Inside This Article:
- Kansas City is considering an ordinance that would allow residents to register their homes as short-term rentals during major events such as the World Cup.
- The proposal aims to expand lodging options to accommodate the expected influx of fans while giving homeowners a chance to benefit economically.
- Short-term rentals may not be covered by standard Homeowners Insurance policies, potentially leading to coverage gaps and the need for Short-Term Rental policy endorsements.
- Property owners may face a heightened risk of claim denials and costly losses if property damage or injury-related lawsuits occur during short-term rental use.
A proposal moving through Kansas City’s neighborhoods committee would allow homeowners to temporarily convert their properties into short-term rentals for “major events” such as the upcoming World Cup. The ordinance would let residents register their homes with the city for a $50 fee and list them on platforms such as Airbnb or VRBO for a limited period of time, the Kansas City Star reported on Nov. 13.
The proposed new ordinance follows growing interest from homeowners hoping to capitalize on the surge of visitors expected during large events. Similar patterns have been seen in other cities, where demand for short-term housing spikes sharply during festivals, sporting events, and other major gatherings.
“We have one of the largest air shows in Oshkosh, Wisconsin, so a lot of homeowners in the area do the same thing,” said Jenna Zalud, Associate Managing Director, Burns & Wilcox, Milwaukee, Wisconsin.
Short-term rentals bring added Homeowners Insurance complexities, however, especially when homeowners assume their existing policy will apply without changes. “If you are thinking about renting your house out on a short-term basis, you definitely need to double-check with your insurance agent and the carrier that you are with to make sure that they are OK with that and that you have the proper coverage,” Zalud said.
If a homeowner temporarily rents out their home without confirming coverage first, their policy may not respond to damage, theft, or liability incidents involving guests.
“Homeowners are essentially making available what is usually the largest single asset that they have — their home,” said Ryan Connolly, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Nashville, Tennessee. “You want to make sure you are protecting yourself and your property.”
Homeowners are essentially making available what is usually the largest single asset that they have — their home. You want to make sure you are protecting yourself and your property.
Risks of short-term home rentals
As part of Kansas City’s proposed ordinance, homeowners could designate their property as a short-term rental for up to 90 days, with all rules and regulations for standard short-term rentals still in force except for the reduced annual fee of $50 instead of $200, the Kansas City Star reported. According to the publication, the World Cup next summer could bring 650,000 visitors to the city. Property owners in other World Cup host cities, including Miami and Vancouver, are also anticipating the surge of interest.
“With an event the size of the World Cup, there is going to be a lot of international interest that will bring visitors into these areas,” Connolly said.
Short-term rentals come with risks that should not be overlooked. “The main risks are the increased liability exposure — if somebody slips and falls, for example — and the property damage associated with a guest hosting an unanticipated party at your house while renting it out,” he explained.
An Airbnb owner in New York filed a lawsuit last November seeking $540,000 for unusual damages done to her property during an eight-day stay, while an Airbnb owner in North Carolina and the hosting platform itself were recently sued by a guest who was “catastrophically injured” during a party at the rental, Newsweek reported.
“Short-term rental incidents can get pretty serious,” Zalud said. “Depending on the features of your home, such as whether you have an unfenced pool, there could be a greater chance of an accident occurring.”
Depending on the features of your home, such as whether you have an unfenced pool, there could be a greater chance of an accident occurring.
Short-term rental claims could be denied
Short-term rentals can expose homeowners to substantial financial losses if something goes wrong during a guest’s stay and is not covered by their existing Homeowners Insurance policy. Zalud noted that claims may be denied entirely when carriers have not authorized the rental use. “If your property was damaged or destroyed, you could have your claim denied because it was not allowed,” she said.
Liability coverage is especially crucial, as lawsuits over guest injuries could be extremely costly. “If somebody got hurt, you might not have coverage for that,” Zalud said.
Some insurance carriers may offer a separate policy for renting out a home, while others will offer a Short-Term Rental Endorsement on an existing Homeowners Insurance policy. An additional policy known as Personal Umbrella Insurance, which provides liability coverage beyond standard policy limits, is also recommended, she said. While many Homeowners Insurance policies limit liability coverage at $500,000, for example, Personal Umbrella policies can offer limits of up to $10 million.
“In the landscape we are in right now, claims are just paying out a lot higher,” Zalud said. “Having the extra liability coverage in case a horrible accident happens on your property is really important.”
In the landscape we are in right now, claims are just paying out a lot higher. Having the extra liability coverage in case a horrible accident happens on your property is really important.
High-value homes could face increased stakes, Connolly said, and these property owners should speak with an insurance broker specializing in High-Value Homeowners Insurance. “When you move into higher-value property, the costs associated with the finishings and the contents can go up, so the potential for loss, as a dollar amount, is more significant,” he said.
Preparing to rent with caution
Homeowners who regularly rent out their properties may also have insurance coverage for Loss of Business Income. “If the house is destroyed and you cannot rent it out again, you could be losing a lot of income,” Zalud said.
More insurance carriers now offer Short-Term Rental Endorsements or allow limited rental periods on standard policies. “Some put it into their policies that for a certain number of days, you are allowed to rent it out,” she said. “That can make it easier for homeowners to rent out their homes for a specific event but still keep their insurance.”
Basic precautions — such as screening renters, maintaining safe conditions, and using smart locks or monitoring tools — can help reduce risk. First-time hosts may face added challenges, Connolly pointed out. “There is the potential of increased risk when you are just starting the process because you may not necessarily know everything to look out for,” he said. “Taking the necessary steps to safeguard yourself and your property is just paramount.”
Using a well-known platform for short-term rentals, such as Airbnb or VRBO, can also provide a measure of protection. “You get the benefit of their vetting process to determine the potential occupants during these events,” Connolly said. “If you have a big event like the World Cup coming to your city and you want to take advantage of renting the space out, make sure you know that your insurance coverage will respond accordingly.”
If you have a big event like the World Cup coming to your city and you want to take advantage of renting the space out, make sure you know that your insurance coverage will respond accordingly.
