What Insurance Do I Need for a Short-Term Holiday rental?
Choosing to become a short-term holiday host using Airbnb or another similar platform presents a wonderful opportunity for many. If you’ve got a spare room or two, or have a holiday house you’re not using, getting a little extra income from them can seem like a no-brainer. Unfortunately, many people don’t seem to take into account the extra cost in making this bit of extra money, including insurance for Airbnbs, along with fees for those who act as hosts.
In this piece, we will unpack the type of insurance you need for your rental, as well as other things to consider before becoming a host.
Protecting yourself
Sometimes, you don’t always get the perfect guests and things can go wrong. Guests may use your property to host a party that gets out of control. Perhaps someone rents your property to carry out illegal activities, and there’s always the fact that people won’t treat the property like it was their own. We’ve all seen the horror stories of teen parties that have gone wild, resulting in property owners being left to carry the financial burden of repairing the damage, not to mention the loss of income that comes with it.
Whilst some short-term holiday rental platforms provide their hosts with some limited cover to protect against liability claims or property damage, it is important to read the terms of their free cover very carefully to fully understand the extent of their protection and where you may be left unprotected. For example, Airbnb provide their Host Protection Insurance and Host Guarantee but it is limited.
The Airbnb Host Protection Insurance may cover some things including:
- Your legal responsibility for bodily injury to guests or others
- Your legal responsibility for damage to property belonging to guests or others
- Your legal responsibility for damage to common areas, like building lobbies and neighbouring properties, caused by a guest or others
The Airbnb Host Guarantee can provide some protection for:
- Damage to your place caused by guests
- Damage to your belongings caused by guests
- Damage caused by a guest’s assistance animal
However, these types of offerings are not going to cover your property for damage caused by a weather event, a burglary, a burst or leaking pipe, a fire or any number of other potential losses. Nor are they going to provide you with protection against ongoing loss of income whilst your property can not be occupied as a result of damage caused by an insurable event. You’ve spent a lot of your hard-earned money on your investment, you deserve to have it properly protected. Having the right cover in place through a comprehensive Landlords Policy which allows for short-term holiday usage, is the only way to provide complete peace of mind that your investment is properly protected. It’s important to have, and you need to make a claim.
Although this seems intimidating, there is a way you can protect your house and assets from these accidents occurring, however, you may need to make sure you have the right insurance policy.
Home and contents insurance
This will cover your own home and contents, but be careful, it may not cover you fully should you choose to rent out your own home, or even a room at your home for short term holiday rental. In this instance you will need to purchase a Landlords policy which will cover your legal liability when renting out your space as well as an option to cover your contents being made available for use as part of the rent. In most cases an insurer will only provide the Landlords policy where they already hold the domestic home and contents policy. Before becoming an Airbnb or short-term rental host, check your insurance policy is up to date, it covers your property for its intended use and that you’re getting the best deal. Using a reputable insurance broker like ACS Financial can help ensure that you have the right cover in place. Ask us about Airbnb insurance.
Landlord insurance
When you have a property dedicated to holiday/short-term rental, a Landlord Insurance policy will be what you are looking for. However, doing your research into landlords’ insurance is crucial, as many won’t insure Airbnbs or short stay rentals, unless you have specifically advised the insurer that it is intended for this purpose. A Landlords Insurance Policy can cover your legal liability as a property owner as well as cover for your building and contents. This can include cover for accidental loss or damage to your property and its contents, or even malicious damage to the home.
One important factor to consider, and certainly something that you should disclose to your broker or insurer is whether you intend to provide refreshments or meals as part of your rental offering. Many insurers will exclude liability cover where food and beverages are offered as part of the deal. Even something as simple as providing a basic breakfast pack could mean that liability cover may not respond if a tenant makes a claim for food poisoning. Cover can be sourced for you if you wish to provide a bed and breakfast service, that’s why using a reputable broker with experience in the short-term holiday market takes the hassle out of finding the right insurer who can provide the cover you need.
Accidental damage to fake gas log fireplace
A recent example of a claim that was paid under a Landlord’s Policy involved a situation where a host’s home suffered damage to their gas log fireplace, when a tenant mistook it for a genuine fireplace and tried to light a fire in it. Damage caused to the fireplace as a result was able to be paid under the Landlords policy as they had the right cover in place, which included cover for accidental damage caused by a tenant.
For consideration
With all these things considered, it’s important to also contemplate a few other factors of what could go wrong, before listing your place or room. Some things you may want to consider include:
- Having a stranger at your place – If you’re renting out a room in your house, consider the impact of having a stranger living with you and being in your space. Are you planning on background checking people before they come to stay, or doing some form of police check? If so, this will need to be communicated with the guest.
- Big groups such as schoolies – Another thing to carefully consider is whether you will accept big groups of teenagers or groups with a higher potential to damage the place (such as schoolies groups). As this group is in a higher risk category, you may decide not to accept these types of groups as a precaution.
- Emergency support – Becoming an Airbnb host means you must be prepared for things to go wrong. Ensuring you have on-call emergency support for plumbing, electrical and other issues is crucial. Find someone local and building a rapport before you make your listing will help put your mind at ease if something were to go wrong.
- Setting boundaries – Creating boundaries or guidelines for your guest’s stay will help outline what you expect. If your guest is renting a room in your house, think about what rooms you might want to make out of bounds or off limits and what’s available to them for use. If guests are renting out your whole house, setting some guidelines as to how you’d like the house to be treated will help your guests understand what’s expected of them.
Deciding to become an Airbnb host is certainly a rewarding experience. If you rent a room, you can meet people from all walks of life, while making a bit of extra cash on the side. When offering your home to others, you need to be aware of the risks involved and ensure you’re covered in the event something goes wrong. Taking out adequate insurance and understanding the risks involved is a must. If you’re considering becoming a short-term rental host whether it be through Airbnb or another similar platform, get in touch with us today.
ACS Financial are a Christian, profit for purpose organisation providing tailored school and church insurance and lending solutions, as well as offering other services ranging from personal insurance to not for profit insurance.