It seems like a no-brainer. You’re heading out on vacation for the week and your home, apartment, or condo will be vacant. If this was 15 years ago, your first priority would be making sure your neighbours keep their eyes on things while you’re away, and that your security system is functioning properly.
Well, not anymore.
In 2015, we’ve seen an explosion in online options to share our properties – notably the ability to rent it out on a short-term basis to make some extra money.
New services, such as Airbnb or HomeAway, connect prospective renters to owners virtually, allowing them to both list and complete the transaction online. But as we invite total strangers into our homes for a fee, we’re opening up our most personal space with little to no guarantee of its safety.
This is where we get concerned. At Allstate, our priorities are to our customers and to the safety and well-being of their families and properties. This is why we want to discuss important issues with you, like temporary or short-term rentals.
One in four Canadians who rented their home on a property sharing site didn’t think about insurance before listing their property.
Many people may think that personal liability coverage through their home or tenant’s insurance policy is sufficient to cover damage caused by a temporary renter. Others may rely on the terms and policies of the property sharing service they’re using and they don’t think twice about what could happen if their property were to be damaged by a temporary renter.
Consider the case of a Calgary couple, who, earlier this year, returned to find their home in shambles. Damage was estimated at up to $150,000 due to what the police described as a “drug-fueled party”. The couple needed to be relocated during renovation and many of their possessions were beyond repair.
In Los Angeles last year, a condo owner faced $10,000 in damage after a short-term renter flushed hygiene products down a toilet in the condo unit. Flood damage extended to neighbouring units. Not only was the short-term rental forbidden by the building’s condo board – which is quite common – but the rental sharing service only covered a $78 plumbing fee. This left the owner on the hook for most of the damage since commercial use wasn’t covered by her own home insurance policy.
In Palm Springs in 2014 a property owner found herself locked out of her rental unit for months. After renting to an individual for one month, the renter stopped paying and refused to leave. The length of his stay entitled him to certain rights in that jurisdiction and he could not be evicted without legal action – an expensive and lengthy process.
Finally in Toronto last month, a homeowner was robbed of an estimated $30,000 in family heirlooms by a renter after listing her property for the first time. She was not covered by the service under their policy.
Despite the countless short-term rental transactions that are facilitated by property-sharing websites, not everyone considers whether their existing insurance policy covers the rental arrangements they have entered into or are planning on entering into.
In fact, according to research conducted on behalf of Allstate Canada, one in four Canadians who rented their home on a property sharing site didn’t even think about their insurance before listing their property. Of the 75% who did think about it, 35% believed that they would be covered by their existing home insurance and 21% relied on the rental service’s policy. Depending on the circumstances of the damage to your property, neither may provide coverage to you.
The same survey conducted on Allstate’s behalf also showed that 50% of polled Canadians thought differently about temporarily renting out their home or property because of the recent incident in Calgary.
Instead of being ahead by a few extra dollars, you could end up forced out of your home and out thousands of dollars because of damage that is not covered. To assist you in considering the risk versus reward involved in renting out your property, Allstate Canada has put together a list of things to think about.
1) How are visitors screened?
Do you really know who might be renting your home? Whether a dwelling or a rental unit (filled with all your personal possessions), a home is a large investment—both emotionally and financially. Be sure you really understand what these sites are doing to help ensure your peace of mind. Does the service require guests to verify their identification? If so, what is the process for verification? Think carefully about what level of unknown you’re comfortable with.
2) Are you just renting out a room, or your entire home?
If you will be on-site throughout the rental duration, your level of risk will likely be lower and you may even be able to add an endorsement on to your existing policy. If you will not be at your property, you should find out if your current insurance policy offers any coverage in case something goes wrong.
3) Does the property sharing service provide any insurance coverage to your property?
Protection and insurance policies can vary quite widely between sites, so be sure you understand what’s included. Does the property-sharing service have a host guarantee or host protection insurance? Read all terms and policies carefully to make sure that you thoroughly understand what would and would not be covered by the property-sharing service.
4) Do you live in a condominium?
Check with your condo board to see if short-term rentals are allowed. Many condo boards do not permit leases shorter than six months or a year and have banned sublets altogether. Make sure that you thoroughly understand the by-laws and regulations that apply to your unit.
5) Do you know what your home policy covers?
Some of the recent extreme property damage stories seen on the news have resulted from home owners assuming that their insurance policy covered damage caused while short-term or temporary tenants were in their home. Though property owners may assume that their insurance covers short-term rental agreements, this is most likely not the case. An insurance expert, like an agent, can provide insight into what would-be renters are covered for and more importantly, what they aren’t. He or she can also explain what your current policy covers and what options for additional coverage may be available to you.
Ultimately, it’s up to you to choose whether or not you are comfortable with renting out your property considering the potential risks, and with the understanding that we may not be able to help you if you choose to proceed. Speaking with your insurance agent to see how you are presently covered, or what options are available to you, is the easiest way to proactively protect yourself and ensure that you are doing everything possible to safeguard your home.