Many homeowners are renting rooms, houses or apartments to short term tenants and travelers using Airbnb and VRBO among other platforms. The income can bring in extra cash and make real estate affordable even in expensive areas. However, most of the hosts have not taken into consideration the entire legal and financial implications of serving as a part-time hotelier. This is because most of the rental platforms pass on all the risks to the users. Herein are a number of insurance issues to be considered prior to joining the short- term rental venture.
Short-term rentals are not covered by homeowner’s policy
A large number of homeowner’s insurance policies are not developed to offer protection against the liability arising from paid guests. Often, insurance firms regard short-term rentals as a commercial activity that is excluded in a home policy. Failure to inform an insurance firm of an Airbnb venture could result in the cancellation of a policy, especially when making a claim. In order to protect assets, an existing policy has to be upgraded by adding a rider that covers short-term rentals. Alternatively, guests can be required to show a certificate of insurance to verify that they are covered under a homeowner or rental policy. Consulting a qualified insurance expert is highly recommended as he or she will review any specific situation and provide a personalized advice.
Risks Associated with tenants
Sharing a home with someone comes with high levels of potential liability. These risks include injuries to the guest or family, damage to the house or a neighbor’s property and theft. In addition, it can lead to lawsuits, illegal activities, legal risks and loss of income in case the tenants decline to pay. In most instances, municipalities require operators in the bed and breakfast sector to hold commercial licenses, have inspections done on their premises and pay special taxes.
For an individual that runs a short-term rental enterprise, he/she may fall under a regulated category. By enlisting the services of a qualified attorney, an individual can be furnished with the specific requirements of a particular area. This is because the protection offered by Airbnb is not sufficient. Considering all the risks associated with running a short-term rental venture is of great value, and so is seeking advice from the legal and insurance experts.
About Richard Blair
Richard Blair is a sole owner and executive of Wealth Solutions, a RIA based in Austin, Texas. He is subject to SEC oversight and has held the industry securities registration for over 22 years. Richard created Wealth Solutions with the aim of offering objective advice and personalized investment, retirement as well as wealth preservation strategies to the clients. He is a Registered Investment Advisor, Certified Estate and Trust Specialist, Certified Annuity Specialist, Certified Fund Specialist, and Retirement Income Certified Professional.
Learn more about Richard Blair: https://www.brightscope.com/financial-planning/advisor/218993/Richard-Dwayne-Blair/
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