Insurance is one of the most important concerns when considering whether to make your home or investment property available for short-term rentals. For your own home, you have Home & Contents insurance to protect your property and your possessions in the event of damage or a break-in, and for an investment property you have landlord insurance to protect you against damage and personal liability claims.
1. Are you actually covered?
When it comes to short-term rental properties, a big potential trap (especially if you are hosting your own property) is that you might think your existing Home & Contents policy covers you in the event of property damage or theft.
In fact, it doesn't.
Traditional Home & Contents policies will not cover you for any damage or theft that occurs while your property is being used for 'commercial' (i.e. revenue-generating) purposes. Even if you only rent out your property for a few days, anything that occurs during a paying guest's stay is not covered. This ranges from a broken TV or a vase that mysteriously goes missing right up to a personal liability claim from a guest that is injured in your property. If you only have a traditional Home & Contents policy, you are not covered for any of these things. This could be potentially extremely costly in the case of a personal liability claim.
2. What if I have landlord insurance?
If you own an investment property and you already have landlord insurance, it does cover you for damage that occurs during a paying guest's stay because it is designed to cover you for damage caused by paying tenants. Landlord insurance also includes cover for personal liability claims, although having said that, some landlord insurance policies only cover stays longer than a certain period and may require lease agreements to validate a claim. If you have landlord insurance, check your PDS to make sure.
Assuming there is no such minimum requirement, on the legal side, it's perfectly fine. However, on the practical side, it may come up short in certain cases. Specialised short-term rental policies tend to have higher levels of cover for damage of contents such as glassware, crockery and electronics which landlord insurance might regard as the tenant's responsibility. They also tend to include greater levels of cover for theft of contents. Even given the extra level of cover for valuable contents, we recommend locking up or putting into off-site storage anything that is especially valuable.
3. What is different about short-term rental insurance?
As we mentioned earlier, short-term rental insurance is like a variant of landlord insurance that is geared more towards the specific needs and requirements of short-term rental property hosts.
First and foremost, there is obviously no minimum stay requirement. Short-term rental properties obviously have guests coming and going all the time so you are covered for all of them.
Secondly, like we mentioned, there is a greater level of cover for contents like crockery, glassware and electronics. Where landlord insurance might regard these contents as the tenant's responsibility, in a short-term rental property they are the responsibility of the owner and as such they are covered.
Finally, short-term rental insurance includes a significant level of cover for personal liability. Most policies include cover for up to $20,000,000 of medical expenses. A word to the wise though: personal liability cover can voided if an injury happens as a result of negligence on your part. If a guest slips in the shower because you dod not supply a non-slip mat or because the tiles on the shower floor were too smooth and slippery, the case could be made that their injury was your fault.
4. Doesn't Airbnb include insurance?
In theory, yes. Airbnb advertises that all properties listed on its platforms are covered by the Host Guarantee for up to $1,000,000 of property damage. They also advertise that all hosts are covered for up to $1,000,000 worth of personal liability by their Host Protection Insurance. In our experience, these guarantees are not a viable substitute for a dedicated insurance policy. We have found these policies difficult to claim against and there are several loopholes in them. As a result, we would strongly recommend that you take out your own policy as well.
This policy only extends as far as properties listed on Airbnb. If the same property is listed across multiple platforms and something occurs during a stay booked on, for example, Booking.com, there is no cover.
5. What are my options?
There are three dedicated short-term rental insurance policies that we recommend to our hosts: IAG ShareCover, BJS Holiday Rentals Insurance and EBM RentCover ShortTerm. We've put together a fact sheet that sets out what each policy does and does not cover to help you navigate the minefield that is short-term rental insurance.
Any further questions regarding property and personal liability insurance? Feel free to send us a message, ask in the comments below or give us a call on 1800 526 133!
MadeComfy provides an end-to-end property management service, which means property owners don’t need to do a thing when they hand over their keys. MadeComfy makes the process of earning greater returns from short-term renting effortless, achieving up to 40% more than long-term rentals and self-managed Airbnb listings. Get in touch with us today to see how we can help!