Rental investment: What insurance to take out to limit risks?

While the National Assembly has just passed a measure that allows the termination of the lease in case of non-payment by a tenant, the restrictions for landlord investors between the recommendations of the High Council for Financial Stability and the prohibitions in the Climate Act remain important.

For those who still want or can invest in 2023, it is best to do so while well insured to limit the risks! Nousassurons, a network of 80 insurance brokers, with a department specialized in property insurance, describes the guarantees to be taken out, from credit to rents and works!

When investing in real estate, certain insurance conditions must be taken into account. While some policies may have reduced guarantees such as home insurance or renter’s insurance, others may be highly recommended, such as workers’ compensation at work or unpaid rent guarantee.

Non-resident owns home insurance (PNO)

PNO insurance provides protection against risks arising during a period when the home is vacant by the owner, in addition to the home insurance policy taken out by the tenant. It protects in particular in the event of fire, climatic events, natural disasters, broken glass, water damage and optional theft for accommodation rented as furnished accommodation. It also covers the owner’s civil liability, which is now mandatory since the Alur Act of 1994. Overall, PNO insurance is cheaper than home insurance by around 40%.

Non-occupant owner insurance allows you to be covered in a condominium in the event of the tenant’s absence, or if the tenant is not up to date with his contributions and is therefore no longer insured, or even in the event of an accident connected, for example, to an electrical fault , in which the owner’s liability may be involved. It is therefore more than necessary at a lower price “, explains Christel Caterino, responsible for the residential offer of Nousassurons.

The PNO can also intervene in addition to the tenant’s insurance, for example in case of water damage, if the work exceeds a certain amount.

The unpaid rent guarantee (GLI) to secure your rent

The unpaid rent guarantee is an insurance that allows securing property income by protecting against rental risks, non-payment of rent, but also in the event of a dispute.

In the event of non-payment by the tenant, and until the home is taken over, GLI insurance guarantees the insured owner reimbursement of unpaid rent, incl. fees (or accommodation compensation on termination of the tenancy) . In addition, the insurance provides for amicable or legal recovery of unpaid debts, from the end of the tenancy to eviction. This contract thus frees the landlord from the burden of litigation by providing legal protection.

The adoption at first reading on 29 November of a text aimed at speeding up litigation in tenancy disputes by introducing an “automatic termination clause” is good news for landlords. In the case of unpaid rent, landlords will then be able to terminate the lease without having to go to court and thus get the tenant to move out more quickly. However, there will still be a need for legal action to recover unpaid rent… Even in this context, the unpaid rent guarantee remains essential. », analyzes Jérôme Robin, founder of Nousassures.

Another advantage, and not least in certain geographical areas, is that a lease extension can be signed in addition to the basic “unpaid rent” contract. In these cases, the insurance also covers the reimbursement of loss of rent and taxes during the vacancy period of the home within the framework of the guarantee ceiling and excess.

The unpaid rent guarantee is the insurance that a landlord can rent out his property with complete peace of mind, be sure of not having unpaid rent, but also be exempted from the proceedings with tenants, while at the same time limiting the risk of rent lapses, or in any case the resulting financial losses », adds Jérôme Robin.

Good to know :

  • The GLI premium, which represents an amount of 2.5 to 3% of the rent, is fully deductible in capital income under the real tax regime for unfurnished rent and BICS (furnished rent).
  • In addition, it can be a way to reassure the bank when taking out a loan to finance a rental investment, because it ensures the repayment of monthly payments.

Work injury insurance (DO), for major work

The structural damage insurance comes in addition to the mandatory ten-year insurance for craftsmen, builders and material producers, which covers the risk of poor workmanship on a construction site for 10 years. In the event of a problem falling under the 10-year professional warranty, Damage to Works insurance covers the damage, advances the cost of repairs and then seeks liability, turning against the contractor’s insurer, or contractors when there are several.

This hate insurance eliminates the risk of endless appeals and disclaimers. The advantage is that, thanks to the advance of the costs, the repairs can be carried out without waiting to identify responsibility, which can be useful in the middle of winter in case of a problem related to the installation of the new heating system! “, explains Christel Caterino.

It is the variety of types of work and the contractors who carry them out that require the taking out of damage insurance, which is not essential for simple decorating work.

The average cost of property damage insurance in France varies from 2 to 3% of the cost of the work or construction.

Borrower insurance: certain guarantees not essential to investors

During a rental investment, the guarantees required by the banks are generally less than when buying a main residence. The collected rents can be used to repay the loan installments, which reduces the risk of non-payment…

Borrower’s insurance for a rental investment must therefore at least include the mandatory death and PTIA guarantees, and possibly ITT (Temporary Incapacity for Work): after an illness or accident or IPP or IPT (Permanent Partial or Total Disability). Because of the lower guarantees taken out, the borrower’s insurance for a rental investment therefore costs about a third less, all together, than the insurance for a main residence.

In addition, insurance contributions are deductible from the capital income of the investment!

At Nousassurons, we support investors to secure their property purchase, from financing to letting, with products negotiated with the largest insurance companies and simplified underwriting. We also allow real estate agents and property managers to offer their customers these products themselves, allowing them to continue the relationship beyond the purchase and build customer loyalty. concludes Jérôme Robin.

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