Rental insurance: what it is and who should take it out in a short-term rental

When looking for a flat, it’s common to come across the term rental insurance without being entirely clear about who is responsible for taking it out or what exactly it covers. The confusion is understandable: that name covers very different products, some designed to protect the landlord and others to protect the tenant.

In this article we explain what types of rental insurance exist, who should take out each one, and how this need changes when it comes to short-term rentals or coliving, where many of these risks are already covered by the operator.

Table of contents

1. What is meant by rental insurance?
2. Rent default insurance: protection for the landlord
3. Liability and contents insurance: protection for the tenant
4. Is rental insurance mandatory?
5. Rental insurance in the context of coliving and short-term rentals
6. What to check before taking out insurance
7. Frequently asked questions about rental insurance

What is meant by rental insurance?

When people talk about rental insurance, they are actually referring to two products with very different purposes:

1. Insurance that protects the landlord against unpaid rent or damage caused to the property.
2. Insurance that protects the tenant against their civil liability or the loss of their belongings inside the flat.

The two are compatible and, in fact, often coexist in many rentals: one is taken out by the landlord and the other by the tenant.

Rent default insurance: protection for the landlord

Rent default insurance (also called rent protection insurance or unpaid rent insurance) is taken out by the landlord to cover the risk of the tenant stopping payment.

What it usually covers

1. Unpaid monthly rent for a set period (usually between 6 and 12 months).
2. Legal defence costs if eviction proceedings need to be started.
3. In some policies, damage caused to the property beyond normal wear and tear.
4. Cover for vandalism or squatting in certain extended products.

This insurance complements, but does not replace, other common guarantees such as the deposit or a bank guarantee, which we look at in detail in our article on deposits, security deposits and guarantees in short-term rentals.

Liability and contents insurance: protection for the tenant

On the tenant’s side, the relevant types of insurance are different:

1. Civil liability insurance, which covers damage the tenant may accidentally cause to third parties or to the property itself (for example, a water leak affecting the neighbour downstairs).
2. Contents or home insurance, which protects the tenant’s personal belongings (computer, clothes, electronics) against theft, fire or water damage.

In a conventional long-term rental, it’s common for the landlord to require the tenant to have civil liability insurance as a condition of the contract, so it’s always worth checking the clauses before signing. If you’re unsure what to look for in that document, you’ll find our guide on how to read a rental contract useful, where we go over the clauses that most often cause disputes.

Is rental insurance mandatory?

In Spain, there is no general legal obligation to take out rental insurance, either for the landlord or for the tenant. However:

1. Buildings insurance (covering the structure of the building) is usually mandatory at the level of the owners’ association, and is the landlord’s responsibility.
2. Many landlords contractually require the tenant to have civil liability or contents insurance, even though the law does not impose it.
3. Rent default insurance is always voluntary, although it is increasingly common among private landlords.

Rental insurance in the context of coliving and short-term rentals

This is where the picture changes significantly. In short-term rentals and coliving, many of these risks are already managed by the housing operator, which greatly simplifies the experience for both landlord and tenant:

1. Buildings insurance and, in many cases, general civil liability insurance for the property are already included in the operator’s management.
2. Landlords who hand their property over to a management platform usually have the risk of non-payment covered through the contract model itself and advance payment, reducing their need to take out additional insurance.
3. Tenants, for their part, remain responsible for their personal belongings, so it may make sense to keep basic contents insurance if they travel with valuable equipment (laptop, camera, professional gear), something common among digital nomads.

This is one of the reasons why more and more relocated professionals and digital nomads are opting for solutions such as a shared flat in Barcelona or a shared flat in Valencia: insurance and maintenance are already taken care of, and all you have to worry about is settling in. At Cotown, 100% of our energy goes into making you feel at home, and that includes not having to deal with the small print of insurance policies.

What to check before taking out insurance

If you decide to take out rental insurance yourself, it’s worth looking at:

1. The maximum amount covered for non-payment and for how many months.
2. Whether or not it includes legal defence and eviction costs.
3. The policy exclusions (for example, damage from squatting or vandalism).
4. The insured amount for contents, if it is a belongings policy.
5. Whether the civil liability cover has any geographical or time limits, which is especially relevant if the contract is short-term.

Frequently asked questions about rental insurance

Who should take out rental insurance, the landlord or the tenant?

It depends on the type of insurance: rent default insurance is taken out by the landlord, while civil liability or contents insurance is usually taken out by the tenant, although the landlord sometimes requires it as a contractual condition.

Do I need insurance if I rent a flat in a coliving?

In most cases it isn’t essential, as the operator usually covers the property’s main risks. It may make sense to keep personal contents insurance if you travel with valuable equipment.

Does rent default insurance cover eviction?

Yes, most policies include the legal defence costs needed to start and carry out eviction proceedings in the event of prolonged non-payment.

Is home insurance the same as rental insurance?

Not exactly. Home insurance usually refers to cover for the building and contents of the property, while rental insurance, strictly speaking, refers to rent default insurance taken out by the landlord.

How much does unpaid rent insurance cost?

The cost varies depending on the monthly rent, the city and the cover included, but it usually ranges from a small monthly percentage of the rent to a fixed annual fee. It’s a good idea to compare several options before signing up.