If you think about renting a property, you have probably heard about the possibility of having a guarantor, making shorts or so-called bail insurance, right? Among these three modalities, the latter has become an increasingly popular practice among residents, given its greater range of advantages when compared to the other two.
But after all, what is a surety bond, because it is a good bet for both the tenant and the owner and how to acquire one? What makes this the most sought after option on the market and what sets it apart from the rest? If those questions still sound confusing to you, don’t worry: we’ll go through each of these points during this article!
The idea here is that you understand the role of surety bond in the rental of a property and be able to decide, with more clarity, what is the best strategy to be taken when closing the contract with the owner.
What is bail insurance?
In a nutshell, a surety bond is a guarantee that the tenant will be able to pay the owner of a property if unforeseen events occur that prevent him from paying the rent or any other variable of the contract signed between them.
For this to happen, the tenant starts to pay a monthly amount directly to an insurance company or a real estate broker, which will be added to an amount to be made available in emergency times. In other words, in the event of a claim (non-payment of rent), the idea is that the owner will still be able to access the contractual amounts previously agreed with the tenant, through the redemption of this “guarantee bank” of the tenant.
How bail insurance works
The idea of bail insurance is very similar to car insurance or life insurance, for example: you choose a plan that covers a certain number of variables and pays a monthly amount to an Insurer that guarantees, within the terms of the contract, payment to the owner if necessary. Like these other more well-known types of insurance, your plan can be tailored according to what makes sense for your purpose and, therefore, in addition to default (which would be covered by more basic plans), a tenant can choose to also include the rent, IPTU , energy, water and electricity bills in your insurance, among other possibilities.
The value of the insurance is then defined according to a thorough analysis carried out and may vary depending on the real estate company and the insurer itself, and must be renewed every 12 months, during which time it may suffer price differences and even offers in the contract. It is also worth remembering that the addition of items to the plan causes the monthly values to increase.
Market options: the differences between surety bond, guarantor and surety
The surety bond, as already pointed out in the introduction of this article, does not stand as the only possibility for those who wish to rent a property. Therefore, let’s understand a little more about the other most common types of market: the guarantor and the guarantee.
When we talk about a guarantor, we are talking about third parties being responsible for insuring your rent. That is, when you call on a relative or friend to take responsibility for the payment of your property if unforeseen events occur, you are using a guarantor or a guarantor.
In order for the chosen person to be accepted as his guarantor, however, some care must be taken. It must prove that it is a source capable of bearing the costs of its rent, after all, without this security, the property owner runs a double risk of falling into contract fraud and losing money.
This whole process ends up being a little bureaucratic (even because it involves a third person, who will not even enjoy the property itself) and, therefore, can delay the delivery of keys to the tenant. In addition, with the changes in the Tenancy Law, today it is more difficult for the owner to accept the figure of a guarantor, since these changes allow the guarantor to depart from the commitment in certain cases, which makes it an insurance flawed for those who are renting that space and, consequently depending on the receipt of that money.
In another proposal, when we are talking about the security deposit, we are talking about an advance on the rental price of a property, which, in general, is equivalent to the amount of three months of the contract. This amount demanded by the owner aims to cover possible damages or fees not paid by the tenant – that is, it acts as a guarantee for the contract to be closed.
This option presents some problems for both sides of the agreement, however. For the owner, it may be that the amount referring to three months’ rent is not a sufficient guarantee, in some situations, to cover the expenses and costs caused by the tenant’s non-payment. In other words, relying on collateral may cause the owner to have to go to court to be able to receive the money necessary to cover the hole in the contract.
On the side of the tenant, the need to make the security available at the time of closing the contract can be an impediment to this. Thus, many times the chance of being able to rent the dream property can come out the window, due to the delay of the agreement between parties and, even, the counter proposal of other tenants interested in the same space.
What are the advantages of bail insurance?
Now that you know a little better about the other most popular options sought when renting a property, let’s go a little deeper into the proposal of the surety bond to understand what are its main advantages for both the tenant and the owner! Thus, it will become clearer to understand why this option has become so popular compared to the others, more common and known.
As we have already pointed out a few times, when opting for a surety bond, not only the owner, but also the lessee, starts to provide benefits. Here are the main ones:
Advantages of surety bond for the tenant
- There is no need for a guarantor: by betting on bail insurance, you no longer depend on friends or family to rent a property, and manage to manage the payment of the space on your own;
- Greater agility in the analysis and release of the contract: unlike the surety or the guarantor, by choosing a surety bond you can close the contract much more quickly, since the payment is given in monthly installments;
- It allows the installment payment in 12 installments or up to 6 installments without interest on the credit card: with annual contracts, you can set up your security fund and a longer time;
- It allows progressive discounts on renewals: still based on the previous item, when you renew your contract at the end of the year, you can get lower value installments, or other types of concessions that will help you to manage your money in a better way;
- It provides 24-hour assistance for emergency repairs and free facilities, as well as discounts on carriers.
Advantages of bail insurance for the owner
- Ensures receipt of rent and charges in case of default: knowing that your tenant has a surety bond gives you the assurance that, even in unforeseen cases, you will be able to access the agreed payment;
- Provides legal advice for eviction for failure to pay ;
- One more option of Guarantee to increase the chances of renting the property with agility: opening the range of possibilities for tenants, you are automatically increasing the number of people who may be interested in closing a deal with you.
Who should insure bail?
As you can imagine by now, the tenant is responsible for hiring the services of an insurer and ensuring that the surety bond exists, in fact, when closing a rental agreement. In this case, it is important to emphasize that this agreement can be made by both an individual and a legal entity, the documentation required for this being the only point that differentiates the two processes.
When we are talking about a surety bond made in the name of an individual, for example, the necessary documents are: RG, CPF, income tax return, proof of income and, if the person already makes use of a rented property, the last three rent payment receipts.
The surety bond in the name of a legal entity, on the other hand, requires the presentation of a social contract, balance sheets and balance sheets for the last two years made by it and also the declaration of income tax in due date. In the case of companies still under construction, it will be necessary for the future partners to present proof of income that attest to the ability to afford that investment.
How does Casa Mineira help you in bail insurance?
If you decide to have a surety bond when renting a property, it is important to pay attention to the fact that, in the market, each insurer has its own criteria for credit assessment. However, as a general rule, the tenant must have a proven income of more than 3 times the rent and its charges.
But this information does not need to chase you away: the good news is that this income can be made up of up to three people, residents or not, of the property!
Another important point when it comes to hiring bail insurance, however, is the fact that prices can vary considerably between one insurer and another, which can often cause people to give up looking for this service. But this is exactly where Casa Mineira helps you!
In Belo Horizonte, only our brokers have a special condition with the Porto Seguro Insurance Company, 1.5 rentals and the possibility of dividing the policy amount up to 12 times, or 6 times without interest on the credit card. In addition, by renting a property in partnership with Casa Mineira, you will be able to be part of an exclusive benefits club and still get discounts on cultural events in the city.
In other words: in addition to having variety and security when renting your next property, you also guarantee one of the best surety insurance policies to get that dream off the ground! Take a look at our website or look for one of our brokers at the Casa Mineira closest to you!