Homes that are rented out to short-staying paying guests are experiencing booking cancellations and reduced occupancy (loss of income) due to fears and government restrictions relating to Covid-19. We take a look at whether insurance provides cover.
Covid-19, also known as the Coronavirus has caused major impact to visitor travel arrangements. The reduced sentiment to travel as well as New Zealand’s move to protect itself from the rest of world with Government imposed restrictions on travel and self-isolation will and has lead to holiday home (Bookabach, AirBnB etc) cancellations and reduced future bookings.
So, as a AirBnB or Bookabach property owner is there insurance for loss of income where there is no physical damage to the property?
The short answer is No. Let’s explain;
- Most insurance policies include a Loss of Rents provision that specifies an amount of cover (e.g. $20,000) and a payment period (e.g. 12 months)
- This cover is triggered by a physical loss to the home or property that results in house being unliveable.
- Some common examples include, a fire at the property, a burst pipe that floods the house, earthquake damage or rising flood waters.
- The policy responds to cover the damage from these things and also the associated loss of rental income while the damage is being repaired.
- So, if the property is a holiday home and is damaged the loss of income would include the confirmed bookings you know about that need to be cancelled, and the other future bookings you miss because the property is not available to be booked. Its the perfect solution…. until non-physical things like Covid-19 come long.
No physical damage – the Covid situation
As Coronavirus (or any other illness, virus or disease for that matter) does not cause any physical loss to the property, it does not trigger the loss of rents cover. The key component for cover is missing.
But wait, what about cover loss of rents due to tenant eviction and prevention of access and the like – that’s not physical damage? Yes, some policies like Initio, have a special benefits that provide loss of rental income cover from other causes that are not necessarily physical.
The one that is most relevant here is the ‘prevention of access’ policy benefit. Prevention of access relates to not being able to access the property, and typically comes in the form of a road closure or a washed out driveway for example. While Covid-19 is causing bookings to be cancelled, access to the property is not actually prevented, meaning that this part of the cover does not provide any assistance for Corona virus related income losses.
It is also important to note that most house insurance policies out-rightly exclude cover for “financial loss or expense of any type in connection with a Notifiable Infectious Disease under the Health Act 1956”.
While this provides little comfort to holiday home and own home owners who rent out their properties to short term guests, it does mean that home owners can make informed decisions about how to manage their lower income risk over the coming months.
Initio is a New Zealand-based online house insurance provider. Founded in 2011 by a couple of Kiwis, Initio set out to change the broken insurance industry by using technology to put control back into the hands of the customer.
Covering landlord insurance, short-term holiday rentals and home and contents, Initio specialises in tailored online property insurance, including an all-in-one landlord insurance with built-in cover for loss of rent and damage by the tenant.
Having completed over 35,000 automated insurance transactions, Initio’s market-leading policies can be quoted, bought and amended online – all in an instant.
Initio is underwritten by NZI, a business division of IAG New Zealand Limited.