In France, a landlord can protect their rental income by taking out an insurance policy against non-payment of rent. This insurance is called l’assurance loyers impayes. The cost of the policy is generally between 3% and 5% of the rent amount and will not cover the first months rent. Some rent policies also cover the cost of legal proceedings against a tenant who is not paying, but this feature may cost extra. Additional options may include coverage for the loss of rent if the property is vacant, damage to the property by a tenant, and coverage in the event the tenant should die. The expense of rent insurance is tax deductible.
There are a number of sources which offer rent insurance in France. The main banks such as Credit Lyonnais, Credit Agricole and BNP/Paribas offer such coverage but might require that you open an account with them. You can also approach insurance companies directly. If you are using an estate agent or property manager, there may be additional insurance options available through their agencies. In fact, some insurers only offer policies to estate management companies while others will directly insure landlords too.
Like any insurance policy, there will be some restrictions and limitations. Probably the biggest restriction is the rent to income ratio. This ratio requires that the amount of the rent not exceed 33% of the tenant’s gross annual income. Of course, this means the insurance company will want to see proof of that income. The insurance company may also place cap on the maximum level of rent they will cover. The duration of payments will be limited to 18 to 36 months rent. An additional restriction, which will be important to keep in mind when screening tenants, is the primary residence restriction. The insurance policy may only provide coverage if the property is the tenant’s primary residence. It is very important to fully understand your insurance policy before letting your property lest you find out you are not covered when it is too late to change your mind.
by Cheryl Hartzman, AboutFrenchProperty.com - Copyright © About French Property
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