Services like Airbnb, HomeAway, and VRBO (Vacation Rentals by Owner) are attractive to homeowners for many reasons. Most of all, many homeowners who like to travel or who own a second or third property enjoy making money off of something they already own and that they aren’t currently using.
But it’s important to note that there are pros and cons of being an Airbnb or VRBO host. Below we’ll outline some of the risks associated with renting out your home so that you can make an educated decision on whether this is a smart idea for you.
Why Most Insurance Professionals Advise Against Renting Your Home
Initially, homeowners usually feel confident about renting out their property to vacationers and travelers. After all, sites like Airbnb offer primary insurance coverage (called Host Protection Insurance), so what could go wrong?
What’s important to remember, however, is that this type of primary insurance coverage only goes so far. It is subject to specific limitations, conditions, and exclusions. But of course, these exclusions are buried within a lengthy legal policy that most people don’t take the time to read.
What is the consequence of this? Insurance exposures.
For example, if a guest slips on a rug and hurts themselves in your home, you should be covered. However, you will not usually be covered if your guests were to do damage to your belongings. For instance, if a guest broke your TV, you would not be covered by Airbnb insurance.
Will Home Insurance Cover You?
It’s at this point that most homeowners look at their home insurance policy for help. On the Airbnb website, it states clearly that there are exclusions with their Host Protection Insurance and that if you want to know how your home insurance policy will work, you’ll need to speak directly with your insurance agent.
It’s essential to keep in mind that all insurance policies are different. No two home insurance policies will ever be exactly the same. And all insurance agencies will allow for different coverage, depending on how you plan on renting out your property. What’s most important here is that you must notify your insurance agency before making any plans to rent out your home or property.
Short-Term Vs. Long-Term Rentals
There are essentially two different types of rentals when it comes to allowing others to stay in your primary residence or second or third home.
- Renting your primary residence for a few weeks or months:
If you want to rent out your home for a few days, you’ll first need to speak to your insurance company. They may allow this and allow coverage through your homeowner’s plan. However, they may require that you get an endorsement or rider for additional coverage.
Now let’s say you want to rent your home for the summer while you’ll be away. In this case, you’ll need to add business coverage as this would constitute a business dealing.
- Renting a second home for a long-term period:
Long-period rentals will require more insurance. You cannot rent long-term with just homeowner’s insurance. Instead, you’ll need a landlord policy.
Speak to Your Tolbert Tower Insurance Agent Today
Renting out your home can be a lucrative way to use your primary residence or other properties when you’re not using them yourself. However, keep in mind the drawbacks we’ve outlined above. These are not to deter your efforts, but rather to keep you informed so that catastrophe doesn’t strike without warning.
If you do decide to move forward with renting your property, remember to notify your insurance agent. Tolbert Tower Insurance agents would be happy to speak with you about your rental options and insurance coverage at any time.