What you need to know about short-term rental insurance

With the festive season and summer holidays almost upon us, property owners may be looking at tapping into the short-stay accommodation market. But what type of property insurance will you need? We explain here…

The appeal is obvious. Renting your property out on a short-term basis means you can charge a premium for shorts stays – particularly for well-kept properties in major cities or popular holiday destinations – and, of course, in some instances, you can still use the property for your own getaway.

Before listing a property on Airbnb, Stayz or another platform though, it’s important you consider what type of insurance you need, so you are adequately covered. The type of cover you need will depend on a number of things, including whether you are a ‘host’ or a ‘landlord’, and it’s important you know the difference. Let us explain.

Home and contents insurance vs landlord insurance

Standard home and contents (homeowners) insurance is residential property insurance that protects owner-occupied property (i.e. a primary residence). It isn’t designed to offer cover for properties which are used to generate income. And unless the property is only rented out occasionally via a platform, it generally isn’t considered by insurance providers to be owner-occupied (different insurers have different rules, so be sure to check the policy).

On the other hand, landlord insurance is designed for owners who derive income from leasing property either long-term or short-term (i.e. an investment property). In addition to offering cover for risks common to all property, including damage from insured events (like natural disasters or fires, theft and legal liability), this insurance also covers the unique risks that landlords face when renting property, including tenant-related risks (like accidental, intentional or malicious damage, and loss of rent).

Host vs landlord

An owner who uses Airbnb to let any part (the whole home or just a room) of their main place of residence for occasional short stays is a ‘host’. 

They are not a ‘landlord’ because they are not using the platform to rent out a holiday home or investment property, they are simply ‘sharing’ their own home with a paying guest. They may be deriving a taxable income from renting out their own home, but the home is not considered to be an investment property as it is primarily for personal use.

Owners should check their home and contents policy for any exclusions on using their home for Airbnb, and also look into the insurance/guarantees offered by the platforms.

Now, if an owner uses Airbnb, for example, to let their holiday home or investment property for short stays (less than six months at a time), then they are a ‘landlord’, not a ‘host’. So long as the property being let is not the owner’s principal place of residence (i.e. their own home) and it is used to generate an income, then the owner is providing ‘temporary residential accommodation’. By this we mean, short-term accommodation for periods ranging from one day to six months at a time provided that such accommodation is not subject to any tenancy agreement (other than for holiday letting or similar short-term purposes).

This means specialist landlord insurance is appropriate – specifically, a short-term policy.

What does short-term rental insurance cover?

These policies are designed to cover the risks that landlords may face when leasing their property on a short-term basis. It is available for letting scenarios including holiday houses, serviced apartments and corporate leasing, and for investment properties rented as short-stay accommodation (via a platform or agent).

Coverage typically includes protection for:

• the structure of the building* including fixed light fittings, fixed wall coverings, fixed ceiling coverings and fixed floor coverings, and other buildings and structural improvements, such as an in-ground swimming pool, on the property
• contents* (fittings and fixtures) such as window and floor coverings, fixed appliances, built-in furniture, cupboards, non-portable electrical equipment, water heaters and coolers, and light fittings
• non-fixed items/loose contents including equipment and amenities the landlord makes available to guests (from books to beds, bicycles to barbeques) – Top tip: Be sure the sum insured is adequate to cover the full replacement costs of the household goods
• accidental or malicious damage (including damage by domestic pets joining their owner on holiday)
• insured events such as fire, water or storm damage, glass breakage, theft or impact
• legal liability if a guest injures themselves on the property
• loss of income if damage (tenant or from an insured event) forces the landlord to cancel a confirmed booking, or following the death of a guest at the property

* There are usually options to cover the building, the contents or both. Cover will depend on the option selected.

The takeaway (getaway?)

Having insurance for a property that is being rented, whether through traditional leasing or as short-stay accommodation, is imperative. But it’s also essential that the owner has the right insurance – and that will vary, depending on how their property is being let.

When it comes to short-term rentals, there is a difference between being an Airbnb host and sharing a primary residence with the odd paying guest, and being a landlord who is offering an entire property, which is not their main residence, for a guest to rent temporarily. The former may be able to rely on their standard home and contents policy, backed up by the guarantees offered by the platform (always check the details). The latter needs specialist landlord insurance to protect against risks unique to the short-term rental market.

Landlords with questions about RentCover ShortTerm, should get in touch with a member of our Expert Care team.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 954 374 if you have any questions.