1 Why is rental deposit insurance necessary?

Many landlords charge a certain amount when moving into a new rental apartment, in the form of a rental deposit. This may be up to three months’ rent and is usually deposited into a bank account, where it remains blocked until the tenancy ends. The rental deposit represents financial protection for the landlord: He can use this money to repair damage to the rental property or cover loss of rent if a tenant is insolvent. With rental deposit insurance, on the other hand, the tenant does not have to pay the deposit amount himself. Instead, he pays his rental deposit insurance provider an annual sum (premium). For this, the insurance company takes responsibility for the guarantee to the landlord. So you can use the deposit money elsewhere and maintain your credit rating. Rental deposit insurance is voluntary and is an alternative to a bank deposit.

2 Can the rental deposit insurance company reject my application?

Yes, the insurance company can reject an application for a number of reasons. One of the most common reasons for this is negative financial liquidity among tenants. A prerequisite for taking out rental deposit insurance is a positive credit report. If several people are listed in the rental agreement, it enough for one of the tenants to provide a positive credit report.

3 What can I do if the rental deposit insurance company rejects my application?

Before accepting an application, a rental deposit insurance company first checks the applicant’s financial strength and credit rating. If these are too low, the application will usually be rejected. There is then only one option left: to ask a relative or acquaintance to provide joint and several liability. This person then assures the landlord in writing that they will pay his claims in the event of damage.

4 Is it possible to get my deposit back?

Yes, the rental deposit can be refunded by converting the escrow account into rental deposit insurance. Many tenants request conversion so that they can freely dispose of their deposit money again. However, if you want to take out rental deposit insurance, you should clarify with your landlord in advance whether he agrees to this. He is not legally obliged to accept rental deposit insurance as an alternative to a bank deposit. Rental deposit insurance can be taken out once the agreement of the landlord and/or property manager has been obtained. The landlord will then receive a deposit certificate which guarantees the amount for the deposit and allows him to assert claims arising from the rental contract against the insurance company. After the landlord has released the deposit money from the bank, the tenant can have the amount paid out to his or her account.

5 How do I cancel my rental deposit insurance?

Unlike other insurance products, security insurance does not have a minimum term or notice periods. So you can it cancel anytime. The most common reasons to terminate rental deposit insurance are moving house or if the tenancy ends, among others. After the rental agreement has been terminated, the insurance company will receive the original guarantee document back from the landlord. This means that the rental deposit insurance is canceled, so a letter of cancelation is not required. If you have already paid in advance for the whole year, the insurer is obliged to reimburse you for the amount owed after you have been billed to the exact day.

6 What do I have to consider in the event of a claim?

The landlord may make claims against the tenant when the lease ends. In this case, the rental deposit insurance company can pay the damage amount to the landlord. However, this must not exceed the agreed guarantee amount on the rental deposit certificate and/or the rental deposit guarantee. The landlord then sends the insurance company the complete documents. The insurer inspects the damage and issues payment to the landlord’s account. The insurance company then recovers the sum from the tenant,  in other words reclaims from the tenant the amount the insurer has paid out. This kind of rental deposit is thus not a traditional insurance policy but a guarantee.

TIP: As a tenant, it is worth taking out personal liability insurance that also covers tenant damage. You should always report any damage to your own personal liability insurer first and find out whether they will cover the damage.