The current trend with many homeowners is to rent rooms or even the entire apartment or home to short-term tenants and travelers using online rental platforms like Airbnb. Through the income they can purchase luxurious real estate property or supplement their income. Most of the people do not consider the legal and financial implications that amateur hoteliers have to take.
Insurance issues to consider before joining the Short-term rental game
1. Homeowner’s policies do not cover short-term rentals
The insurance policy taken by the homeowner does not protect the liabilities associated with the guests. Most insurance companies interpret short-term rentals as a commercial project and therefore exclude the claims from your home policy. When claiming for compensation, it is advisable to inform Airbnb, least the claim is canceled. Homeowners are advised to either upgrade their existing policies or take a business liability policy. The other option is to ensure the guests using the premises are insured with the homeowner or rental policy.
2. Tenants come with many risks
Tenants pose numerous liabilities to the homeowner. The risks include theft, injuries to the guest or someone else from the family, illegal activities, etc. Many local authorities require the people offering beds and breakfast to pay special taxes, have a commercial license, and submit to inspections
3. The protection offered by most rental platforms is not enough
A firm like Airbnb gives a $1 million guarantee to every host. This guarantee is not like an insurance company, and a person may suffer in the event of peril. The guarantee is only applicable when all other means to recoup the loss are exhausted. It also excludes some losses. The majority of the rental platforms disclaim the responsibility for protecting the guest or the host from trouble. Homeowners don’t want to be the ones testing the policies in lawsuits.
The desire to supplement income is a wise idea. However, it is advisable to inform your legal and insurance providers and get their professional advice.
Richard Blair is an investment advisor at Wealth Solutions Inc. He went to the University of Houston where he graduated with a Bachelor’s degree in finance. He is the executive and sole proprietor of Wealth Solutions Inc. The firm is based in Austin, TX. He developed this firm with an aim of providing independent advice. Richard Blair enjoys helping others accomplish their personal financial objectives.