Several factors may motivate you to rent out your home, condo or cottage for short periods using an online platform such as Chalets au Québec, the PACs, Kijiji, Homeaway or, of course, the well-known Airbnb*. Whether a short-term property rental is something you decide to do for financial reasons or because of an extended absence, it will have an impact on your home insurance. This article by Assurances Multi-Risques explains what constitutes a short-term rental according to insurers and how to adequately insure your property during your absence.
*Airbnb will not be covered in this article, as we previously published an article dealing with this subject. In fact, we invite you to have a look at it.
For a home insurer, what constitutes a short-term rental?
Every insurer has their own definition of a short-term rental. Its duration may vary from one insurer to the next, but, in general, to be considered “short-term”, the rental period has to last from one day to less than a year.
However, regardless of the rental period you have in mind, the most important thing you need to do is to inform your home insurer! Because if you neglect to report this activity, your insurer could refuse to indemnify you in the event of a claim. In fact, renting out one’s property is considered a commercial activity because it generates income, and commercial activities are excluded from most home insurance policies!
Insuring your property during short-term rentals
As previously mentioned, the first thing to do to adequately insure your property when it’s being rented out for short periods is to contact your insurance company. Don’t be surprised if your insurer refuses to continue to cover you. In such cases, we strongly suggest that you contact an insurance broker with experience in the sharing economy and short-term rentals. They will take care of shopping for home insurance on your behalf and will find coverage that’s right for your situation and at the best price without your having to make a lot of phone calls.
Also, some insurers may agree to continue covering you, adding an endorsement entitled “Short-term rental of your property” to your specific conditions. If this is the case, we strongly recommend that you also add loss of rental income coverage. Thus, if your budget is calculated based on your property being rented X number of days per year and the property burns down, you could be compensated for the lack of rental income.
However, the most important aspect in insuring property adequately for short-term rentals is making sure that your insurer is aware of this activity and having proof in writing. Spoken words fly away, written words remain.
To conclude, renting out your home, cottage or condo may be a very attractive source of additional income and may allow you to spoil yourself, unless an incident occurs without you having informed your insurer of this activity! Because, in this case, they may refuse to indemnify you. So, before embarking on this adventure, remember to inform your insurance company. Also, take the time to assess how much more your home insurance will cost and contact an insurance broker to evaluate the cost efficiency of your project.