Rent default insurance vs guaranteed rent in the Canary Islands

When a landlord in the Canary Islands starts worrying about non-payment, they almost always arrive at the same question: should I take out rent default insurance, or look for an arrangement that guarantees the rent directly? They are two very different things, even if at first glance they appear to solve the same problem. In this guide we compare both options in detail — what they cover, what they cost, and how much real risk each one takes off your shoulders — so you can decide with a clear head.

The underlying fear: non-payment

Alongside leaving the flat empty, non-payment is every landlord’s biggest worry. It is not just the loss of income: it is the cost of an eviction that in Spain can take months, the utility bills that keep mounting up, the potential damage, and the sheer emotional wear of dealing with it all. If you want to understand the full process, we cover it in our guide on what to do when a tenant stops paying in the Canary Islands.

Faced with that risk, there are two broad approaches: transferring the risk to an insurer (rent default insurance) or removing the risk at the root by handing management to a company that pays you a fixed rent (guaranteed rent). Let’s look at each in turn.

What rent default insurance is

Rent default insurance is a policy you take out as the landlord, covering the monthly payments your tenant fails to make, usually with a cap on the number of months (between 6 and 12 depending on the provider). It normally also includes legal cover for the eviction proceedings and, in some cases, cover for vandalism.

What it covers

• Unpaid monthly rent, up to the policy limit.
• Solicitor and court agent fees to recover the debt and pursue eviction.
• Sometimes, damage caused by tenant vandalism.

What it does not cover (and the small print)

This is the detail that many landlords discover too late:

• It requires tenant screening. The insurer only pays out if the tenant passed its solvency check at the time of signing. If they were not approved, there is no cover.
• It does not cover empty periods. If the flat is unlet, the insurance pays nothing. It only kicks in when there is a contract and a tenant who stops paying.
• There are waiting periods and excesses. Many policies do not pay the first month of arrears, and the payout arrives weeks after you begin the claim.
• The eviction is still yours. The insurance funds the process, but the hassle, the timescales and recovering the flat still fall on you.

The cost runs at around 3% to 5% of the annual rent. For a flat let at €900 a month, that works out at between €320 and €540 a year.

What guaranteed rent is

Guaranteed rent is not insurance: it is a management model. A professional company — in the case of rent-to-rent — signs a contract with you and becomes your single point of contact. It pays you a fixed rent every month, whether or not there are tenants, and takes on the management and the risk in full.

What it covers

• The rent, always. You get paid on the same day every month, occupied or empty. The risk of non-payment and the risk of voids simply stop being yours.
• Full management. Finding tenants, contracts, collections, issues, maintenance. You don’t lift a finger.
• Property upkeep. Preventive and corrective repairs are the company’s responsibility.

The key difference

With rent default insurance, you are still the landlord: you manage, you absorb the voids, and you only recover money after fighting a claim. With guaranteed rent, the risk changes hands: the company collects from the tenants (or absorbs the loss if there are none) and pays you whatever happens.

Side-by-side comparison

Aspect	Rent default insurance	Guaranteed rent
Covers non-payment	Yes, with a monthly cap	Yes, no cap
Covers empty flat	No	Yes
Cost to the landlord	3-5% of annual rent	€0 (taken from the company’s margin)
Rental management	Landlord’s responsibility	Company’s responsibility
Eviction / disputes	You handle them (with legal support)	The company handles them
Payment during a claim	After a waiting period, with delay	On time, every month
Requires tenant screening	Yes, it conditions the cover	No effect on the landlord

Which one suits you?

The choice comes down to how involved you want to be:

• You want to keep managing the let yourself but sleep more easily about the odd missed payment: rent default insurance is a reasonable layer of protection, as long as you accept its waiting periods and the fact that it does not cover voids.
• You don’t want to manage anything and you want total certainty of income, including the months with no occupancy: guaranteed rent removes the problem at the root, with no direct cost and without depending on you approving each tenant.

Put another way: rent default insurance mitigates a risk; guaranteed rent removes it and takes the management off your hands as well. If your goal is to turn your flat into truly passive income, insurance only gets you halfway there.

A note on tax

Both the insurance premium and the particulars of guaranteed rent have their own tax treatment. Before deciding, it pays to be clear on how every euro coming in is taxed — we explain it in the Canary Islands rental tax guide — and how much you could realistically earn depending on your flat, which we set out in how much you can earn renting out your flat in the Canary Islands.

In summary

Rent default insurance is a good tool for the landlord who wants to stay in charge and protect themselves against a defaulting tenant. Guaranteed rent is for those who would rather take on no risk at all — neither non-payment nor voids — and not spend time on management.

At Looping Rooms we work with the guaranteed-rent model: we sign with you, pay you a fixed rent every month and take care of everything. Request a free valuation of your flat and we’ll tell you exactly what you would earn. You can also see how our model works and the areas where we operate.