Short Stay - it doesn't have to be Risky Business
Updated: Sep 22, 2019
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 may not be 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 this emerging economy, 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 Public Liability 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.
The need for adequate Public Liability coverage cannot be over-stated – you should not take your first booking without it, and responsible property agents and managers may insist that you provide proof of appropriate cover. In Australia, Public Liability limits on landlord policies are typically $20 million, and many House & Contents policies now 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. Although Airbnb offers Host Protection Insurance, it is limited cover and may not be adequate in the event of a claim. If you are using a short stay property agent, they are likely to be listing your rental on a range of other platforms such as Stayz, Booking Dot Com and Expedia. If a claim arises from a booking through a platform other than Airbnb, you may not be covered. And what about the times when there are no guests in residence? The property needs to be covered 365 days per year, not just when you have a booking. What if a fire breaks out when the property is vacant? This is why you need private insurance.
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 MEANINGS
Most Product Disclosure Statements include a glossary of definitions for particular words. This is very important, so make sure you read it!
“Short Stay” is generally defined as stays of up to 3 months (will vary slightly depending on the insurer)
Situation means the address of the insured property
Does it specifically mention “short stay”? If not, chances are it won’t cover stays of less than 3 months
Does it specifically exclude short stay? (not suitable at all)
Does it say “Property owner”? (that will be a problem if you are renting & subletting)
Some policies will only cover you if you are at home 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 or insurer to ensure you are covered
You must have written landlord permission. If not, your insurance policy may not respond in the event of a claim
If you are breaking a law or by-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 described in the Product Disclosure Statement. For instance, many underwriters won’t provide cover to those who lease & sublet, although that may not be specifically mentioned in the Product Disclosure Statement. A broker will help you to find a product that is suitable to your circumstances.
Regardless of which kind of hosting you do, you need to find appropriate cover. This is not the time for DIY insurance: Most short stay insurance is not available online: many of these products are only available through brokers who can give you professional advice to ensure that the product you are buying is the correct one for your situation.
The information provided is general advice only and does not take account of your personal circumstances or needs. You should consider the PDS prior to making the decision to purchase this product. Please refer to our financial services guide which contains details of our services and how we are remunerated.
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