Why Rental Insurance is Essential
Published Date: 07/29/2025
Source: GENRIC Insurance Company Limited
Alfred Wilsenach
Securing Your Investment: Why Rental Insurance is Essential in South Africa's Recovering Property Market
South Africa's rental property market is experiencing a strong recovery, with gross rental yields for apartments reaching an impressive 10.36% in Q2 2025, up from 9.96% in Q4 2024¹. This surge in profitability is attracting a new wave of property investors, particularly in the rental sector where demand is exploding across major metropolitan areas such as Johannesburg, Centurion, Cape Town and Durban.
The statistics paint a compelling picture of a rental property market in recovery mode. The average rent in South Africa has risen to R8,598, representing an increase of R368 year-on-year, while the volume of micro portfolio owners with one to two properties has risen from 47.7% in 2010 to 57.47% in 2024 according to data from TPN².
This growth in small-scale investors also highlights the need for protection among newer, potentially less experienced landlords. With opportunity comes risk, and landlords are recognising that rental insurance has become more critical than ever before as economic conditions both locally and globally, remain uncertain and volatile.
The Hidden Risk in the Recovery
Despite these encouraging trends, landlords face a sobering reality that threatens to undermine their investment returns. According to the Landlord Association of South Africa (LASA), the South African rental market in 2025 is facing a complex and shifting landscape. While demand for rental housing is strong, landlords are being warned of an increasingly high-risk tenant pool. Recent data shows that in the first quarter of 2025, 26% of rental applicants were classified as high risk, up from the previous year. LASA points out that the 26% high-risk figure does not exist in a vacuum and is deeply tied to South Africa’s broader economic landscape where inflation has put pressure on household budgets, while interest rate hikes have increased the cost of credit and reduced disposable income. Many tenants are spending a larger portion of their income on essentials, such as food, transportation, and utilities, leaving them with less margin for rent.
These conditions and statistics are a wake-up call for landlords, property managers, and investors to strengthen vetting processes, embrace technology, and adopt risk-based management strategies.³
Alfred Wilsenach, Divisional Manager Underwriting at GENRIC Insurance Company, points out the growing take-up of rental insurance as one of the risk mitigation tools among landlords. "There has been a steady uptake of Rental Insurance by landlords and managing agents in a bid to protect their rental book of business from the financial repercussions of tenants failing to pay rent, as well as the costs that come with eviction should this become necessary."
Why Rental Insurance is Your Financial Safety Net
The mathematics of rental insurance become compelling when viewed against potential losses. Consider a property generating R15,000 per month in rental income. Without insurance, a defaulting tenant could cost the landlord R45,000 in lost income over three months, plus eviction costs that can easily exceed R20,000. Meanwhile, rental insurance premiums starting at just 5% of monthly rental (R750 per month in this example) provide comprehensive protection that far outweighs the cost.
"One of the primary reasons landlords need rental insurance against defaulting tenants is to ensure financial stability," notes Wilsenach. "Rental income is typically a crucial aspect of a landlord's cash flow and income, and when tenants fail to pay rent, it can lead to financial strain. Rental insurance provides a safety net during the time of non-payment until a resolution is reached."
GENRIC's rental insurance offers landlords a robust shield against the financial risks of property investment:
- Income Protection: Coverage for up to R30,000 per month across residential properties including freestanding houses, townhouses, clusters, and apartments. Claims can be lodged from the second consecutive non-payment, with coverage extending up to three months or until resolution.
- Legal Cost Coverage: Eviction proceedings can be legally complex and expensive. GENRIC provides coverage for eviction costs ranging from R10,000 to R40,000, helping landlords navigate the legal process without bearing the full financial burden.
- Flexible Recovery: Upon receipt of rental payments from tenants after a claim settlement, landlords reimburse the insurer only for amounts actually recovered, ensuring fairness in the claims process.
- Affordable Premiums: Starting at just 5% of monthly rental, the insurance represents exceptional value. When you consider that the monthly premium on a R10k rental would be R500 per month, a claim of three months' rentals of R30,000 would be equivalent to five years of premiums, bringing massive peace of mind that you won't be sitting with a huge dent in your cash flow and rental income.
The Economic Context: Why Now is Critical
South Africa's housing shortage of 2.2million homes continues to drive demand4, creating excellent conditions for both homeownership and investment. However, this growth occurs against a backdrop of economic uncertainty that makes tenant screening more challenging and payment defaults more likely. The combination of strong rental yields and elevated default risks creates a perfect storm where rental insurance transitions from optional to essential.
In an environment where home loan applications increased by over 18% from Q4 ‘23 to Q1 ’25 according to Ooba Home Loans, indicating renewed market confidence5, the smart money is on protecting these investments comprehensively. The rental insurance market is responding to a fundamental shift in investor behaviour. Today's landlords understand that thorough tenant vetting, while essential, cannot eliminate all risks. Economic pressures can affect even the most creditworthy tenants, making rental insurance the final piece of a comprehensive risk management strategy,” adds Alfred.
South Africa's rental market recovery presents unprecedented opportunities for property investors, particularly in high-demand areas like Cape Town and Johannesburg. However, with 26% of tenants marked as high risk, the financial risks are substantial.
GENRIC's rental insurance provides landlords with the confidence to capitalise on market opportunities while protecting against the downside risks that can devastate cash flow and undermine investment returns. In a market where rental yields exceed 10% but tenant defaults affect nearly one in four properties, rental insurance isn't just prudent – it's essential for sustainable property investment success.
GENRIC’s rental insurance is subject to terms and conditions and premiums are reviewed annually. For more information about GENRIC's rental insurance solutions visit https://www.genric.co.za/rental-insurance/
GENRIC Insurance Company Limited FSP No. 43638, is an authorised financial services provider and a licensed non-life insurer.
References:
- The Global Property Guide. Available at: https://www.globalpropertyguide.com/africa/south-africa/rental-yields [Accessed 18 July 2025]
- TPN Residential Rental Monitor: Available at: https://mrisoftware.tpn.co.za/resources/category/residential-rental-monitor/ [Accessed 18 July 2025}
- Landlord Association of Southa Africa. Available at: https://www.landlordsassociation.co.za/landlords-alert-one-in-four-rental-applicants-in-south-africa-deemed-high-risk-in-early-2025/#:~:text=The%20Alarming%20Statistic:%20One%20in,are%20prepared%20for%20new%20tenants. [Accessed 18 July 2025]
- South Africa's housing crisis: Why 2.2 million homes are needed immediately, Biz-Community. Available at: https://www.bizcommunity.com/article/south-africa-housing-crisis-why-22-million-homes-are-needed-immediately-147496a [Accessed 18 July 2025}
- Ooba Homeloans. Available at: https://www.ooba.co.za/resources/oobarometer/
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