Imagine this: You’ve just been relocated to a different state for your job. You have a great home and really don’t want to sell it; after all, what if your job brings you back? Other people have rented out their homes on a short term basis, so maybe that will work for you? However, will you need to change your homeowners insurance?
Once you start the process, you are immediately successful in renting your home to vacationers. Your new job is going great and you’re even making a little extra money from your renters! What could go wrong?
Did you get the correct Landlord Insurance ?
You get a call late one night that one of the people staying in your home fell down the stairs, breaking both arms and they are very upset. They claim that you didn’t have the proper traction on the stairs and that’s why they fell.
You call your insurance agent and start a claim immediately. Your agent asks you a few questions and soon finds out that you have been renting your home out on a short term basis.
The claim gets denied because the correct policy wasn’t in place for short term rental. You are now on the line for all of the damages and future damages this person may ask for and you cringe at the thought. You wish you had shared your plans to rent out your home with your insurance agent when you had the chance.
Here’s the deal
Real estate is booming and more people are buying second homes than ever. Since they only use them a few months out of the year, it’s a great option to be able to rent out your home while you aren’t using it. Many websites have popped up in the past few years that facilitate the transaction between owner and renter. VRBO.com, Airbnb.com, and Tripping.com are just a few.
If you own a home and rent it out as a VRBO, then you want to make sure to check with your insurance carrier. If it is insured as a landlord policy, or as a second residence, there are certainly gaps in the coverage that may surprise you. The worst case scenario is that you are paying for insurance that will not cover a loss when it happens.
Things you should be aware of:
- Most people insure their property as a secondary residence or vacation home. This assumes that you are the person staying there and you are not generating income from the home. If you are renting it, this is not the appropriate type of liability and does not cover ‘loss of rental income.’ In a worse case scenario, a claim may be denied altogether because of a ‘material misrepresentation’ by the insured. Insureds have a duty to disclose the use of the property to the insurance company and a duty to read your policies on new business and renewals.
- Why not insure this as a landlord policy? This type of policy includes loss of rent and the expectation that the property generates income. You would be correct in that statement; however, a typical landlord policy will have a clause that only long term lessees are allowed, or, at a minimum, a month-to-month renter. Many people are concerned that the cost of insuring a home with short term rental exposure will be much higher than insuring a home as a long term rental. I’ve found the difference in cost to generally be less than 20%.
We offer these policies at a low cost and a great value. Call us today at (360)414-8754 to find out how we can help you!
Disclaimer: The information used in these blogs is for examples only and does not pertain to every situation. All insurance policies are different and tailored to each specific client. Claim details can also change outcomes. In no way do these blogs represent your specific coverage or replace coverage advice from your insurance company/agent. You should always review your entire policy and contact your insurance company and/or agent to verify coverage your policy does and does not cover.