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Is Your Short-Term Rental Covered By Your Homeowners/Apartment Insurance?

Are you a District resident thinking of renting your home or apartment for a short period of time? Some residents rent their homes or apartments to vacationers and travelers for a short period of time to earn extra income. The District of Columbia typically sees an increase in demand for short-term rentals during big events such as Inauguration Day on Jan. 20, 2017.

Before you consider being a landlord, and agree to let a paying guest stay on your property, you want to make sure that you are protected. Consult your insurance agent and inform them of your plans. Your agent may require you add a rider or endorsement to your homeowner’s policy, which will ensure that you have adequate liability and property insurance coverage to cover certain injuries or occurrences which may occur in your home. As a general rule, your unendorsed homeowner’s or renter’s policy(s) is not designed to cover accidents or damage to property arising from rental arrangements, and your insurance company may deny coverage for any resulting claim.

To make sure you’re protected, read these tips:

Assess the Risk

As a temporary landlord, your homeowners or renter’s insurance policy is not designed to cover accidents or property damage arising from the rental of your property, and your insurance company may deny coverage for any resulting claims.  So what happens if your tenants gets injured on your property? Or if your tenant vandalizes or damages your property, the hallway of your home or even your neighbor’s property? Both you and your tenants could be responsible.

Because these new rental operations take place on an online platform, these types of rentals may fall outside of local housing and zoning laws and regulations, which could result in violating local law or code. Even if you have not violated any law, you might have to hire legal counsel to protect and defend yourself.

Protect Yourself as a Landlord

Even if you take precautionary steps, accidents can happen anywhere and anytime.  Someone could fall down your steps, trip over a rug or injure themselves on your property.

Most homeowners’ policies provide coverage if a visitor to your home falls and is injured. However, that is probably not the case if a paying guest falls in your home, because your coverage is not intended for commercial use. And without liability insurance protection from an endorsement/rider or from the company facilitating the host agreement, your homeowner’s or renter’s insurance policy might leave you without any coverage.

Once you begin earning income from renting out your home or a room to different people at different times during the year, you probably will be considered to be running a home-based business. An insurer may claim you have established a bed and breakfast and deny coverage.  If you wish to conduct an operation of this nature you probably will need to purchase “hotel” or “bed and breakfast” insurance coverage

Homeowners’ policies vary, but usually exclude or provide very limited coverage for homeowners who are running a business in their home. However, if you seldom rent out your home, your insurer might provide coverage. Either way, it’s always best to contact your insurance company and find out what is covered under your policy and what isn’t. A renter’s insurance policy is often subject to the same limitations as a homeowners’ insurance policy.

If you only occasionally rent a room or your house, your current homeowner insurer might be willing to provide an endorsement to protect you. However, if you plan to rent your house for a long term or if you plan to frequently rent out a room or the whole house, then purchasing a landlord policy (also known as landlord property insurance or rental coverage for landlords) might be your best option. A landlord insurance policy will cover your home, structures on the property, property contents that you own (such as appliances and furniture), lost rental income due to building damage, legal fees and liability protection.

To make sure you are protected, talk to your insurance agent about your situation and participation in this activity. Some experts recommend only renting to guests who have homeowners, renter’s or personal liability insurance and are able to show proof they are insured. Then if your property is damaged, you could file a claim under your tenant’s policy.

Protect Yourself as a Tenant

Your own homeowners, renter’s or personal liability insurance policy will generally protect you even as a guest if you happen to cause damage to a host’s property.

Short-term rentals are a way to make extra money, but you need to be prepared before you enter into an agreement. Be sure to do your research and take steps to protect yourself against the unexpected.

The District of Columbia’s Department of Insurance, Securities and Banking regulates the city’s financial-services businesses. It has two missions: to effectively and fairly regulate financial services to protect the people of the District; and to attract and retain financial-services businesses. For more information, visit disb.dc.gov. This information is courtesy of the National Association of Insurance Commissioners (NAIC).

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