The Spanish rental market is currently facing a major imbalance between supply and demand, leading to a continuous rise in prices. Recent data shows the average monthly rent at a record high of €1,155, representing an annual increase of 4.4%.

Among the factors limiting supply are concerns about unpaid rent and unauthorized occupancy by tenants.

In this context, rental guarantee insurance has become an essential tool for landlords, offering legal protection and compensation in cases of non-payment or property damage.

‍

Why is rental guarantee insurance important?

‍

The main purpose of this insurance is to protect landlords against unpaid rent. It ensures the advance payment of any missed monthly rent while legal proceedings are underway. This coverage is especially useful since the implementation of Law 1/25, which now requires landlords to attempt an out-of-court resolution through what are known as Alternative Dispute Resolution Methods (ADR).

Additionally, landlords receive immediate access to legal advice and representation, including eviction management. If, after the eviction, the tenant has caused damage to the property, most insurers include compensation for those repairs within their policies.

‍

Types and duration of missed rent coverage

‍

Landlords can choose how long they want the advance rent coverage to last, depending on the contract type and their personal needs. Options usually include 6, 9, 12, 18, or 24 months. This flexibility ensures rent payments continue for the selected period in the event of non-payment, significantly reducing financial risk.

At Okify, we recommend selecting coverage for at least 12 months, since recovering possession of a property after an eviction can take time, depending on the city or region.

Landlords can also choose whether to include a deductible in their policy.

But what exactly is a deductible in rental guarantee insurance?

• With a deductible: The landlord covers the first missed rent payment, and the insurance company covers subsequent unpaid months.

• Without a deductible: The insurer compensates for rent starting from the very first missed payment.

‍

Are these policies available for all rental types?

‍

Yes. Rental guarantee insurance can be used for both long-term leases and short-term rentals. Here are the main differences:

Long-term residential lease

• Usually signed for extended periods. In Spain, the Urban Leases Act sets a minimum duration of five years (for individual landlords) or seven years (for corporate owners), unless otherwise agreed.

• The property serves as the tenant’s main and permanent residence.
• ‍

Short-term or temporary rental

• Contracts last for a specific, limited period, typically longer than three months.

• The agreement must clearly state the reason for its temporary nature (vacation, studies, temporary work, relocation, etc.).

‍

Insurance tailored to the short-term rental market

‍

Short-term rentals make up about 7% of Spain’s rental market, but that percentage is significantly higher in cities like Barcelona, Madrid, San Sebastián, and Valencia. As a result, more insurers are adapting their products to meet this growing demand.

Unlike long-term policies, short-term rental guarantee insurance usually has a single-term duration, meaning it does not renew automatically once the coverage period ends, it simply expires.

‍

Required documentation

‍

Some insurers require little to no documentation when issuing the policy, as they use their own algorithms to assess tenant solvency. Others, however, request certain documents to evaluate the tenant’s financial stability. This may include information from both the tenant and any guarantors, particularly when tenants’ income does not exceed a specific threshold (around 40% of the monthly rent).

In all cases, consent for the use of personal data must be provided.

For short-term rental insurance, the requirements are typically lighter, no solvency check is needed, which simplifies the process considerably.

‍

Don’t forget about property protection

‍

While rental guarantee insurance is a must-have for landlords, it’s not the only policy that ensures peace of mind. Home insurance is equally important, as it covers incidents such as fire, theft, or water damage.

At Okify, we also recommend that tenants take out their own home insurance policy for added security. This way, if something happens in the property, both parties know exactly which policy covers which issue.

‍

The smart choice for landlords

‍

Taking out rental guarantee insurance is undoubtedly one of the smartest decisions a landlord can make. Before signing any lease, request the necessary documents from your tenants and their guarantors, review the coverage you need (both for unpaid rent and property damage), and decide whether you prefer a policy with or without a deductible.

‍

By doing so, you’ll enjoy your rental income with complete peace of mind and confidence. At Okify, we can help you choose the insurance plan and coverage that best fit your needs.