Airbnb, VRBO, Homeaway and Flipkey. Just a few of the big players in the vacation home-sharing market. In cities all over the world, people are listing their homes as short-term rentals. It can be a great way to supplement your income, but it can quickly turn bad when renters damage your home or its contents.
Whether you’ve purchased an investment property specifically as a vacation rental, or are renting out your primary residence for a few weeks a year, it’s important to make sure you have adequate insurance coverage before your roll out the welcome mat.
Burning down the house
If you think a standard homeowners policy will cover your vacation home-share, think again. Even if you are only renting your home out for a week or two, you should contact your insurance agent to make sure you have proper coverage in place. Here are some things to know:
- Your homeowners policy is not enough. Standard homeowners and renters insurance policies are designed for personal risks, not commercial use. If someone is paying you to stay there, your home becomes a business.
- Rental property (i.e. Landlord) insurance will not cover you, either. Insurance companies differentiate between properties that are leased to long-term occupants versus those that are rented out to multiple tenants on a short-term basis.
- Insurers can refuse to cover damages made by short-term renters. If vacationers vandalize or otherwise damage your home and furnishings, chances are you will have to foot the bill for any repairs.
- You can be held liable for injuries to tenants. What if someone falls down your steps or slips in the shower? As paying guests, they can hold you responsible and your insurer does not have to cover the claim.
- Full-time vacation rentals may be treated differently from one-time home shares. Some insurance companies may be willing to extend your regular homeowners policy if you are renting for a special occasion–the Superbowl, for example–as long as you notify them first. Whereas a home that is rented out on a regular basis has more in common with a hotel or B&B. Consult an insurance professional to make sure you are properly covered.
- Protection offered on host websites is often incomplete. If your property is listed on one of the commercial vacation rental websites, you probably know that these companies all offer some type of host-protection program. While these programs offer some coverage, they are not the same as insurance. The companies generally have final discretion over what gets paid out. You may still find yourself on the hook for damages to your property, and claims made by guests.
- Rentals in multi-unit buildings may be subject to restrictions. Apartment and condominium complexes often have homeowners associations or leasing policies that prohibit short-term rentals. This could impact your ability to properly insure the property.
- Local regulations may impact you. In many places, investment in vacation rentals has pushed up housing prices. They also draw frequent complaints from neighbors, who don’t like having unknown people coming and going. In response, many municipalities are moving to regulate short-term rentals. Review your local laws before you travel the vacation-rental road.
Despite the potential pitfalls, vacation home sharing continues to grow in popularity with both travelers and homeowners/investors. And as the saying goes, if you build it, they will come.
A growing number of insurance companies now offer home-sharing liability insurance policies that can be purchased long-term or on an as-needed basis. These policies are designed to cover the specific risks you, as a short-term landlord, will face.
If you’re about to embark on the journey of vacation home-sharing, contact your General Southwest advisor. We’ll help you explore your insurance options so that you can enjoy many happy returns on your investment.
Article by Lisa Binsfeld
Information courtesy of Zywave, Liberty Mutual Insurance, and iii.com.