In order to formalize a rent guarantee policy, insurance companies will first analyze the financial solvency of the tenants you are considering renting your home to. This is reasonable, since if these individuals do not pay their rent, it will be the insurance company that must assume responsibility for the amount corresponding to the rent payments that have not been received, as well as any possible costs related to collection of the debt.
Because of this, the insurer will typically perform an economic viability study on the potential tenant. In a manner similar to the process used for a loan or a mortgage, the company assuming the risk of non-payment wants to have sufficient guarantees to make sure that the tenant will be able to make the monthly rent payments. It is typical that a potential tenant will be considered as unsuitable (or in other words, the insurer will not agree to offer the policy) if the amount of the rent represents more than 40% or 45% of the tenant's monthly income.
In order to carry out this analysis, the insurance company may request a variety of documents to verify the renter's financial solvency:
- For employees: it is typical to ask for the two most recent salary receipts, to evaluate both the employee's income and the amount of time they have spent at their present job. In this case, insurers put a higher value on permanent employment contracts, since these offer better guarantees of future payment compared to temporary contracts.
- For self-employed workers: potential tenants who are self-employed are usually asked for their two most recent quarterly VAT statements, as well as their most recent personal income tax return.
- Pension earners: retirees receiving pension benefits are usually asked for evidence of their retirement status as well as proof of their monthly income, such as a bank statement. In relation to this process, it is also worth mentioning that insurance companies also check the main credit default lists existing in Spain.