With the weather warming up across the country, many Canadians have already started to book their cottage getaways for the summer. According to VRBO, the demand for rentals on the platform this summer has already outpaced the previous summer’s demand by almost 15%.
Are you a seasonal property owner looking to make an additional stream of income? Before listing your vacation home on the rental market, here’s what you need to know about your cottage rental insurance.
The importance of rental property insurance for your cottage
Before renting out your vacation home, you’ll need to let your insurance provider know. Your cottage insurance may not be enough – in fact, renting out your property without informing your insurer ahead of time can void the existing coverage.
In some cases, your insurer will recommend purchasing rental property insurance, a specialized coverage that protects you against the unique risks of using your home for commercial purposes. It’s important to select the right policy ahead of time as you wouldn’t want to pay for damages out-of-pocket due to what should’ve been an additional stream of income. So let’s take a look at your options as a landlord for this summer season.
Landlord insurance for long-term rentals
Most landlord insurance policies are designed for long-term rentals – think a condo owner renting out their unit for the entire year. If you’re planning on using your vacation home for long-term rental, however, this may be just the coverage you need to protect yourself financially.
Types of landlord insurance coverage
Different providers may offer different types of landlord insurance, but you can ask your insurance company about the following common coverages:
- Property damage – Landlord insurance can help pay for repairs and replacements on your rental home, provided you’re insured against the specific risk. So if your tenant starts a fire that damages your entire kitchen, you won’t be paying for a new remodel entirely out-of-pocket.
- Liability – Rental property insurance also covers you against liability claims. Let’s say your tenant slips and injures themselves on the stairs of your home – in this case, you’ll be insured for the cost of any medical bills, legal expenses, and awarded damages.
- Contents – Contents insurance on a rental home policy is typically only limited to the landlord's personal belongings and not the tenant’s items. Keep in mind, also, that many landlord policies don’t cover belongings for theft and vandalism unless you specify these risks.
- Loss of rental income – If your rental property can’t be used, due to an insured risk, your insurance may reimburse you for the loss in rent during this time. So while you’re repairing your cottage’s broken windows after a windstorm, you won’t need to worry about losing out on your monthly income.
What doesn’t landlord insurance cover?
Like a conventional homeowner’s insurance policy, landlord insurance also has its own exclusions. Therefore, it’s important to ask your insurance broker about the coverages on your specific policy as each provider is different. Generally speaking, landlord insurance won’t include protections for your tenant’s items – so while your television will be protected, your renter will need tenant insurance to protect their own laptop.
You typically also won’t be able to make claims for general home maintenance issues. As for risks such as flooding, earthquake, theft, and vandalism, you may need to purchase additional coverage for an added cost. And if your tenant fails to pay rent for the month? You won’t be reimbursed unless your insurer offers this specialized coverage, or you’ve purchased it from a third party.
Short-term rental insurance for Airbnb and VRBO
If you’re listing your seasonal home for short-term rental, again, be sure to notify your home insurance provider ahead of time – not all companies insure properties listed on Airbnb, VRBO, and other property management platforms. Instead, you may need to purchase short-term rental insurance, a specialized policy that protects you against the increased risks of using your home for business.
Types of short-term rental insurance coverage
While Airbnb and VRBO provide some form of protection for hosts, home insurance for short-term rental properties can fill in the gaps to ensure you’re adequately protected. Again, coverages may differ depending on the provider, but common types of protection include:
- Property damage – Short-term renting comes with high risks of property damage. So be sure to double-check your policy to make sure you’re adequately protected in the event your tenant damages your building and the contents within it.
- Liability – If your short-term guest gets injured on your property and decides to sue, liability protection can cover the medical fees, legal expenses, and awarded damages you’re responsible for.
- Theft – While most home insurance policies won’t cover your contents if they’re stolen by a tenant, short-term rental insurance can protect you financially from theft (and attempted theft) by a guest.
- Loss of income – Like conventional landlord insurance, short-term rental coverage can also reimburse you for the fair rental value while you’re unable to list your place on Airbnb due to an insured risk.
- Guest property – Aside from protecting your own contents, some insurance companies, including Aviva and Wawanesa, offer coverage on the visitor’s belongings too.
Because short-term rental insurers are aware of the unique risks you face, you may be able to receive additional protections that wouldn’t otherwise be available on a long-term landlord policy. For example, Duuo offers the ability to claim up to $1,000 if your guest uses the internet excessively under their Airbnb property coverage.
Looking for Airbnb & VRBO insurance?
Should you require short-term renters to purchase tenant insurance?
Generally speaking, your guests won’t need to purchase tenant insurance when staying at your property for a short vacation. Although renters insurance and landlord insurance aren’t substitutes for one another, short-term rental insurance is designed for the unique situation of hosting through Airbnb or VRBO, and it’s also a second layer of coverage on top of what the property management company already offers. Just be sure to double-check your policy to ensure you’re covered comprehensively for the increased risks you face – and if not, find an insurer that can provide the proper protection.
Besides that, most tenant insurance policies are designed for either a monthly payment basis or an annual payment basis, so it may be difficult for short-term renters to find an insurer that can cover them for a one-week vacation (without having to cancel mid-policy). If you’re still worried about the risks of putting your home on the short-term rental market, you can speak to your insurance broker to seek out more coverage options.
On the other hand, if you’re renting out your property for the long term, you should consider asking your tenant to purchase their own coverage.
The bottom line
Putting your vacation home on the rental market comes with a whole new set of risks, so you’ll need to notify your home insurance company ahead of time. Whether you need a landlord insurance policy or a short-term rental insurance policy, be sure to speak to a licensed insurance broker for more insight on purchasing the right coverage for your needs.