Insurance against rental default and tenant fraud: Your financial shield
7 Oct 2025
7
Minutes
Katrin Straub
CEO at nextsure
A tenant who doesn't pay can quickly cause damage running into five figures. Insurance against rental defaults and rent dodgers protects your assets and secures your liquidity. Find out how you can protect yourself for less than one Euro per day.
The topic in brief and concise terms
An insurance against rental default not only secures rental income but often also covers costs for renovations and legal disputes, which can quickly exceed 10,000 euros.
The cost of comprehensive rental default and tenant rogue insurance often amounts to only two to five percent of the annual net rent and is an economically sensible investment.
An immediate termination is legally possible if the rent arrears reach the sum of two months' rent (§ 543 BGB), but it requires a formally correct handling.
Estimate the financial damage caused by rent dodgers
The problem is larger than many think: 27 percent of landlords suffer damage from rent dodgers amounting to between 5,000 and 10,000 euros. Another 19 percent of cases even incur costs between 10,000 and 20,000 euros. This sum is comprised of several items. First, the monthly rental income is missing, often over a period of six to twelve months. Additionally, high costs arise for the restoration of the property. A comprehensive insurance against loss of receivables can be effective here. Often landlords have to incur four-figure amounts for clearance, renovation, and damage repair. The financial double burden of lost income and high expenses endangers the profitability of the property. This clearly shows that prevention and protection must go hand in hand.
Guarantee rental income with a loss of rent insurance
Insurance against rental loss is the direct answer to this financial risk. It not only covers the unpaid basic rent but often also includes ongoing additional costs. The duration of benefits varies depending on the policy and can last up to twelve months, sometimes even longer. Good policies also cover the costs for property damage caused by rogue tenants. Such a rental loss insurance for landlords is a key component. The insurance typically covers the following points:
Missed rent payments for up to twelve months.
Coverage of renovation and repair costs.
Costs for clearing and cleaning the property.
Continuation of rent payments during the renovation phase for up to three months.
Partial coverage of disinfection costs in case of pest infestation.
This protection turns an uncertain situation into a manageable one. The next step is to evaluate the costs in relation to the potential benefit.
Analyze the cost-benefit ratio of the insurance
The cost of insurance against rental loss is small compared to the potential damage. A simple rent loss insurance often costs only between 60 and 100 euros per year. Comprehensive cover, which also includes property damage caused by tenants who refuse to move out, can cost up to 400 euros annually. Compare this premium to an average claim: six months of rental loss at 800 euros cold rent already means a 4,800 euro loss. If you add 5,000 euros for renovation costs, the total loss quickly amounts to 9,800 euros. Investing around 300 euros per year reduces this risk to a fraction. Such a tenant default insurance is therefore an economically sensible decision. However, the insurance is only part of the solution; the legal approach must also be correct.
Understanding the legal framework for termination
The Civil Code (BGB) provides clear rules for termination due to payment arrears. An immediate termination is possible according to § 543 BGB if the tenant is in arrears for more than one month's rent for two consecutive due dates. Alternatively, termination is justified if the rent arrears accumulate over a longer period to a total of two months' rent. Our expert tip: Ensure the termination is formally correct, as errors can result in invalidity. The termination must be in writing and specify the reason for termination precisely. To be protected in legal disputes, a landlord legal protection insurance is recommended. It covers lawyer and court costs, which can quickly reach several thousand euros. Besides the legal response, proactive risk minimisation is crucial.
Reduce the risk of rent avoidance by carefully selecting tenants
The best insurance is a reliable tenant. A careful screening of prospective tenants reduces the risk of payment default by more than 50 percent. Therefore, take time in making your selection and check the creditworthiness of potential tenants. The following steps have proven effective in practice:
Request a self-disclosure that records all important data.
Ask for the pay slips for the last three months.
Insist on a current credit check with no negative entries.
Obtain a landlord's reference confirming there are no rent arrears.
Arrange for the payment of the first rent and the full deposit before handing over the keys.
These measures create a solid foundation for a secure rental relationship. The final step is selecting the right insurance policy.
Select the optimal insurance policy for your property
Not every rental income insurance policy is the same. The details make the difference in terms of effectiveness during a claim. A good policy for your house and living should offer a high coverage amount of at least 10,000 Euros. Also, ensure there is the longest possible benefit period of at least twelve months for rental loss. Check whether property damage is explicitly covered and whether there is any deductible. A good contract should meet the following criteria:
Insurance sum of at least 10,000 Euros.
Benefit period for rental income loss of twelve months.
Inclusion of property damage due to vandalism and neglect.
Coverage of clean-up and renovation costs.
Low or no deductible in the event of a claim.
No waiting period after contract conclusion.
A careful selection ensures you the best possible support in the event of a serious incident.
More useful links
On the platform Gesetze im Internet, you can find the full text of § 535 of the Civil Code (BGB), which governs the essential content and main obligations of a tenancy agreement.
The Bundesfinanzministerium provides detailed information on the tax aspects of leasing and renting within the framework of income tax.
FAQ
What damages are covered by a tenant rogue insurance?
A good tenant insurance policy covers not only loss of rental income but also damages caused by deliberate destruction or neglect, costs for clearing out, cleaning, and disinfecting the property, as well as any necessary renovation work.
Is there a waiting period for rental loss insurance?
That depends on the provider. Some insurance policies provide cover immediately from the start of the contract, particularly if the tenancy agreement has been in place for a while and there have been no payment arrears. With new contracts or certain tariffs, there may be a waiting period of several months.
What should I do in the event of damage so that the insurance will pay?
In the event of damage, you must report the loss of rent to the insurance company without delay. Typically, you need to prove that you have issued a warning to the tenant and initiated legal actions such as termination or an eviction lawsuit. Carefully document all damages with photos.
Is landlord legal protection insurance included in the rental loss insurance?
Not always. With many providers, landlord legal protection is a separate component that needs to be added separately. Premium plans sometimes include it. Such protection is highly recommended as it covers the costs of lawyers and court proceedings.
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