Is It Worth Getting Rent Guarantee Insurance? Cost-Benefit Simulation

This is the question many landlords ask — and the answer depends on concrete numbers, not opinions. In this article, we will do the math: what is the true cost of a non-payment process without insurance, and how much does rent insurance cost? The math speaks for itself.

How Much Does Non-Payment Really Cost?

Most landlords underestimate the total cost of an eviction process. It is not just about the unpaid rent — there is a series of additional costs that add up quickly.

Cost breakdown of a typical case:

Scenario: rent of €900/month, eviction process lasting 9 months (from the first non-payment to the recovery of the property).

• Unpaid rent (9 months): €8,100
• PED (Special Eviction Procedure) fees: €50
• Enforcement agent: €300
• Lawyer’s fees (potential opposition phase): €800
• Post-eviction repairs (average damages): €1,500
• Period without rental income between departure and new tenant: €1,800 (2 months)

Total: €12,550

And this is a relatively favorable scenario — no court opposition, no vulnerable tenant, no serious damages. In more complex cases, the cost can exceed €25,000.

Annual Premium vs. Potential Loss

For the same €900/month rent, the cost of a standard rent insurance with 12-month coverage is between €270 and €380 per year.

Cost-benefit ratio:

• Insurance cost (12 months): €270 to €380/year
• Average cost of a claim without insurance: €10,000 to €20,000
• Estimated probability of non-payment (Portugal, 2024): ~3% to 5% per year

Even with a 3% probability, the expected loss value is €300 to €600 — already higher than the cost of the annual premium. And with a 5% probability, the expected value is €500 to €1,000.

Mathematical conclusion: rent insurance has a positive expected return — and this does not account for the cost of stress, time, and uncertainty.

Break-Even Analysis

Break-even occurs when the accumulated cost of the annual premium equals the loss of a single claim. For a €300/year insurance and a €12,000 claim:

Break-even = €12,000 / €300 = 40 years of premiums paid without a claim.

In practice, a single claim over 40 years of renting completely justifies the cost of having had the insurance during that period. And the data shows that claims occur much more frequently.

Real Cases: Landlords with and without Insurance

Case A — Without insurance (Lisbon, 1-bedroom, rent €850/month):

Tenant stopped paying in March. Eviction procedure started in June. Property recovered in December. Total loss: ~€9,500 in rent + €1,200 in costs and repairs = €10,700.

Case B — With AluSeg insurance (Porto, 2-bedroom, rent €1,100/month):

Tenant stopped paying in February. Claim reported to AluSeg in March. First payment received in April. The insurance company handled the eviction procedure. The landlord received 11 months of covered rent while waiting for the property to be recovered. Final cost to the landlord: €0 in lost rent + annual premium of €395.

Calculator: Enter Your Rent and See the Numbers

Use the interactive calculator at aluseg.pt/calculadora to simulate:

• The cost of your insurance based on your specific rent
• The estimated loss in the event of a claim without insurance
• The number of years needed for the insurance to ‘pay for itself’