Take heart of these important Insurance considerations to cover your risk

[Oct 2016]: With economic pressures mounting, many property owners are renting out their homes to locals and foreigners over the holiday season, with platforms such as Airbnb adding impetus to the trend. In doing so, owners could open themselves to significant liability and damage risks if their insurance covers are not correctly scoped.

Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa, advises property owners to seek the advice of a professional insurance broker to protect against loss and liability when renting out.  “Owners are naturally keen to generate extra cash from their holiday homes to offset their costs, but it is advisable to do so from an informed perspective to prevent unexpected losses that could far exceed any profits made.”  

“When renting out your private property for a fee, you fundamentally change the insured risk profile of the property and its contents,” explains Mandy.

“A standard home owner’s insurance policy will most likely exclude any liability arising out of the letting or hiring out of any immovable or movable property for a fee, reward or any other consideration.  As for contents, insurers will generally restrict theft cover to forcible and violent entry only, which translates into no theft cover in the event of contents disappearing while there are paying guests in the house,” she adds.

“While many letting platforms such as Airbnb offer limited insurance cover for its property owners, it’s highly advisable to declare the changed risk to your insurance broker.  It’s important to interrogate your risk of exposure and to avoid an instance where a claim is repudiated on the grounds of non-disclosure,” explains Mandy. 

Some insurance providers are also able to offer cover to bed and breakfasts (B&B) through a personal lines policy, under the following conditions:

• The owner must be residing on the property and no more than three rooms are used for paying guests.
• Loss or damage of personal effects of paying guests will be covered up to a limit of R10,000 per event.
• Paying guests of the B&B will be covered for trauma compensation up to a limit of R10,000 per event.
• Loss or damage to external signs, blinds and canopies will be covered up to a limit of R2,000.
• Loss or damage due to cleaning and dry-cleaning of guests’ property is covered up to a limit of R5,000 per event.

“I strongly advise clients to consider a commercial bed and breakfast policy which caters for the above, in addition to extra public liability and other essential insurance covers that are not included under a personal lines policy.   The last thing you want is the cost of letting out your holiday home outweigh the benefits of doing so.  Consult your broker to properly scope your rental home insurance covers and be informed of the possible risks that you may face and how to mitigate them,” concludes Mandy.