13 Apr Insurance & Your Short Term Rental
Homeowners who are renting out their homes are always “worried about the structure,” says Lauren Steinhardt, a producer at New Orleans commercial insurance broker, Gillis, Ellis, & Baker. “I’m worried about what if someone falls down the stairs.” When you’re renting out a property for vacation rentals, your regular homeowner’s policy just won’t cut it.
Most people’s homes are insured on a homeowner’s policy, which usually includes a provision that excludes business activities. Your vacation rental? That’s a business. You may know what your home is worth, but a liability claim when you own a business means uncertainty.
Lloyd’s of London, founded in 1688 (!) created an insurance policy written specifically for short-term rentals, and luckily, other insurance agents have access to it through Proper Insurance LLC. It’s essentially a commercial general liability policy combined with a property policy. With this comprehensive approach you can throw out your old homeowner’s policy, and replace it with this one to cover your property and your wallet.
Liability means property damage and bodily injury to a third party. What if a tenant punches a hole in the wall or steals something? You’re covered. What if a tenant slips in the bathtub and claims it’s because you didn’t clean it? You’re covered. Your insurance coverage can even cover you if your tenant empties your liquor cabinet. Some policies will cover personal injuries if your property includes the use of a boat, bicycle, golf cart or other mode of transportation.
The business income component covers you if your revenue declines due to unforeseeable events. What if your house gets flood damage, and you can’t rent it out until it’s fixed? You’re covered for the income that you lose during that time. What if you’re contractually obligated to pay a property manager even if you can’t rent it out? You’re covered for those payments as well.
Lauren says getting this policy sorted out will take a few weeks depending on how much your agent knows about short-term rental policies. But to speed things up it always helps to have the proper information ready. At your first meeting, be prepared with the following answers:
- How old is your property?
- When was it updated? Roof? Wiring? HVAC?
- Square footage
- Just short-term rental? Long-term? Event space?
- An idea (a number in mind) of how much coverage you want
Finally, you may be wondering how to handle the claim process if something does go wrong. While you should always consult with your insurance agent, here are some of Lauren’s tips:
- Take as many pictures as possible
- Report the damage to the insurance company immediately
- Try to stop any continual damage (you have a responsibility to protect your property)
- Never tell anyone: “Don’t worry, I’ve got insurance.” You never know who will be liable until the claim is processed.