Short Stay Insurance – The low-down

May 27, 2017

Short stay letting is a great way for property owners to leverage the value in their residential properties.  Whether you are managing your property yourself or using an agent, your property needs to be appropriately insured.  

Short stay letting is a great way for property owners to leverage the value in their residential properties.  Whether it’s your unloved granny flat, a holiday house, an investment apartment or the family home that you want to let while you are away, platforms like Airbnb now make it easy for property owners to list their assets on the holiday rental market.

 

For those who are too busy or simply don’t want to have to manage their property themselves, engaging a short stay property agent to manage the listing, guest communication, marketing & maintenance of the property may be a great solution. 

 

Whether you are managing your property yourself or using an agent, your property needs to be appropriately insured.  Although most owners will say they have insurance in place, they are not aware that most Landlord and House & Contents policies do not allow short stay letting.  Your policy must specifically allow short stay letting or any claims that arise from guest stays may be declined.

 

The ignorance and misinformation surrounding insurance makes it the number one topic of discussion on hosting forums all over the world. The insurance industry has been very slow to respond to the market demand for these emerging economies, and consequently there aren’t many suitable products available. 

 

WHAT’S RISKY ABOUT SHORT STAY LETTING?

The two major risks that short stay property owners need to consider are Public Liability and property damage, with PL being the big-ticket item.  While property damage can be expensive and annoying, it pales into insignificance when considering the far-ranging financial and legal consequences of a serious guest injury or death.  What is Public Liability?  Read more here

 

The need for adequate PL coverage cannot be over-stated – you must not take your first booking without it, and responsible property agents and managers will insist that you provide proof of appropriate cover.  In Australia, Public Liability on landlord policies is typically $20 million, and many House & Contents policies provide coverage of up to $30 million (this is a guide only, and may vary depending on product and provider).

 

DO AIRBNB HAVE YOU COVERED?

Yes and No. 
The much-vaunted Airbnb Host Protection Insurance has lulled many property owners into a false sense of security.  The $1million Public Liability cover is woefully inadequate in the event of a serious injury claim, and the fact that Airbnb does not provide a PDS (Product Disclosure Statement) means that hosts are completely in the dark about what they are in fact covered for.  If you are using a property agent, they are likely listing your place on a range of other platforms such as Stayz, Booking.com and Trip Advisor.  If a claim arises from a booking through a platform other than Airbnb, you are on your own.

 

YOUR HOSTING STYLE

There are lots of different hosting scenarios, and each has their own insurance requirements.  Make no mistake - it's complicated!  Here is a summary of the most common Short Stay hosting scenarios. 
Which one are you?

 

In-home - You let out spare room(s) in your primary residence.

Landlord - You own a house/apartment/unit and let the whole property to short-stay guests.  It is not your primary residence.

Periodic– You let out your entire primary residence (typically, when you are away on holidays, or you may move out when you get a booking)

Leasing & subletting – You do not own the property.  You are a long-term tenant with a rental agreement, and you let a room or whole property on the short stay market.

 

WORDS WITH SPECIAL MEANING

Some things to be aware of – always check your policy wording!

  • “Short Stay” is generally defined as stays of up to 3 months (will vary slightly depending on policy & underwriter)

  • Occupancy type:

    • Does it mention or allow “short stay”?  If not, chances are it won’t cover stays of less than 3 months

    • Does it specifically preclude short stay? (not suitable at all)

    • Does it say “Property owner”? (that will be a problem if you are renting)

  • Some policies will only cover you if you are in residence when hosting guests, so not good for those who want to let their primary residence while travelling

  • Some policies have limits on the number of nights a year you can let the property

  • For those renting & subletting:

    • Most policies will not cover you unless you are the property owner, so check with your broker to ensure you are covered

    • You must have written landlord permission.  If not, your insurance policy will not respond in the event of a claim

  • If you are breaking the law in any way, your insurance will most likely be void

Be aware that every insurance product has its own set of underwriting criteria, and these may not be fully explained in the PDS.  For instance, many underwriters won’t provide cover to those who lease & sublet, although that may not be specifically mentioned in the PDS.  A broker will help you to find a product that is suitable to your circumstances.  Find out why you should use an insurance broker.

 

Regardless of which kind of hosting you do, you need to find appropriate cover.  This is not the time for DIY insurance:  You can’t just buy this online as you would your car or house insurance.  You need professional advice to ensure that the product you are buying is the correct one for your situation. 

 

Insurance - don't lease home without it:

As you already no doubt know, I am an Airbnb SuperHost and a well-known member of the Melbourne hosting community.  I have a wide range of experience through being both an in-home host and having investment properties that I let out on the short stay market.  That's my point of difference as an insurance broker - I get it.  Please note that I am not the only broker who can help you with short stay insurance, but I am committed to educating my hosting friends on the need to be properly covered before risking their assets on the short stay market.

DISCLAIMER

This advice does not take into account the reader’s particular objectives, financial situation or needs.  For this reason, before you act on this advice, you should consider the appropriateness of the advice taking into account your own objectives, financial situation and needs.  Before you make any decision about whether to acquire a policy, you should obtain and read the product disclosure statement for the policy.

 

To discuss your personal insurance needs, please email veronica@ceneta.com.au 

 

Ceneta Insurance Services Pty Ltd ABN: 78 133 436 254 

PO BOX 178 Altona North VIC 3025

Level 1, 96 Wellington Parade, East Melbourne VIC 3002

Authorised Representative No: AR 332815 of PSC Connect Pty Ltd

ABN 23 141 574 914 AFS License No 344648
 

 

 

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