Short-Term Rental Situations and Condo Insurance

A new way of living is taking root in the housing market. Founded in 2008, Airbnb has ushered in a wave of people leasing and renting short-term lodging to vacationers, college students, etc. Not confined to owners of homes, condominium unit owners and long-term renters of condos are utilizing Airbnb to bank some extra cash, which creates increased liability for both the person who is supposed to be occupying the unit and the association.

The unregulated nature of Airbnb allows anyone to post a listing via their website or app and no fact checking is done in regards to insurance. While most by-laws prohibit short-term rentals, people go forward and do it anyways. How does this new age tech affect you?

The Implications to the Master Policy

By design, the association master policy and bylaws are written with the understanding that the people occupying the units either own the units or are a long-term renter. People who fall into either one of these categories are generally going to care more about the upkeep of the unit than a short-term renter who will be gone within a week.

A short-term renter is a high-risk tenant for both an association and an insurance company, which is why both entities have a tendency to not want to do business with them. If damage to the complex is found to be caused by a short-term renter as opposed to the individual who is supposed to be occupying the unit, the insurance company could deny the claim. Think about it this way, if a short-term renter triggers a water damage claim by overflowing the washer, why would an insurance carrier pay for the damages if the person is not supposed to be there in the first place?

What’s worse, if an insurance company finds out that multiple people are using their unit as a short-term rental pad, they may choose not to renew the policy the following year.

A Risky Money-Maker

Most homeowner’s policies are not designed to cover short-term rental situations. Hopefully, a claim never gets filed, but should the lawful occupying tenant file a claim it may get denied because they are not using their unit for its intended purpose. Claims can also get denied if it’s discovered you are using misleading or omitted information to extract money to repair damages.

Airbnb tries to mitigate risk by offering Host Protection Insurance which provides $1,000,000 in general liability insurance but that policy may not kick in until other policies pay out.

Are you dealing with an Airbnb type situation? Give Brian Kilcoyne at H&K Insurance a call at 617-612-6515 to discuss your options today!