Vacation season in the northeast is approaching and for those who own investment properties, it means business is picking up. Services like Airbnb and VRBO are very popular ways to vacation and travel these days, with many investors buying homes in popular destinations to rent out. Some people are even utilizing their own homes to temporarily rent out for extra income.
As the owner of one of these investment properties or the homeowner who rents out their home, you need to be careful when it comes to your insurance coverage!
Insurance for these types of situations is complex and considered high-risk. Properties used for short-term rentals have high foot traffic and usage with guests that have no financial interest in that property and property owners are absent and unable to monitor how their property is being used.
Consider college kids hosting parties or family reunions where everyone has a carefree attitude, and you can start to anticipate the concerns the insurance companies have.
It’s important to make sure your insurance agent is aware that your property is being used for short-term rentals!
If you aren’t clear about the usage of your property, these additional high-risk factors could lead to coverage gaps. Be specific about how you’re renting out your property, simply saying you “lease out” the property isn’t enough as these “leases” are on a temporary basis, there is also a very good chance that this type of usage is noted as excluded on your coverages.
Beware of “free insurance” provided through your rental company such as Airbnb and VRBO. The Host Protection Insurance and Host Guarantee Insurance aka AirCover Protection if very limited and very one-sided to the vacation rental company.
As a rental property host, you want insurance and direct legal protection with your name on it. In a potential claim situation, you don’t want to rely on the insurance company and attorney for the large corporation. Your insurance should respond to your specific needs and not the rental companies. The “free” insurance has many limitations and leaves many gaps in coverage.
Something as simple as a slip and fall that renders someone with a brain injury, the “free coverage” is denied because it falls back on your ownership with allegations that you should have had your property in a better state of repair.
When you think of insurance, you most likely think of basic losses like fire or water damage. But with short-term rental claims, think liability claims and if it happens, it’s usually something big.
In one of the most recent events in the media, an infant died at an Airbnb rental when it was exposed to fentanyl and the parents in the legal suit allege the property owners didn’t have the premises properly cleaned. In this direct example, this situation would fall outside of the scope of the “free” insurance coverage. (Source)
It’s also important to note that if your property is in a Condominium complex, the by-laws may prohibit short-term rental usage, compromising your general liability coverage in communal areas of the complex.
If a two-year-old wanders off from their parents renting your condo, discovers a swimming pool, and drowns. Because of the existing by-laws, you would have no liability coverage for this circumstance.
Short-term rentals require specific insurance because of the complexities involved.
Basic coverages that you should consider having include:
Building Insurance to protect the building itself.
Contents Insurance to protect any contents you have inside the building.
Business Income Insurance to protect from any potential income loss in the event the home becomes unusable from a covered loss.
Liability Insurance to protect you from any sort of allegation that states you are legally liable to your guests or their losses, except for situations that are noted as excluded in your policy.
For more broad protections of your liability and investment, consider a commercial form of insurance with the specifically noted coverage of “short-term” rental coverages. If this is missing from your current policy, chances are you are not covered, or you have very limited coverage should something catastrophic arises.
With all of these complex, confusing rules, how do you make sure you and your property are protected while still enjoying the benefits of owning a short-term rental? Your independent insurance agent is here to help!
We can help assess your property and situation, advising you on the right coverage options for your needs and budget. Give us a call at 844-GANNONS today to get the conversation started!