Short-term lets can expose landlords to property damage
Airbnb launched in South Africa in 2015 and since then the number of home hosts has grown to more than 35000, with South Africans pocketing more than R3.8billion over this time.
The ripple effect of this booming Airbnb community has also proved significant, resulting in an economic impact of approximately R10bn and supporting upwards of 22000 jobs.
The catch for Airbnb property owners is they seldom know what they are letting themselves in for when renting to strangers, warns Christelle Colman, managing director of Elite Risk Acceptances.
“And a big risk for homeowners is that their property will be damaged,” she says.
While most stays go off without incident, there are stories of entire houses being wrecked by dozens of partygoers. There was also a public liability claim of £26 000 (about R500000) in Wales when a guest slipped on decking steps.
“With the holiday season looming and many homeowners gearing up to rent their homes out over this period, it’s critical that they have the necessary insurance for both property damage and third-party claims,” Colman says.
Airbnb offers Host Guarantee and Host Protection insurance which are designed to protect hosts in the rare instance of damage (up to $1million or about R14.8m) to their possessions, unit or home by a guest staying in the space.
Yet while it sounds fair, several incidents suffered by Airbnb guests have shown that it’s not always as simple as it seems.
Colman says the claims process can get very complicated, with guests often suffering personal financial setbacks when covering medical bills which they presumed would be covered by the Airbnb host’s insurance.
Homeowners still need to have their own homeowner’s insurance.
“It’s important to know exactly what your homeowner’s insurance policy covers. Many companies exclude short-term lets and therefore do not cover your Airbnb rental.”
It is also important to note that if the Airbnb is a residential property which is used to supplement the client’s income, the liability will be covered.
However, if the client is a property owner whose sole business is the owning and letting of properties, it is considered a commercial risk and the personal liability policy will not provide cover.
Colman adds: “If you are renting out part of your home on a regular basis in order to generate income, it is general insurance practice in South Africa that your insurance company might view that as a business activity, which is typically not covered by a homeowner’s policy.
“Property owners would, instead, need to buy a commercial insurance policy to ensure they are covered against damages in case something untoward happens,” she says.