Tips for choosing the right security deposit insurance

Swiss landlords can legally demand a security deposit equal to up to three monthly rents. But many people cannot or prefer not to tie up an amount in the four or even five figures for the duration of their home rental.

Security deposit insurance offers an alternative by giving your landlord a guarantee that they will receive due payment for rent and damages. Instead of paying down the deposit at the start of your rental, you pay an annual premium to the insurance company. Here, moneyland.ch offers useful tips for using security deposit insurance for your rented home.

Tip 1: Check whether your new landlord accepts security deposit insurance

Before getting security deposit insurance, you should first check whether your new landlord accepts security deposit insurance in place of a security deposit.

Tip 2: Only use security deposit insurance if you have to

Rental deposit insurance is expensive, costing several hundred francs per year for an average rent. If you have money that you can afford to do without for the duration of your home rental, it is almost always cheaper to use a rental deposit account instead. Paying down the deposit yourself instead of using insurance can save you thousands or even tens of thousands of francs over the span of your home rental.

Exception: If you would otherwise invest the money and earn an average return that is significantly higher than the cost of insurance – accounting for possible interest earned from a rental deposit account – then using insurance can make financial sense.

Tip 3: Your landlord cannot make you use security deposit insurance

Using rental deposit insurance is always voluntary. Your landlord must also give you the option of paying your deposit into a rental deposit account. 

Tip 4: Compare offers

There are big differences between the offers from different insurance companies. The most expensive offers can cost hundreds of francs more per year than the cheapest offers. Comparing offers based on your specific needs can save you thousands of francs over your full home rental. You can do so using the interactive security deposit comparison on moneyland.ch.

Note: Landlords can specify a specific security deposit insurance provider that they want you to use. In that case, you are not free to choose the cheapest insurance offer.

Tip 5: Account for all possible costs

Make sure to compare all possible fees and charges, and not only the insurance premiums. Premiums are typically charged as a percentage of your security deposit, though some insurers have a minimum premium that applies to smaller deposits. In addition to the insurance premiums, you may also be charged annual administrative fees. Some insurers charge a one-time signing fee when you first get the insurance. 

The interactive security deposit insurance comparison on moneyland.ch accounts for all possible costs, including Swiss stamp duties.

Tip 6: Choose the right minimum contract term

Pay careful attention to the minimum contract term. Some insurers do not have a minimum term. That lets you terminate the policy at any time if you find a cheaper insurance or want to pay down the deposit yourself. But other insurance providers have contract terms of between 1 and 3 years – depending on the offer. You will not be able to change your insurance or move to using a rental deposit account until the minimum contract term ends.

Important: If your rental contract ends, the insurance policy will be terminated even if the contract’s term has not yet expired. So the minimum contract term does not apply if you stop renting your home.

Tip 7: Pay attention to notice periods

Some rental deposit insurance offers do not require you to give notice in order to terminate your insurance. But others require you to give notice between 1 and 3 months before your contract term expires. If you do not, the insurance policy is automatically renewed for one year. 

This is important if you ever decide to move to a different rental deposit insurance, or to use a rental deposit account instead. In the case of a move, the insurance is ended automatically without the need to give notice. 

You can filter offers based on their notice periods in the interactive security deposit insurance comparison on moneyland.ch.

Tip 8: Check the limits on insurance cover

Most rental deposit insurance offers have a limit on how high your deposit can be. The limits range between 10,000 and 20,000 francs, depending on the offer. If, for example, your monthly rent is 4000 francs and your landlord requires a deposit equal to three monthly rents, you will need an insurance offer with a limit of at least 12,000 francs. It is worth noting though, that some insurance providers may still give you customized insurance with a higher sum insured upon request. 

You can see if an offer has a limit, and how high the limit is, on the information pages of offers in the security deposit insurance comparison on moneyland.ch.

Tip 9: Security deposit insurance is not liability insurance

Rental deposit insurance does not cover the cost of damages you inflict on a rental home. The insurance provider simply fronts the money due for unpaid damages to your landlord, and then bills you for the cost. The risk of accidentally damaging a rented home can be covered by getting personal liability insurance.

Tip 10: Security deposit insurance does not pay your rent for you

Security deposit insurance does not pay any missed rent payments for you. If you have unpaid rent due after moving out of your rented home, the insurance will front the money you owe to your landlord. You will then owe the money to your insurance provider instead, and will be billed accordingly.

You can avoid missing rental payments by budgeting for your rent and setting up a standing order with your bank to automatically transfer the money as soon as you get paid every month.

More on this topic:
Compare rental security deposit insurance offers now
Security deposit account or insurance?
Swiss rental security deposit accounts compared
Damages to rental homes – who pays for what?