Airbnb host? Your current insurance is probably non-compliant
Despite its phenomenal success in South Africa, Airbnb hosts could be inadvertently falling foul of their insurance policies.
This is according to Louis Hay, head of Short-Term Insurance Propositions at Standard Bank Insurance Limited, who says many people don’t realise their standard residential, or ‘Personal Lines’, insurance policies typically only cover the property if it is being used for private residential purposes.
“It is important to note that while Airbnb does offer hosts host guarantee, which protects hosts against damage to personal possessions, the unit or home by guests, the guarantee is not insurance and doesn’t replace your homeowner’s contents insurance,” he says, noting that Airbnb’s host protection insurance is designed to cover hosts in the event of third-party claims of bodily injury or property damage, but will only act as primary insurance coverage for incidents related to an Airbnb stay. “Regardless of these offerings, renting out your property for short-term holiday rentals, whether through Airbnb or an alternative service, will in all likelihood require a ‘Commercial Lines’ insurance policy, with cover that adequately reflects the different risk profile of such rental arrangements.
“Policyholders who rent out rooms in their properties need to be aware of their obligations under their insurance policies. It is the duty of the policyholder to disclose to their insurer that they are renting out their rooms or properties to holidaymakers or tourists. Failure to make such disclosures may prejudice the policyholder in the event of a claim.”
What you need to consider with Commercial Lines insurance
In addition to the usual cover for Fire and Special Perils (water, storm, hail damage etc.) a policyholder needs to ensure that the cover provided is extended to include Malicious Damage and Accidental Damage.
“It is important that the policyholder ensure that they comply with any specific warranties, conditions or exclusions that the insurer may have in respect of the rental property,” says Hay, noting that an example of an exclusion would be that Theft of Contents cover would only apply in the event that there are signs of forcible and violent entry into the buildings (i.e. disappearance of items would not be covered). “Most policies would exclude, or at least limit, cover for loss or damage to guests’ or tenants’ property. It is therefore recommended that the rental agreement specifically exclude liability for any loss of or damage to the tenant’s property.”
In the event that the property is damaged and therefore cannot be rented out, the policyholder would incur a loss of income (business interruption) for the duration of the repairs.
“Some policies provide loss of income until the property is repaired to a tenantable condition and other policies may extend the benefit to the point of the property being tenanted,” says Hay
Property owners are required to keep their premises free of defects and should such a defect lead to a third party, such as a tenant, being injured or their property is damaged, the property owner may be faced with a legal liability to provide compensation to the third party.
“Some premises are rented out with meals included (e.g. dinner, bed, and breakfast) and therefore, the Public Liability policy should be extended to include the Products Liability extension to cover exposures relating to, for example, food poisoning,” says Hay.