee online and benefit from the advantages of an established insurance company.

4. When to get rent deposit insurance…

Rent deposit insurance is particularly useful if you value financial flexibility and want to avoid the administrative burden of a rent deposit. Here are some scenarios in which rental deposit insurance can be a good choice:

• If you do not want to pay the entire deposit in cash or in a bank account.
• If you want to avoid the administrative burden of a rental deposit account.
• If you have a good credit rating and want to benefit from lower premiums.
• If you want to be flexible and do not wish to be restricted in the use of your funds by a blocked account.

Conclusion:

Rent deposit insurance is an attractive alternative to the traditional bank deposit in Switzerland. It offers the same security for landlords without tying up your money or causing additional administrative work. With various insurance partners such as AXA you have flexible options to secure the rental property of your dreams quickly and without a large financial burden.

Tip: Don’t forget to take out household contents insurance for your new home before you move in. You can find everything you need to know about household contents insurance here .

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