Important insurance considerations when letting out your property

With the rise of the ‘sharing economy’, many property owners are renting out their homes to locals and foreigners over the holiday season, with platforms such as Airbnb, Houseswop and local variants such as Wheretostay making it easy. 

Most property owners are however blissfully unaware that they could open themselves to significant liability and damage risks if their insurance covers are not correctly scoped.

“While the prospect of making some extra cash by letting out your property this holiday season is very appealing, it is advisable to do so from an informed perspective to prevent unexpected losses that could far exceed any profits made,” says Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa.

Aon points out a few aspects to consider:

• If there are no signs of forcible or violent entry, the loss of stolen or damaged goods is generally not covered.
• If you have a clause in your insurance policy that requires an alarm system to be activated, you could be at risk if your paying guests did not set the alarm before leaving the house.
• As soon as you bring paying guests into your home, you become liable for any personal injury-related claims e.g. slipping and falling around the pool.
• If there is an incident of a criminal nature, the personal belongings of your paying guests will not be covered.

“It is highly advisable to seek the advice of a professional insurance broker to protect against loss and liability when renting out,” says Mandy.  “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 to avoid an instance where a claim is repudiated on the grounds of non-disclosure,” she explains. 

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

• The number of rooms that are used for paying guests.
• Loss or damage of personal effects of paying guests.
• Trauma compensation for paying guests of the B&B.
• Loss or damage to external signs, blinds and canopies.
• Loss or damage due to cleaning and dry-cleaning of guests’ property.

“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 in a personal lines policy.   The last thing you want is the cost of letting out your holiday home outweighing 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.