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Home Replacement Cost vs. Market Value: What’s the Difference?
Whenever you purchase a new homeowner’s policy or want to evaluate coverage on your current policy, you’ll always want to know how to value your home to ensure you are covered properly. The problem faced by consumers is there are numerous ways to determine your home’s value. Depending on who you ask or where you look these numbers can be all over the place. That begs the question, “What’s the difference, and which one is right”.
Will My Home Insurance Cover Home-Sharing?
The introduction of home-sharing companies like Airbnb and VRBO has changed the norm of what it looks like to rent out a residential home.
In the past, renting out a home mostly occurred on a long-term basis where the renter occupied the home for at least 6 months at a time. This made the insurance process pretty streamlined since carriers usually knew what to expect. These home-sharing companies have provided options and flexibility that makes renting a much more customizable experience. That being said, some insurance companies steer clear of homes that are used for this purpose. Other companies have welcomed these new opportunities with open arms.
Do I Need Short-Term Rental Coverage?
Before we get into what type of policy you should be looking at for your Airbnb, we need to understand the difference between a short-term and long-term rental. Long-term rental is the more traditional way to rent out a property. Anyone who rents out a home for a standard 6-month or 12-month leasing period is participating in a long-term rental. Landlords who own properties participating in these types of leases will not need to worry about finding an insurance company that accepts short-term rentals. Anyone who owns a home that is leased for less than 60 days at a time, whether it be via Airbnb, VRBO, or another platform, should look to find an insurance company that will accept short-term rental homes. Neglecting to research whether or not your insurance company will accept the risk can result in policy cancellations or even denied insurance claims.
Host Protection
Both Airbnb, and VRBO have options that the host can purchase to protect themselves. These programs can cover the host for things such as personal property that was stolen by the tenant, home systems that were damaged, or liability claims that were caused by the tenant. These programs all have different levels of protection that come at varying costs to the host. It is a good idea to take a look at what is and is not covered in order to make a knowledgeable decision.
Different Types of Rental Homes
One big factor to consider when searching for property insurance for an Airbnb rental is the primary use of the home. Is this a home that you live in primarily and rent out a portion of? Is this a home that is solely used for Airbnb rentals? Is this a home that is typically rented out, but occupied by the owner on a seasonal or secondary basis? Each of these homes can potentially require different types of policies. Homes that are rented out full-time will typically require a Dwelling Policy just as a normal rental property would. Homes that are occupied by the owner who rents out a portion or a room need to be written on a Homeowners Policy. Homes that are occupied occasionally by the owner and occasionally by a tenant could potentially need either of these policy types. A knowledgeable insurance agent should be able to help determine which of these is best in any given scenario. No matter which policy form fits the bill, it is important to remember that all insurance companies are different and may not accept homes with short-term rental risk, so be sure to check that this is acceptable.
What to Expect
Renting out a home in any capacity comes with a new level of risk. Naturally, a homeowner who occupies their own home will typically take better care of the property than a tenant who is renting the property. With this in mind, insurance companies understand that tenants usually pose more risk than owners, and they calculate premiums accordingly. You can expect that an insurance policy for a home that is rented out is typically going to be more expensive than a policy for a home that is occupied by the owner. Even more so when looking at a home that is being rented out to multiple tenants on a short-term basis.
Home-sharing services have challenged insurance companies to innovate quickly. To avoid any unwelcome surprises, it's crucial for hosts to keep their insurer in the loop - that way you'll know precisely what your current homeowner policy covers and if additional coverage will be needed. Whether that means an Airbnb endorsement or something else entirely, having all of the facts can give you peace of mind when opening up your home as a short-term rental.
The contents of this article are meant as general information to help you understand personal lines insurance and not specific to a particular policy. Policies, coverages and discounts can vary by state and insurance carrier. To understand your coverage, you should speak directly with a licensed insurance agent or read your full policy contract. Call your agent or contact us at (833) 779-4090.
Home insurance premiums have been on the rise in recent years. If you’ve noticed your rates going up, you’re not alone. Many homeowners are seeing increases, even if they haven’t filed a claim. Rates can increase for several reasons. Some are personal, like expired discounts or prior claims.
