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Welcome, Guests! Know the Risks of Renting Your Home

Know the risks of renting your home on a rental website and how the right insurance can help protect you and your property.

In April, news outlets reported a shocking story: a Calgary couple who had rented out their home through a website had returned home to find their home destroyed by the nearly 100 people who attended a two-day party. The mess could cost up to $75,000 to clean up.

The story was a tale of caution to many who had considered renting out their primary or vacation home through a website. Recently, peer-to-peer rental websites have exploded in popularity, and travelers looking for something other than a hotel room now have millions of homes, apartments, and spare bedrooms to choose from. Homeowner's policies doesn't extend to business

But as the Calgary story showed, it’s not all easy money. Before you list your home (or living-room futon) online, know that opening your home to short-term renters comes with risks - beyond messy guests or awkward conversations. In most cases, traditional homeowner’s insurance will not cover damage or injury resulting from rental activity. That means you could be on the hook for any property damage caused by a careless guest and all liability claims resulting from a short-term stay.

Here are five tips to help you find the right insurance coverage for your short-term rental:

  1. Understand the limits of your homeowner's insurance Understand the limits of your homeowner’s insurance. Most homeowner’s and renter’s policies do not provide coverage for business activities conducted in the home. Renting all or a portion of your home to a paying guest is a business activity, and so short-term rentals likely are not covered by your homeowner’s insurance.

    However, according to the Insurance Information Institute (III), some homeowner policies do cover short-term rentals if the rental activity is occasional and only for short periods of time. Some insurers also may be willing to sell you an endorsement, extending a traditional policy to cover short-term rentals.

  2. Consider business insurance. If you plan to make renting your home a regular thing, HUB advises purchasing a business policy. A hotel or bed-and-breakfast policy may be more expensive, but will provide the most complete coverage.

    If you want to rent your home for a longer period of time, consider landlord insurance. This insurance provides specific coverage for long-term rentals, but won’t cover business activity on the property, including short-term rentals. (Confused yet?)

  3. Don’t forget about liability coverage. While most homeowner’s policies offer personal liability coverage, it doesn’t usually extend to business activities. That means if a renter trips on a rug or falls down your steps, you could be liable for medical expenses and related legal fees. And that’s why you may want to consider a separate liability policy. Business liability insurance can be purchased separately or as part of a bundled Business Owner’s Policy, which combines property and liability protection in one package.
  4. Learn what’s offered through the rental website. Several peer-to-peer rental websites offer some level of host coverage, but it may not provide the insurance protection you need. For example, one website offers up to $2 million in liability coverage to U.S. hosts – but doesn’t offer similar protections to Canadian hosts. And the U.S. coverage is designed to serve as backup liability protection, kicking in only after a host’s own insurance company denies a claim. If a host does not have other insurance, the protection can serve as primary insurance, but for “qualifying incidents” only.
  5. Know if coverage is required. Depending on where you live, short-term rental insurance might be more than peace of mind - it may be required by law. In Quebec, for example, anyone renting out accommodations for less than 31 days must obtain a permit, pay a host tax, and carry $2 million in liability insurance. Other provinces may be developing similar short-term rental requirements and restrictions, so be sure to check with your local government before listing your home.

Whether you’re looking to cover your bills or just like the idea of meeting new people, renting your home to travellers can be a fun and easy way to earn extra cash. But your dream listing can turn into a nightmare if you don’t have the right insurance protection. To learn more about the best short-term rental coverage for you, contact a HUB expert today.