Both landlords and tenants are split over the effectiveness of new insurance-based deposit schemes, according to recent research by Upad.co.uk.
The letting agent revealed concerns from both landlords and tenants regarding various aspects of these insurance-based deposit options. Specifically, landlords were worried that the insurance would not cover them fully for repairing any damage at the end of the tenancy.
A number of insurance-based deposit schemes have been launched recently, which aim to resolve tenants’ difficulties in raising the cost of a deposit by instead offering a monthly insurance payment.
When questioned over the new alternatives, some tenants felt that, despite sometimes having to borrow money to pay their deposit, they would get their deposit back in the majority of cases. Paying for the insurance, however, would see them making payments that would never be returned.
Nevertheless, tenants overall were more in favour of the insurance-based deposit schemes than landlords were.
Perhaps most alarming is that less than 10% of both groups were even aware that these new options existed.
Landlords and Tenants Split over New Insurance-Based Deposit Schemes
When the new insurance-based schemes were put to landlords, they were unconvinced that they would have any real impact, with 57% claiming that they’d never had a tenant struggle to raise a deposit.
Just 35% thought that finding tenants would be easier if they offered this option as an alternative to requesting a deposit. Additionally, only 14% thought that insurance-based deposit schemes were better than taking a deposit.
Although a higher proportion of tenants appeared to support these new schemes, in some cases, those in favour were still in the minority, with 35% thinking that insurance-based deposits are better than taking a deposit.
However, 37% said that they would definitely rather pay a monthly insurance cost than a deposit, while 62% had no concerns about paying a monthly sum, rather than one large deposit.
Portfolio landlord and the Founder and CEO of Upad, James Davis, responds to the findings: “Alternatives to paying one-off deposits are always welcome, and these schemes are a great idea.
“Immediately, tenants will be free of the struggle of having to raise a deposit for a new rental before they have got their existing deposit back, and those who are unable to raise a deposit at all, or have no means of borrowing the money, could find themselves able to rent a far wider range of properties than they previously could.”
He adds: “I am definitely in favour of such schemes, and hope in the coming months a greater proportion of landlords will also take this point of view.”
Do you believe that insurance-based deposit schemes are a better idea for the lettings industry?