Scottsdale is a popular vacation or winter destination, and the use of Airbnb, VRBO, and similar services on the rise. This is partially thanks to Arizona removing legal restrictions on homeowners using these services. But just because something is legal doesn’t mean you’re protected. Continue reading to learn more about the liability risks homeowners face when renting out their home and how you can reduce your risks with insurance.
What Are the Risks of Renting Your Home?
While renting out your home while you’re out of town may seem like an easy source of income, many potential risks could drain your bank accounts.
- Guests suffering an injury and filing a personal injury lawsuit.
- Property damage to your home or surrounding properties.
- Thefts committed by your guests.
- Loss of use of your home during potential repairs.
Remember, even if you could potentially sue your guests, a recovery is not guaranteed, and you would still need to pay out of pocket initially.
Does Your Homeowner’s Insurance Apply to Rentals?
It would be a mistake just to assume that your homeowner’s insurance would cover you. Homeowner’s policies are intended for residential uses, and renting out your home is a business.
Here are a few potential situations.
- Your homeowner’s policy excludes any rental activities — even one night.
- Your policy allows only a certain number of rental nights per year.
- Your policy does not cover short-term rentals but would cover a long-term lease.
- You must buy a separate add-on for rental coverage.
- You’re covered if you rent a room while you’re staying home but not if you rent your entire house.
Which situation you fall under depends entirely on your insurance contract. Your first step should be to carefully read your policy documents and ask your insurance agent if you have any questions.
What about the Insurance Offered by Airbnb or Other Platforms?
Airbnb offers insurance as one of the selling points for using their platforms. These included policies will likely go farther than your homeowner’s policy but may still have gaps.
Typically, rental platform policies are designed to protect against lawsuits. The promised million dollar limit (or whatever they offer) applies if a guest is injured and wants to sue you. However, you may find that the policy has much lower limits when it comes to property damage or theft. If you have a high net worth, you may also wish to carry a larger amount of liability protection.
Further, you may find yourself in a situation where the platform alleges you acted outside of its terms of service or that the incident didn’t happen while its insurance applied. While you could contest this in court, you may feel more secure having blanket coverage that you know applies 24/7/365.
What about Legal Costs?
One additional area you may want to look into is coverage for potential legal costs. Shortly after Scottsdale and surrounding communities tried to ban Airbnb when the Super Bowl was played here, the state passed legislation saying that local governments couldn’t ban these types of rentals. However, this doesn’t mean that they won’t try to take other enforcement action or that your condo association won’t have a problem with you renting your unit.
Just as you would with other business activities, you may be able to obtain coverage for your legal defense costs.
To learn more about whether you have the right coverage or to obtain coverage, contact All Arizona Insurance, Inc today.