Having a comprehensive insurance policy on your holiday home is a no brainer – but have you checked with your insurer about renting your property as a short term holiday rental?
Many property owners automatically assume that because they have insurance on their holiday house that they are covered by their insurer for holiday rentals. We urge all of our owners to check, and double check this with your insurers as every insurance company has different levels of cover and rules that could have a major effect on your ability to lodge a claim.
In 2012 Bookabach published an article (that is still on their site today) regarding the different attitudes of the insurers to holiday rentals. In that article they canvassed the three major house and contents insurers in New Zealand with a theoretical situation regarding a holiday house in Mt Maunganui. The findings highlighted just how different each insurer treats the concept of holiday rentals.
However, times have moved on from 2012, and due to the growth and popularity of holiday home rentals, each of the major insurers now provide cover – however, you MUST specify to them your intentions. Some insurers may even consider a short term rental as a business operation, while others might specify limitations to the amount of rental activity you can conduct. The excess charged will also be up for consideration depending on what is specified.
The key questions you need your insurance policy to cover are:
- Are you covered in the event of damage or theft caused by a tenant?
This is a critical question, and you must have an assurance from your insurer. There have been some reported incidents of “P” being cooked in rental properties and the damage bill from this can be very expensive. Another example involved an out of control party on the Coromandel that resulted in over $100k of damages. If you use a property manager, make sure that they are conducting face to face check ins and check outs, as well as screening all potential tenants prior to confirming bookings. We also recommend that you adopt a family preferred option for your house – It has certainly been our experience that these groups are far less likely to have parties, uninvited guests, or generally do anything that could be termed “damaging”.
- If a tenant has an accident at my house, am I covered?
Check the policy wording to make sure that there is adequate liability insurance. Accidents do happen – it could be something like slipping down stairs, or a kid running into a ranch slider door. Many traditional kiwi bach’s have DIY alterations or repairs, and as a guide, please make sure that things are safe for potential tenants. Check things like your locks – are they all working, and are things you do not want tenants to touch locked away. Also check things like the nails on your deck – are any exposed? Are your electrical plugs and sockets all compliant and are you cleaning the moss off your outdoor areas to reduce slipping risks. Regular property maintenance is essential. Again, talk this through with your insurer and make sure you are covered properly.
Things to watch:
In working with our own property owners we have come across some interesting variations in policy that are also worth noting. One insurer made a provision that a property was not to be rented out more than ten times in one month. Another insurer stated that a property could not be vacated for more than 60 days – this is an interesting clause and worth having a think about – there was an incident in Omaha last year where a property owner had not visited their house for over a year and on return found the house completely overridden with mice. The damage was extensive, and for that reason please either arrange from someone to keep an eye on your house, or have your property manager arrange maintenance for you.
So in summary, here is our check list for you to run through with your insurer:
- They confirm in writing that your policy covers short term holiday letting.
- They confirm in writing coverage for theft and damage
- Ensure that furnishings and chattels are covered under your contents insurance – also check that appliances are also covered.
- Check your policy covers periods on vacancy – as mentioned before, if you have a 60 day lapse and damage occurs on the 61st day, you may struggle to get a claim paid.
- Make sure there is coverage for liability. The law states that you have a duty of care to your tenants and guests, and in the event of an accident make sure that personal injury or damage to a tenants property eg a car in a garage is covered.
Finally, absolutely make sure that regular cleaning and maintenance is being carried out on your house. If you can’t do it yourself, have your local manager supervise the work for you.