Millions of homeowners today are renting rooms to travelers and short-term tenants using VRBO and Airbnb. The income is good for the homeowners, and it can make expensive areas more affordable. However, the problem is that many of these homeowners have no idea about the financial and legal implications of acting amateur hotelier and the risk onto their users. The following are some of the insurance issues that you should consider before engaging in short-term rentals.
The insurance policy you have for your home is not designed to protect you against the liability associated with paid guests. In many of these cases, the insurance companies consider the commercial activity or short-term rentals you have engaged in as explicitly exclude from the home policy. If the insurance company is not informed or not aware of any commercial activity being carried out in your home, you may not be compensated for a claim.
In response to the high-profile incidents, Airbnb announced $1 million insurance cash as guarantee available to every Airbnb host. However, the guarantee is not an insurance policy and may leave you in problems in case there is a problem. It is because the guarantee is second to insurance and requires the homeowner to explore all the avenues to recover the damage before he/she is eligible for the claim with Airbnb. It also excludes certain kinds of losses, and most online platforms have publicly distanced themselves from taking any responsibility for protecting hosts or guests from trouble.
To protect your assets from these kinds of issues, it is critical that you seek the right policy such as the business liability policy, upgrade the existing policy, or add a rider covering the short-term rentals. Another important way is to require the quests to show the certificate of insurance to prove that they are covered under the rental or homeowner policy. The best way to handle the matter is to consult a qualified insurance professional who has the right knowledge and experience. One of the professionals you should consider is Richard Dwayne Blair.
Richard Dwayne Blair is the financial advisor and the sole owner of the Wealth Solutions Inc. that is based in Bee Cave, Texas. He has over 24 years of experience and passed seven exams. Mr. Blair is a registered professional with SEC as an investment advisor mainly about securities, managing investment portfolios, and other financial planning services. As a Certified Financial Planner (CFP), he has taken exams in insurance, taxes, estate planning, financial planning, and retirement.