When you are a property owner with a second or third property, you’d want to rent out to tenants for some quick and good cash flow. Though this seems like an excellent idea for a good amount of extra income, renting out your property to strangers comes with its own set of risks. You need to know the minutest of details to fine-tune and understand your liabilities before you set foot in the world of renting.
So, what are the risks of renting your property? How to ensure that the risks do not affect you monetarily and protect your finances above all? The answer to this is getting short-term rental insurance.
If you are left asking questions about short-term rental insurance and have no clue if you should or should not get one for your property listing, this article is a must-read for the first step towards responsible renting.
If you’re on the other side of the coin and are looking for tenant insurance, check this link out https://www.surex.com/insurance/tenant/toronto to find competitive, cheap tenant insurance in Toronto with the pros at Surex.
The risks of short term renting
Short-term rental homes have become really popular in the past years due to the tourism boost. Travelers get the local feeling of a place on a low budget, but property owners rarely know the real risks behind such listings.
- Sudden accidental damages
- Fires, floods, storms, etc.
- Damages incurred by renters/visitors.
- Theft by tenants
- Damages caused by acts of vandalism
- Break-ins
The best way to stay protected against these unforeseen events is to get short-term rental insurance for the property you plan to put out on short-term rent. If you do not wish to pay heavy cash out of your own pockets to cover all of the damage incurred when you are off the property, you need to plan your way forward before thinking about tenants.
What is short-term rental insurance?
Short-term rental insurance is a customized form of insurance for property owners who want to rent out their property on a short-term basis. The concept of the short term is subjective, which varies from company to company. However, a six-month short-term rental period is the standard for most places in Canada.
Why do you need short-term rental insurance?
So why does your regular home insurance not work if you rent out your property? This is simply because most home insurance companies insure your property based on occupancy. If you change your property occupancy from long-term occupants to short-term renters, you must inform your insurance company in advance. Most insurance providers would require you to get new insurance if such changes occur.
If a homeowner does not show the change of occupancy to the concerned insurance company, they stand the risk of their whole insurance plan being termed null and void, with no damages being covered thereon.
What are the basics of short term rental coverage?
The Insurance Bureau of Canada (IBC) has strict guidelines that you need to follow while renting your property to abide by the law.
A property owner needs to understand that any home insurance is given out in good faith and with the understanding that the property owner will be the sole resident to occupy the space. Thus, any damage caused by someone you rented your property to is most likely not a part of any insurance plan. You need to have a detailed word with your insurance agent to know what comes under your plan and what does not.
Things to keep in mind when buying short term insurance plans
Here are some essential things you need to keep in mind while buying short term rental insurance Ontario:
- If you are listing your property on Airbnb or VRBO, you are insured for some damage liabilities by the property listers as a host. To know your rights in detail about goods inside your home that come under this insurance, you must contact your listers.
- Depending on where you live in Canada, there might be differences regarding policies in your region. You need to confirm with professionals if you need short-term rental insurance to rent out your property.
- Any business activity on your residential property is not covered by any home insurance and is illegal if you do not have extra insurance covering that. Renting your property to outsiders many times comes under a business activity. This will set you up for a lot of legal problems if you do not cover your bases with the best insurance plan.
This depends on what kinds of services you provide for your tenants. Check the guidelines before you begin. Essential services like water, light, heat etc., do not bring your property under the business activity section. If you provide additional things like cleaning services, security, and food, your rental is most likely a business activity. Although it sounds like a gray area, you need to talk to your insurance provider to get a clearer picture.
The details you need to provide to get short term rental insurance
You need to be upfront about many small details with your insurance company to avoid a long-drawn legal battle later on. Here are some of the essential details from the top of the chart.
- The exact period for which you are renting your property to outsiders.
- A physical mailing address of the property you want to rent out.
- Details about any historic claims on your rental property.
- Minute details of the property, including replacement costs etc.
What have you learned about short-term rental insurance Canada?
We understand that renting out your property for some extra cash sounds like a very exciting idea to many secondary property owners. But it can quickly turn into your worst nightmare of paying extra bills for damages if you do not have all your insurance policies in place.
To avoid putting yourself at a high risk of losing out on a lot of money, you need to make very well-calculated moves. You need to know your legal obligations before and after renting your property to others. Reaching out to experts can help you make informed decisions.
