By: CHRISTELLE FOURIE
The growing popularity of property rental platforms, such as Airbnb, is raising concerns over the insurance implications for renters. While it might sound like a great idea to rent out one’s home in order to make a little extra cash, many homeowners could find themselves out of pocket if they do not consider the insurance implications.
Besides the risk of financial loss faced by homeowners if property is damaged or stolen, there are significant liability issues which could bankrupt the homeowner should a guest be injured on the property and the owner is proven to be at fault for failing to effectively secure the property.
While the Airbnb platform does offer its host a ‘Host Guarantee’ of $1,000,000 to pay for damages (excluding cash and securities, pets, personal liability and shared or common areas), this option is not yet available to South African homeowners. However, even if it were available, the Airbnb website clearly states that “The Host Guarantee is not insurance and should not be considered as a replacement or stand-in for homeowners or renters insurance”.
Before homeowners consider renting out their home to holiday makers, it is imperative that they make contact with their insurance provider to inform them of the arrangement to ensure adequate cover is in place. Not all insurance policies are created equal and many exclusions may apply when renting out a property.
The onus is on the property owner from a liability point of view to ensure that the property is maintained in a good condition, free of any hazards, which could cause injury or harm to a lessee. Any visible “defects” in the property must be drawn to the attention of a lessee. If, however, the lease agreement does not place the onus on the lessee to maintain the property, the insured will be held liable if a lessee is injured on the property (like falls on a loose step).
In most cases, as long as the homeowner is still the main occupant of the home, and only rents the property out on an ad hoc basis, the liability cover in the homeowner’s policy should pay out in the event of a claim. However, if the home is mainly being rented out to guests, the insurance provider will perceive this as a commercial risk and require a commercial property insurance policy to be taken out. When it comes time to claim, this could be a huge problem for the homeowner as the insurance policy is unlikely to pay out of the appropriate cover was not taken out.
Another major problem for homeowners renting out their property is that most homeowner’s insurance policies will require visible and forcible entry in order to pay out for any theft while guests are renting the home. This is why it is a good idea to have a written and signed agreement with the lessee so that they are made aware that they will be held liable for any stolen or damaged items if there are no signs of forced entry.
Some policies offer cover for the personal belongings of guests, which is a good idea as the homeowner does not want to be held liable for stolen or damaged belongings in the event of a burglary or disaster, such as a fire.
Another important consideration for owners is looking at the alarm warranty of the insurance policy if foreign guests are renting the home. Often foreigners do not understand risks in South Africa and might not set the alarm, even when instructed to do so.
If there is a claim and it is discovered that the alarm was not set, the insurance policy won’t pay out unless there is a special arrangement with the insurance provider. One can easily contact their broker and specifically ask to the wave alarm warranty.
It is always a good idea for homeowners planning to rent out their property to prepare a detailed digital ‘welcome pack’ which is emailed to guests prior to arriving at the property. This pack can include information such as directions to the property, security tips, key emergency contacts, how the alarm works and the importance of setting the alarm. It is also a nice gesture to recommend some local attractions and restaurants.
All the above considerations also apply for those homeowners who rent out their property for a few days for a photo or movie shoot. When renting out one’s home for any reason, even through a service provider such as Airbnb, it is still the responsibility of the homeowner to ensure proper cover is in place.