It’s easy to post an ad and advertise yours home for rent, but is it worth it? Certainly, cash in-hand is a big attraction. But did you know that you’ll need specific insurance for your rental property and there’s much more involved than a standard homeowners insurance policy?
Here’s what you need to know about insuring a rental property to make an informed decision.
Not Telling the Insurer Isn’t An Option
If you don’t tell your insurance company you’re renting your property your homeowners insurance policy probably won’t protect you. While policies do vary between insurers and states, they almost always exclude coverage for rentals as they consider it running a business.
This is particularly true for vacation homes where renters come and go, as it increases risk for the insurance company. Unless you buy specific coverage, they’re not willing to assume the risk.
If you experience a loss, they do investigate and if they discover the rental they will likely deny your claim. They may also cancel your policy making it more difficult to obtain another policy, and/or charge you with insurance fraud.
Short-Term vs Long-Term
It’s really up to the insurer whether they’ll permit an occasional short-term rental in your primary residence. Some do with permission, while others demand a policy endorsement.
However, renting out part or all of your property regularly constitutes a business and you’ll need home-sharing insurance if it’s your primary residence or business insurance if it’s another short-term rental property.
If you’re renting out a secondary residence for a longer period such as six months or a year, you’ll probably need a landlord or rental dwelling policy. Business and landlord policies cost more, but they also offer additional protections.
What About Home-Sharing Services Policies?
Rental agencies such as Airbnb, HomeAway, VRBO, Flipkey and others often offer limited insurance coverage. For instance, Airbnb offers $1,000,000 third-party bodily injury or property damage liability coverage per listing location, but many conditions, limitations, and exclusions apply.
These policies don’t cover intentional acts or health issues such as mold and mildew. As well, they only pay actual cash value of your property (value minus depreciation). You can’t buy replacement value coverage.
There’s no coverage for certain types of property such as fine art or if the guest stays longer than the booking period shown in the listing and causes damage or injury.
Additionally, these policies often impose rigid deadlines and complex requirements. For instance, Airbnb’s Host Guarantee only allows “14 days from the guest’s check out, or before the next guest checks in, whichever is earlier” to file a claim. If you don’t notice something’s damaged or missing, it’s not covered.
Finally, collecting on a damage claim may involve a dispute resolution process where you work directly with the guest and the provider’s just the intermediary. Obviously, this can be time-consuming and emotional. Buying your own home-sharing insurance or a policy endorsement avoids this type of scenario.
Talk to Your Agent
Talk to your agent if you’re considering renting your property so they can arrange the right coverage. You don’t want to be left unprotected, especially when you have many people visiting your property.