Does Homeowner's Insurance Cover Short-Term Rentals?

If you need another source of income, renting out extra space in your home or finding tenants for a second house you own is a good way to earn some cash. In general, homeowner's insurance doesn't cover tenants who rent housing for long periods of time (e.g. 12 month lease), but what about short-term tenants who stay less than 30 days? It depends on the circumstances of the rental. Here's more information about this issue.

The Frequency of Rentals

How often you rent your home affects whether the tenant is covered by your policy. If you only let out the space once or twice a year, then the insurance company may cover damages and losses caused by or that happens to the tenants.

Oftentimes whether something is covered depends if you'll be living in the home as well. Homeowner's insurance policies are crafted with the assumption the owners will occupy the residence. If you're not living in the home with the tenant, then you may be required to add a rider to your policy to cover third-party occupiers for the time period the people are renting the space.

However, some policies will cover the tenant if you're renting your home out for special events. For example, the insurance company may provide coverage if you rent your home out during the Super Bowl or Olympics. Regardless of the reason, you're typically required to notify the provider beforehand about the rental; otherwise the company may deny your claim.

On the other hand, if you'll be renting your home or extra space on a fairly regular basis throughout the year, the insurance company may classify this as business activity. Most homeowner's policies don't provide coverage for businesses run out of the home, so you may be required to obtain landlord's insurance to cover tenants.

Options for Coverage

If your insurance company doesn't cover tenants in your home, there are a couple of ways you can protect yourself. Sometimes the hosting platform you use to rent your home will provide coverage. For instance, Airbnb provides liability coverage for property damage and bodily injury up to $1 million. It's a good idea to check your agreement with the hosting platform to determine if they offer a similar benefit.

If you're renting your property independent of any third-party system, then you'll likely need to purchase landlord insurance. This is a separate policy that covers damage to the home while the tenant is living there. There are several different kinds offering varying levels of coverage, and some will even replace any rental income you lose due to the tenant's actions.

It's best to discuss your insurance needs with an agency if you'll be offering short-term rentals in your home. For more information about this issue, contact an insurance brokerage like United Counties Insurance Group.