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Your Own Home, that’s also rented to guests

To insure your own home (your primary residence) that is also rented to guests (such as via Bookabach or Airbnb), here’s what you need to know:  

What can be covered?  A shared primary residence

If the dwelling is your primary residence, initio can cover your own home that’s also rented with our Own Home Rented product. However, it is a requirement that you share the use of the property with guests.

The two most common scenarios for renting your own home are:

  1.  You rent out part of your home to short stay guests while you are still residing in the property (e.g. a room, the downstairs, or a wing).
  2.  You rent out the entire home to short stay guests and you vacate the property (e.g. you go overseas, or stay in another property or with friends)

If your rented property is not your primary residence, it can potentially be insured as a Holiday Home also Rented property type.  Learn more about insuring holiday home rentals here.

Essentially, initio’s guest rental cover only applies to properties that have shared use (at-least occasionally) by the owner.  We’ll explain why next.

What cannot be covered?  A dedicated short-stay accommodation

A dedicated short-stay living unit (or dwelling) that is only used for guest accommodation cannot be insured by initio.  When a dwelling is used solely for guests it becomes a commercial property – similar to a motel.  The EQC’s $150,000 of natural disaster cover will not apply to a ‘dedicated short stay’ as they are considered commercial risks. A domestic house insurance policy like initio’s assumes that part of the natural disaster risk is covered by the EQC. A dedicated short stay rental should therefore be covered under a commercial material damage policy where the insurer covers 100% of the natural disaster risk.

The definition of a dedicated short stay property is: A Living unit that is set up purely as a commercial enterprise and the owners do not use it or intend to use it for their own purposes (or for somebody else to use it as their home).  

Can an additional unit at my property be covered as part of my Own Home policy?

Yes, as long as it’s not a dedicated short stay property, or unit – and it’s used by yourself (at least occasionally) as part of your own home.

It is common for people to have an additional self contained living unit at their property. This might be a separate unit at the back of the house, or it could be a downstairs living unit with its own access. Often these are rented to short term guests (via Airbnb or BookaBach), or longer term boarders for additional income.

If you do not use the additional unit yourself, at least occasionally when you do not have guests – then the unit cannot be insured as part of the main dwelling. If the unit is used purely for short terms guests, then a separate policy is required (commercial policy). If the unit is only used by longer term boarders and not yourself, then a separate landlord insurance policy is required to cover the second unit.

There are a number of different scenarios, we’ll look quickly at the two most common ones here and suggest how these should be insured:

Short Stay Airbnb Unit Example

If the additional unit’s use is shared by the owner (e.g. for himself or family) as well as short-stay guests, initio can provide specialist cover under the Own Home Rented product.
When the living unit is solely rented to guests and not utilised by the owner,  it is deemed a dedicated short stay. EQC cover does not apply, and initio cannot provide cover.

An example of an additional unit that is used by the owner is where the unit is used to accommodate children when they return home from university. Otherwise the unit is rented to short stay guests. This can be insured under a Own Home Rented policy on the main house.

Renters or Boarders Unit Example

If the rental unit (for example downstairs unit) is only used for a longer term tenants (i.e. more than 90 days) or boarders and not utilised by the owner themselves – this cannot be insured under a single Own Home Rented policy. In this instance, a separate Landlord Insurance policy is required to cover the self-contained rental unit.

If you need help working out which insurance or combination of insurance is best for your situation, see our home & income insurance page.

What is Covered?

The initio Own Home Rented product takes all of the Owner Occupied policy features, and includes additional cover for the risks of renting. You can also choose to add personal household contents cover. This means you have the peace of mind that your property and contents itself is covered, while the risks associated with renting your house to guests is insured.

Generally a standard house insurance policy will not provide cover for the guest risks, so it’s important for owners to get the right policy. The additional cover included in the own home rented policy includes:

  • Accidental or intentional damage by guests
  • Theft by guests
  • Loss of rent following damage
  • Owners liability cover

Learn more about what the Own Home Rented policy covers.

If damage means I can’t live in my property, where do I then live and is there Loss of Rents cover?

Yes, if your home or part of your home cannot be lived in because of damage (e.g. a fire, water damage), Initio will cover the cost of your alternative accommodation (up to $20,000) while the repairs or rebuild is being completed. Initio will also provide cover for any loss of rental income you would otherwise have received if the property was not damaged. Initio provides $20,000 of annual loss of rents cover for free, with options to increase to $40,000 or $80,000. Both loss of rents and alternative accommodation have a payout period of 12 months.

The Loss of Rent calculation will take account of future actual guest bookings that need to be cancelled, and expected bookings based on the same period in the previous year.  If you are new to the home and income game then we will use short-stay occupancy rates in that particular region to estimate the loss. If you have boarder or tenant with a fixed weekly rent then that amount will be used to calculate your loss of rental income.

The policy aims to put the owner in the same financial position if not for the loss, by paying for the repair costs and lost rental income – all while paying for the owners temporary accommodation costs.

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