Accommodation companies like AirBnB – as well as favourable exchange rates – have spurred more and more property owners to rent out their house or flat on a short-term basis to earn additional income. According to Attie Blaauw, head of personal lines underwriting at Santam, it is vital that individuals who decide to go this route go in with their eyes wide open. They should examine the risks associated with vacation letting – and put the appropriate insurance in place.
Earlier this year AirBnB released statistics showing more than 20 000 listings in South Africa alone. “The take up for this clever revenue stream has been astounding but it’s important to remember that renting out your personal home or cottage comes with its fair share of risks to the owner,” says Blaauw.
When you rent out your home, there are various types of incidents that could leave you liable. Santam paid out more than 500 liability claims for damage to residential properties in the past year. Examples of liability claims include:
- Damage to a residential property;
- A tenant being the victim of crime;
- A tenant getting hurt on your property (e.g. slippery surfaces on your premises); and
- Shoddy structures which lead to injury and/or damage to the tenant or their vehicle.
“Prospective holiday home owners are often unaware that such liabilities can translate to costly medical attendance or treatment for which they may be held responsible,” says Blaauw. When you decide to accept payment for accommodation in your residence (or on your property), there are a number of risks you need to take into account, he adds.
Damage or losses caused by a paying guest as a result of negligence (such as leaving the house unlocked when going out) could mean the difference between having your claims paid out or not. In the past, Santam has dealt with claims where letting agents (i.e. businesses that rent out your property on your behalf) did not do their due diligence properly and the tenants themselves were found to be guilty of causing damage to the property.
Although rental entities such as AirBnB do offer a ‘host guarantee’ or ‘host protection’ insurance, a careful review of the terms and conditions is advisable.
“Study your insurance policy very carefully to ensure you have proper liability cover in place and that there are no exclusions that could cost you down the line. Many insurers exclude malicious damage to property and theft if the residence is lent, let or sublet to a tenant. It is very important to check what you are covered for, before you decide to rent out your house,” Blaauw advises.
Mishaps can very easily turn a much anticipated holiday break into a bad experience for any traveller but could also turn into an expensive outlay for the property owner concerned.
“Ensuring that the right liability insurance cover is in place before letting out your residence provides both security and peace of mind for both the property owner and their prospective guests. Speak to your broker or contact your insurer to make sure you have the proper insurance cover in place for your home if you’re going to rent it out,” Blaauw says.