When the PGA Tour’s first major, the Masters Tournament, is held this week at Augusta National in Georgia, thousands of fans from around the world will converge on the small town of Augusta. It is estimated that 150,000-190,000 patrons attend the Masters each year. And they will all need a place to stay.
With hotels and online rentals being booked nearly two years in advance, the “shared economy” has provided an opportunity for these consumers to find lodging in a home-like setting through websites such as Airbnb, HomeAway and VRBO. Whether for specific events, such as the Masters or the Kentucky Derby in May, in Louisville, or vacations in general, more homeowners are finding income opportunities in renting their homes online. But renting out your home does come with unfamiliar risks.
What homeowners might not know is that their Homeowners policy is unlikely to protect against losses involving renters and boarders. “Meeting with an insurance broker or agent to review options is critical to ensure that the policy will cover any damages renters may inflict on the property, any damage renters cause to neighboring properties and any injuries renters may suffer while staying at the property,” said Bill Gatewood, Corporate Vice President, Director, Personal Insurance, Burns & Wilcox.
It is a very litigious world. You don’t want to go into this thinking you will make money and then get in a situation where you owe a million or more dollars after being found negligent and uninsured.
“A standard Homeowners policy does not take into account the fact that a house may be rented,” Gatewood said. “That can significantly increase your exposure. When you are renting your property out for a period of time, it is just like opening a small business—it is a great way to supplement your income, but you need to be smart about it.” This makes having coverage for short-term or long-term rental exposure a must.
Numerous insurance options are available
Make sure your insurance company knows that one or more of your properties are being rented. A wide range of potential products can help limit exposure and provide the coverage needed.
- Homeowners and Dwelling policy: With risks ranging from fire, water damage and liability losses, it is important to be covered for exposures that are more likely to occur when a property is rented out. Cottages and vacation homes can be particularly at risk. Homeowners should ensure their Homeowners and Dwelling policy includes Short-term or Long-term renters coverage for as long as they rent out their home.
- Umbrella policy: This policy is designed to insure for an additional layer of liability protection, and supplements current policies to limit exposure to crippling financial losses. For example, Gatewood said that a deck collapse or a tree branch falling that caused a personal injury could leave the homeowner liable for millions of dollars.
Prices will depend on the size of the property and how often it will be rented.
However, on average, the amount of additional policy costs above a standard Homeowners Insurance policy is often only a few hundred dollars a year, according to Gatewood.
The policy needs can be further expanded if the homeowner allows renters to use items such as bicycles, four-wheelers and boats. Gatewood said it is becoming more common for clients to let renters use a boat as part of a lake-front house or condo rental agreement. In that case, risk exponentially increases.
Let an insurance specialist provide help
Online insurance options often fail to provide the range of policies needed for an individual situation. An insurance specialist can provide recommendations to clients based on their specific needs.
“It is a very litigious world. You don’t want to go into this thinking you will make money and then get in a situation where you owe a million or more dollars after being found negligent and uninsured.”
As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs.
