Property risks don’t go on vacation just because your clients do. Make sure they’re protected with the right coverage, whether they’re renting a home or renting out their own.
As the weather heats up and schools close for the summer, your clients are probably itching for their long-planned vacations — or looking forward to the cash flow from renting out their properties to others. With the rise of the sharing economy, people have more and more options when it comes to choosing how they vacation and how they make use of their home(s). Through AirBnB and other short-term rental sites, for example, vacationers can choose to stay in a spacious home or condo. Or, while they’re away, your clients may decide to rent out their primary or secondary residence for extra income.
In either scenario, insurance agents should make sure their clients have comprehensive insurance coverage if the unthinkable happens. Whether renters damage your clients’ property, your clients damage someone else’s, or their possessions are lost or stolen on a trip, there are policies to give them peace of mind.
Before your clients hit the road for their summer getaway or hand the keys of their home to vacationing guests, thoroughly review if their current policies protects them against any possible risks. Then, determine what you can do to eliminate glaring gaps in coverage.
If Your Clients Rent Out Their Property
If a client rents out their property for visiting guests, their homeowners insurance most likely remains in effect depending upon the policy. Some insurers ask that the homeowner notify the company when a guest is occupying the home, even if just for a short period. The homeowner can also add a rider to the policy to cover occasional short-term rentals.
However, if your client rents out a property frequently, insurers will reclassify that as an ongoing business. Therefore, they would exclude the property in a standard homeowners policy. Your client would have to purchase a business policy, similar to a bed and breakfast insurance contract.
Although your client may not consider their house a “business,” explain how business insurance can benefit them. This type of policy would reimburse them for any property damages that occur while the home is being rented, and provides liability coverage if a guest is harmed while staying at the home. Impress upon your clients that entering into a temporary lodging arrangement without business insurance puts them at greater risk of a financial hit if the property or its contents are damaged, or if a guest takes legal action against them.
If Your Clients Own a Second Home
Some of your clients may own a second home as an investment property that they rent out regularly to vacationers. They may even lease the property for six months or more, whether to long-term renters or family members. In this case, they’d need the added protection of a landlord’s or rental dwelling insurance policy.
Priced about 25% higher than standard homeowner coverage, a landlord’s policy covers any damage to the property due to a fire or natural hazards. If guests or tenants are injured on the property, a landlord’s policy pays for medical and legal expenses under its liability provision. Your clients can also recoup any lost income from the rental property while it’s being repaired as long as the cause of the damage is specified in the policy. Despite the additional cost, a landlord’s policy provides the full protection your client needs if they own a full-time vacation rental home or investment property.
If Your Clients Rent a Vacation Property
The good news for your clients is that a typical homeowners or renters policy covers any valuables like computers and clothing stolen or destroyed while on vacation. The only difference is that the policy may place a lower cash value on items lost or broken in another location. To ensure they get reimbursed for those pieces, recommend your clients make a list of what they’re taking with them so they can submit a claim to the insurer.
The liability coverage in your client’s homeowner’s insurance policy likely extends to a vacation property, too. So any accidental damage caused by your client at another property would be covered under his or her homeowners policy.
Your clients may not want to think about insurance as they pack for vacation or advertise their home as a short-term vacation rental. Nevertheless, it’s important they know they’re protected in the event that their valuables are lost or their property is damaged by guests. Encourage them to come in for a detailed review of their policies before the summer gets into full swing. That way, they can enjoy their downtime — or extra cash flow — with peace of mind.