You’ve decided to rent your property on Airbnb, you check with your insurer and they say you’re covered. So, you’re good to go, right? Think again.
Most insurance policies are not designed to cover sharing economy activities.
If you rent your room out on websites such as Wimdo, Homestay and Airbnb, your insurer will class this as commercial use and most will exclude this under their policies. Those that do are likely to have a raft of exclusions written within their terms and conditions that will severely restrict what you can claim for. If your insurer say’s they are happy to cover you, you might not be covered for as much as you think you are. Whether you’re doing it for a living or a bit on the side, treat your money making enterprise like a business and do your homework so that you know what your insurer’s level of cover is.
But what if my home insurer say’s it ok. Doesn’t that mean I’m covered?
Insurers are not likely to cover you if you leave your door open for strangers to walk inside your home, steal your things or damage your property. Many won’t see allowing guests into your home as much different either. It’s difficult to predict what a lodger will do in your property until they have settled in for a sustained period of time. To counteract this, many insurers restrict what you can claim for if you decide to let your property out on short term basis, which is why your cover might end up being very little. In most cases, if your insurer does agree to cover you, it means your insurer has agreed to add your guest as a lodger or additional family member. Whilst your home insurance may not be invalidated and they will still accept claims that would normally occur if the hosting activity did not exist altogether, key aspects of cover are likely to be missing.
Inlet provides cover for malicious damage and theft without forced entry caused by guests. Unlike the cover that we provide, most standard home insurance policies do not cover theft if there has been no forced entry to your property and are unlikely to cover any claims caused by guests that have been added to your policy. This means that vandalism or accidental damage caused by a guest is unlikely to be covered either. It’s vital you check with your insurer to check you are covered for these things or you could be putting your home at risk.
You could be liable for thousands of pounds.
Home insurance policies usually exclude liability claims against if you if this is as a result of letting out your home. If a paying guest injures themselves on your property and hold you liable., they may decide to sue you for thousands of pounds. Whilst it is true that Airbnb’s host protection insurance can cover you for a maximum of $1 million worth of liability cover per case in the event something like this occurs, serious injuries can incur damages well in excess of this. In addition, they have a maximum limit of $10 million so if the total number of claims worldwide reaches this limit then you may not be fully covered. What would you do if you had to foot the bill?
Your insurance premiums could rise.
The premiums for standard home insurance policies are usually calculated based on who is staying at your home and how many people are living there. Their premiums aren’t designed to favour people who allow any number of paying guests into their premises. Insurers that do decide to cover you are likely to charge a higher premium if you rent your property out on a short-term basis due to the increased risk. What’s more, your insurer may decide to charge you individually each time you decide to bring a paying guest into your home, which could be costly. Also bear in mind that if any claims did occur then this would affect your no claim bonus, which could see the cost of your insurance rise even higher at the next renewal. When factoring in your potential earnings, it’s vital you take this into account or it might eat into your profits. As a cheaper alternative, consider shopping around for an additional insurance product that is specifically designed to cover your needs. Taking out a policy with a specialist insurer like Inlet is likely to be a cheaper option and any claims made through us as a result of bringing in guests, are unlikely to affect your no claims bonus with your main home insurer either.
You might not be allowed to have regular guests.
To mitigate the risk of having short term tenants in your home, your insurer may only allow you to have paying guests on an occasional basis. This may be fine for people who want to make the odd bit of money on the side but those who want a regular income stream will effectively be without protection if their insurer puts a limit on how many times you can do this.
You could be breaching the terms of your mortgage contract or lease.
As a side note, it’s worth considering that most mortgage lenders and leaseholders do not allow borrowers and tenants to offer short term lets of their properties so check your contract first. If you’re not sure, call your mortgage company or leaseholder. If you don’t do your homework you could be evicted from your property or have your mortgage invalidated. However, bear in mind that your mortgage lender is primarily interested in protecting the asset they are investing in. It likely that they would be more comfortable with this activity if you had the right protection so consider getting additional insurance elsewhere if your primary insurance cover isn’t adequate.
Do your research and consider specialist insurance.
Whilst most home insurance policies aren’t designed to cover short term letting, each insurer is different they might offer a compromise that’s right for you. The take home message here is to be careful and check the facts. Don’t take your insurer’s word without digging deep into the nuts and bolts of the cover you’re going to get. If you’re not happy with your level of insurance, consider getting additional cover elsewhere and talk to your insurer to check they are happy with you supplementing your insurance in this way. Inlet offers specialist insurance specifically designed to cover you for short term letting.