Renting out a property in Portugal is one of the most common ways to generate passive income. But it is also an activity with real financial risks: a tenant who stops paying can cost the landlord months of lost rent, eviction costs and damage to the property, in a process that can take more than a year.
The essentials in 30 seconds
- Rent insurance pays the landlord when the tenant does not pay, within the limits of the policy. The period covered varies by insurer, unlike the security deposit (caução), which is capped at two months' rent.
- The premium depends on the insurer, the contract and the tenant's profile: always ask for a written quote. Aluseg does not sell insurance or quote prices.
- How quickly a claim is paid depends on the insurer and the policy: confirm it before you buy.
- Some insurers accept leases already in progress, as long as there is no rent in arrears when you take out the policy.
Rent insurance exists precisely to reduce this risk. This guide explains what you need to know to make an informed decision.
What Is Rent Insurance?
Rent insurance is a policy that guarantees the landlord receives the rent when the tenant stops paying. If the tenant defaults, the insurer pays the overdue rent to the landlord, within the limits of the policy, and then takes care of recovering the amount from the tenant.
It is different from a guarantor (fiador) or a security deposit (caução):
- A guarantor commits personally, but may not be able to pay, may contest the debt in court, and their financial situation may change.
- The security deposit cannot exceed two months’ rent (Law 56/2023), which may not be enough in a prolonged eviction process.
- Rent insurance covers the missing rent up to the limit set in the policy.
What It Covers (and What It Does Not)
Usual coverage:
- Unpaid monthly rent after the excess (franquia) or waiting period set in the policy
- Legal and eviction costs (in full or in part, depending on the policy)
- Damage to the property caused by the tenant (in policies that include damage cover)
- Lawyer’s fees in the special eviction procedure (PED, Procedimento Especial de Despejo)
Usual exclusions:
- Non-payment caused by a dispute started by the landlord (e.g. the tenant withholds rent because works were not carried out)
- Leases not registered with the Tax Authority (AT)
- Tenants with a known history of default at the time the insurance is taken out
- Waiting period after taking out the policy (varies by insurer)
- Rent above the maximum limit set in the policy
How Much Does It Cost?
The premium is set by the insurer and depends, among other factors, on:
- The tenant’s risk profile (type of employment contract, effort rate)
- The amount of the monthly rent
- The cover included (basic or more complete)
- The landlord’s claims history
Aluseg does not sell insurance and does not quote prices: ask for a written quote from a broker registered with the Insurance and Pension Funds Supervisory Authority (ASF) or from an insurer. To measure what is at stake on your side, use the rent default cost calculator.
How Does the Payout Work?
The claims process generally works as follows:
- The tenant misses 1 or 2 rent payments (waiting period, varies by policy).
- The landlord reports the claim to the insurer, attaching proof of non-payment.
- The insurer reviews the claim and, if valid, starts paying the rent to the landlord.
- The insurer starts recovery from the tenant (including the PED, if necessary).
- The rent is paid up to the policy limit or until the property is recovered, whichever happens first.
Rent Insurance vs. Guarantor vs. Security Deposit
| What it covers | Cost | Limits | |
|---|---|---|---|
| Security deposit | Up to 2 months’ rent (legal limit) | No additional cost | May not cover a long eviction |
| Guarantor | In theory, the whole debt | No cost to the landlord | Hard to enforce, risk of the guarantor’s insolvency |
| Rent insurance | As set out in the policy | Premium paid by the landlord, set by the insurer | Waiting period, excess and exclusions in the policy |
How to Take Out Rent Insurance
- Ask for quotes from an insurance broker registered with the ASF or directly from an insurer.
- Prepare the property details, the lease registered with the AT and the tenant's file.
- Compare the cover: months of rent covered, waiting period, eviction costs and damage.
- Read the exclusions before you sign.
You do not have to wait for your next letting: some insurers accept leases already in progress, as long as there is no rent in arrears when you take out the policy.
For a summary of the topic, see the page rent insurance for landlords, where you can also ask to be informed when a rent protection solution becomes available.
