Things You Need to Know About Insuring Your Home for Short-Term Rental
These days, it’s not uncommon for homeowners to rent out their home or second home for a short-term period. In fact, short-term housing platforms are becoming more and more popular… (Airbnb has entered the chat.) Becoming a short-term rental host can be a great thing, especially if you’re looking to make some extra money.
Most such rentals are uneventful, but there are exceptions. If one of those exceptions happens to you and you are not covered properly, serious and expensive consequences could result. Here are four things you need to know about insuring your home for a short-term rental:
1. Will Your Homeowner’s Policy Cover Short-term Rentals?
Odds are your homeowner’s insurance policy will not cover any injuries guests suffer in your home. Every policy is different, but virtually no homeowner’s policy covers businesses run out of the home. For that, you need a commercial insurance policy. If you rent out the premises frequently, the insurer can argue legitimately that you are running a business and refuse to pay a claim.
If you are only renting out your home once a year, your policy may cover it. Perhaps you live in an area hosting an annual event drawing in thousands of visitors. You and your family want to avoid the crowds, and the demand for a place to stay is high. Contact your insurance representative and ask whether this type of annual short-term rental is covered by your policy. You may need to boost your coverage temporarily in the form of an endorsement. Your representative will let you know your options, including the purchase of special short-term rental insurance.
2. Can You Depend on the Host Company Policy?
Airbnb and other companies in the short-term rental business may offer their own insurance plans to homeowners. As with any insurance product, read the terms carefully and ask questions about anything that is unclear.
For example, Airbnb lists a “host” of things they do not cover, including the theft of or damage to artwork, antiques, jewelry, and other valuable items. They do not offer liability protection if a guest injures themselves on your property. Other such companies will not cover any damage done to your home by guests. If you are not properly covered and a guest is seriously hurt, you could end up paying a huge amount of money out of pocket. If you find a guest’s negligence has destroyed a family heirloom, you are out of luck. Never assume because a company is known internationally just relying on their assurances is a safe bet.
3. What are the Time Limits for a Short-term Rental?
As noted, short-term rentals are usually considered 30 days or less. If you rent out your home for a year, even if you intend to move back in at the end of the lease, you are considered a commercial renter. Most short-term rental insurance policies for homeowners allow rentals not exceeding 60 days. In any case, the policy will state unequivocally how many days you can rent out the dwelling. If you rent out the property beyond that number of days and a claim occurs, the insurance company will not honor it.
4. What Happens If I Do Not Notify the Insurance Company About a Short-term Rental and the Guests Trash My Home?
Even if your homeowner’s policy does allow a short-term rental for a special event –say, a major sporting championship is coming to your town –always notify the insurance company in advance. If you fail to do this and some partying idiots trash your home, the insurer may not pay your claim. It is possible the company may also cancel your policy. Not only do you have to pay for repairs on your own, but you must hunt for a new carrier.
Questions, Concerns, Comments?
We’re standing by ready to answer any questions you may have about short-term rental insurance! It’s better to really think about these rental insurance considerations before you start your business and get yourself into a sticky situation.
Originally published 1/26/21 - Updated 7/18/23