Holiday Homes; rented to short-term guests
Hosting short-term guests introduces unique risks. Most insurance companies are cautious about rented holiday homes so before letting out your home or listing your property on platforms like Airbnb or Bachcare, it’s important that you confirm your policy covers holiday bookings.
Effects on insurance costs
If you host paying guests, and you tell your insurer, they will likely adjust your coverage. Be sure to inform your insurer about your hosting activities and understand the implications for your policy. Many insurers, including Initio, may increase premiums or excesses due to the additional guest-related risk. Some insurers may exclude coverage for guests entirely, leaving you at risk of being uninsured. It’s best to review your policy or contact your insurer if you’re unsure. Make sure your insurer is aware that you rent out your holiday home.
What qualifies as a holiday home, for insurance purposes?
To qualify as a holiday home, the owner must;
- demonstrate use of the property, and;
- Have the right to occupy the property at will, and;
- Store personal belongings at the home.
A holiday home can be used by:
- The owner, at any time.
- Friends and family.
- Tenants on a periodic basis, including short-term paying guests.
These criteria ensure the property remains under your control and qualifies as a holiday home with your insurance provider and meets the requirements for cover provided by the Natural Hazards Commission (NHC, previously EQC).
How property management can affect your insurance
Using a property management company under a full management contract can impact your insurance. If the property manager has full control, you may lose the right to occupy the property, which can disqualify it from being considered a holiday home, and makes it ineligible for Natural Hazards Commission (NHC) coverage. You must check your agreement with your property management provider as it may mean that you have assigned control cover to the manager and you no longer have the ability to occupy it when you wish.
An insurer cannot provide domestic house insurance cover for a holiday home that does not meet the conditions of cover for the NHC.
Understanding NHC cover: The Natural Hazards Commission (NHC) provides special insurance protection for the home against natural disasters like earthquakes and floods, and unlike your house insurance policy, it also extends to cover land damage. To qualify, your property must meet specific criteria, including being under your control as a holiday home. For detailed information, refer to the NHC guidelines.
What if your property does not qualify as a holiday home under the NHC legislation?
If your home does not meet the NHC definition of a holiday home, to obtain cover you will likely need a commercial property insurance provider to structure insurance that covers the building, loss of income and liability risk. Generally speaking, commercial property insurance is more expensive than domestic house insurance.
If you use Airbnb, does Airbnb’s ‘Host Guarantee’ cover me?
If you manage your property using Airbnb, you’re likely familiar with their Host Guarantee.
it’s important to understand that this guarantee isn’t a substitute for proper insurance. The Host Guarantee comes with limitations and might not cover everything you anticipate. It’s not equivalent to regular insurance and some hosts have discovered it doesn’t provide comparable protection. To ensure your property is fully covered against any damages or issues, having your own insurance policy is essential.
Airbnb’s Host Guarantee is not a traditional insurance policy but a conditional promise. It’s not regulated like insurance. Key requirements include:
- Report damage and file a claim within 14 days.
- Provide proof of ownership and, in some cases, a certified police report.
House Guarantee conditions can include:
- Only covers damage during the booking period.
- Coverage is limited to listed areas in your profile.
- Exclusions include damage from excessive utility use, animals, or pets.
- Rent loss cover only applies to confirmed bookings cancelled due to damage.
Given these limitations, Airbnb themselves recommends having a specialist insurance policy in addition to the Host Guarantee.
Everything’s in order, how do I get the right cover?
If you manage your holiday home yourself and meet the necessary NHC criteria, Initio offers specialised cover for short-term holiday home rentals. As the first in New Zealand to provide a house insurance policy specifically designed for holiday homes, Initio offers a hybrid house, contents, and guest insurance policy tailored for short-term rentals, without the strict conditions of a Host Guarantee.
Initio’s holiday home policy covers:
- The home itself for damage from things like flood, fire and storm (whether rented or not)
- Accidental damage to the home by guests.
- Intentional damage by guests, up to $25,000 (e.g., if guests decide to damage walls deliberately) .
- Loss of rent for confirmed bookings cancelled due to the home becoming uninhabitable following insured damage, and also for loss of rent from unconfirmed bookings based on seasonal, area or your previous year’s use data)
- Meth contamination from manufacturing.
- You have legal liability to your guests for your costs or loss.
These are the sort of protections you need when renting your home out to short-term guests.
Key takeaways
- Check your insurance: Ensure your policy covers holiday rentals before using platforms like Airbnb.
- Higher costs: Be prepared for higher premiums or excesses if your insurance covers guests.
- Host guarantee limits: Airbnb’s Host Guarantee has strict rules and limited coverage.
- Property Management impact: A property manager’s control might disqualify your home from holiday home insurance, check your agreement with the property manager and that you still comply with the NHC definition of a holiday home.
- Holiday Home rules: You must retain occupancy rights and keep belongings there to maintain holiday home status.
- Get the right insurance: Choose insurance designed for short-term rentals for better protection.
- Comprehensive coverage: Seek policies that cover guest damage, lost rent, meth contamination, and liability.
By managing your property with these factors in mind, you can better protect your holiday home and maintain your insurance coverage.