Insurance tips for homeowners thinking about listing on Airbnb

Wednesday, 20 December 2017

New Zealand's Insurance and Financial Services Ombudsman is warning people should take care with their insurance cover if they let their homes via Airbnb this summer.

'While we haven't had any complaints as yet, Airbnb is one to watch,' Karen Stevens said. 'Many homeowners don't appear to be thinking about insurance before they list their homes, or baches, on Airbnb.'

While Airbnb offers a host guarantee to provide some protection for damage, Stevens said that might not be comprehensive and it did not replace insurance.

In one case dealt with by IAG, a house burnt down because Airbnb tenants were not familiar with how to deal with ashes from a fireplace.

'For insurers, the sharing economy changes the amount of risk that assets face and makes it harder to put things into traditional commercial and personal insurance buckets,' said Richard Godman, manager of technical underwriting, personal insurance at Vero.

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Thousands of New Zealand homeowners are using Airbnb to rent their houses.

'A basic house insurance policy covers owner-occupiers on the assumption that only close friends and family will be invited to their home. But listing a home on Airbnb opens the door to strangers staying in the family home, and the risks that come with not knowing who your guests are.'

Contact your insurer and check your policy

Tell your house and contents insurer about your plans. Usually, a standard house and contents policy will cover short-term, one-off Airbnb rentals, such as a three-week stint while you're away over summer. But if you're letting in a more serious way, you might be required to change from a residential to a landlord, or commercial, policy and EQC cover might no longer apply. If you're in a block of flats or an apartment, your body corporate arrangement might not allow you to rent out your home.

'Policyholders have a responsibility to tell their insurer about any change in circumstances that may increase the risk, including when the occupancy of the home changes. Insurers have the right to change the terms of their policy in response to any increased risk,' said Rebeka Tregonning, technical manager of personal segments at IAG.

'If people fail to notify their insurer that they're renting out their home, even temporarily, they might find themselves in breach of their policy which could result in them not being covered at all.'

She said she was not aware of any Airbnb claims that had been turned down – but Airbnb owners had claimed. In one case, a house was rented to foreign tourists who were not familiar with open fireplaces. They disposed of ashes incorrectly and the house burnt down.

If the property has previously been rented on a more permanent basis, and you're switching to an Airbnb style arrangement, that might mean an adjustment of cover, too.

'If you're letting out a home on Airbnb, it's important to remember that traditional insurance for rental homes may not cover you,' Godman said.

'That's because temporary rentals have more visitors, and fewer checks, compared to a normal tenancy agreement. For example, Vero's policy defines a 'tenant' as someone who holds a tenancy agreement with you that's not less than 90 days.

'Landlord cover often contains conditions around how you select and inspect your tenants that you're unlikely to be able to meet through platforms like Airbnb, so don't assume that traditional landlord insurance will cover you.'

Ask about accidental damage cover

Most house insurance policies will provide cover for accidental damage caused by anyone who has been invited into the home, including Airbnb guests. Damage caused by paying guests is often also subject to an extra excess.

Deliberate damage is unlikely to be covered at all – Stevens said people ask their insurers to clarify what damage by a paying guest would and wouldn't be covered.

You may also find you are not covered for any methamphetamine contamination if it occurs. Tregonning said some insurers now explicitly exclude the cost of cleaning up methamphetamine contamination in short-term rental situations.

Keep your home secure

To maintain your cover you must exercise 'reasonable care', Stevens said. Lock doors and windows, install smoke alarms and check they are working, check wiring, appliances and heaters, and inspect the house regularly. Also keep the house and gardens neat and tidy, and empty the letterbox.

Take care with your belongings

If there is a theft by someone lawfully on your property, you won't be covered. Lock your jewellery and valuables in a safe, or a secure location.

Protect yourself

The Airbnb site has features, including guest profiles and reviews. Steven suggested property owners choose to take a security deposit from guests before they stayed, to cover minor damage.

And your guests

Check your liability for the people renting your home. Adam Heath, executive general manager of portfolio and product at Vero, said in some circumstances, if a guest was injured in a property, the owner could be required to cover some of the costs of their medical care or loss of income.

Claiming

Heath said, when damaged occurred, the first thing was to check whether it was covered under Airbnb's host guarantees, which covers up to $1.3 million. If it applies, you might not need to claim on insurance at all.

He said it was not worth trying to hide from the fact that a property was let at the time of the loss.

'If you do claim on your insurance policy, make sure you're honest at claims time about the circumstances of the claim. If you've been hosting, the excess on your claim may be a little more, but the cost of having your claim declined could be far higher.'