EPMEPM: First Person

Insurance and the ‘share economy’

With the lure of easy cash for little effort, more and more Australians are jumping on the short-stay accommodation band-wagon and becoming instant landlords. But many are neglecting to make sure they are properly insured, says EBM RentCover’s Sharon Fox-Slater.

The number of people offering their homes on sites like Airbnb, HomeAway and VacationRentals is snowballing. There are now more than 115,000 Australian properties listed on Airbnb alone.

What started out as an opportunity to rent a room for a couple of days and earn a few dollars has turned into a business for many homeowners.

In fact, the money they can make from renting out their homes short-term has led to a new breed of landlord.

By not recognising that they are in fact landlords, many are exposed and unaware they can access protection designed specifically for landlords.

Beyond requirements like council approval, laws and tax obligations, insurance is an aspect many are neglecting. By not recognising that they are in fact landlords, many are exposed and unaware they can access protection from insurance products designed specifically for landlords.

Although accommodation platforms like Airbnb usually offer some form of protection for hosts in terms of damage, many property owners rely on their home and contents insurance to back this up.

I would urge those renting their property short-term to check their home and contents insurance policies, as many insurers won’t cover claims if the property is being used as a business – that is, being used to generate income.

If an owner is renting out their property short-term, they should look at specific landlord policies which offer protection against a range of risks not covered by standard home insurance.

As an example, a landlord policy like RentCover ‘ShortTerm’ offers comprehensive contents cover for items including game consoles, entertainment equipment, linen, crockery and cookware. It also covers damage caused by tenants or their guests, whether the damage is accidental or malicious.

I would caution owners and property managers to do their homework before selecting a landlord policy as not all insurers offer cover for short-term rentals, or they may specifically exclude Airbnb.

The short-stay accommodation market is also popular with landlords who usually lease out their investment properties on fixed terms.

The money that an owner can make from tapping into the short-stay market can be very tempting. For example, one comparison website found that the average weekly Airbnb rent for a two-bedroom unit in a major city was almost triple what the owner would make on a traditional rental basis. It’s easy to see why many landlords, particularly those with property in inner-city areas or popular holiday locations, are seriously looking at these options.

If a landlord is looking to switch their property from fixed-term to short-stay, they need to make sure they switch their landlord insurance policy too. There are different landlord policies for different types of letting because each type of tenancy agreement has its own unique risks, and having the wrong policy could prove costly.

That brings us to the issue of tenants subletting the rental property through Airbnb or similar.

Most landlord insurance policies are very clear about cover and subletting. If the property is being sublet by the tenant and the landlord has approved this, then the cover may be void.

Of course, there will be tenants who ignore the fact they can’t sublet the property and will do it anyway without ever informing the landlord or property manager. In this case, the landlord is generally still covered – so long as they and their PM were not aware of the subletting – as any claim would be considered an unforeseen event.

Whether the property owner is a new breed of landlord or an experienced investor tapping into the short-term market, having the right landlord insurance in place is a must.

The short-term accommodation market holds many opportunities but also risks. Astute property owners assess and mitigate those risks. Property is a big investment; it’s worth making sure it is properly protected.

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Sharon Fox-Slater

Sharon Fox-Slater is the Executive General Manager of EBM’s RentCover, which insures 120,000 investment properties around Australia and creates covers specifically for the property industry. Sharon was also the first woman to become a Fellow of the National Insurance Brokers Association. For more information, visit rentcover.com.au.
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