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Short-term holiday leasing: Are you covered?



The views expressed in this article are not necessarily those of the FIA. The article below was supplied by PPS Short-term Insurance

Let’s face it, South Africa is one of the most beautiful countries in the world. Where else in the world will you find our abundant and unique wildlife, breathtaking mountain ranges and picturesque coastlines?  Because of this, South Africa is and remains, a popular tourist destination.

We welcomed over 10 million visitors in 2017 alone. This has seen local homeowners in many of the more popular holiday destinations in the country looking to capitalise and cash in on the short-term leasing trend.

According to Airbnb, a leading international short-term lodging specialist, almost 400 000 guests were welcomed to South African Airbnb homes in 2017. These are huge numbers, and they are only set to increase.

But here is the thing. While the need to generate additional income through short-term holiday leasing is understandable, homeowners need to be aware of the insurance risks involved before they hand over the keys to their guests.

From my experience, it is critical to be open about your intentions from the outset to your insurance provider. Most policies don’t exclude homes being rented out, but it is advisable for homeowners to disclose this information beforehand.

This way, all the risks are fully understood by the underwriters. Failure to disclose this kind of information may lead to issues down the line when it comes to claiming back should something go awry.

Also, all policies carry a ‘non-disclosure/misrepresentation’ condition, which means that if your insurer receives a claim for damages that is perceived to be prejudicial to them, chances are, your policy will be cancelled, which is never a good thing!

So, the question stands, should you take out a separate policy to cover your home and belongings if you rent it out?

In my opinion, not necessarily. If your insurance provider is comfortable accepting the risks, then there is no need for a separate policy. Most policies include liability sections which you must opt for, such as injury, illness or death to a third party and damage to third party property.

Moreover, should your tenant act in a way that could compromise your policy validity, the onus is on you, the policy holder, to immediately inform your insurance provider of these actions.

However, to provide you and other homeowners with additional peace of mind, it would be wise to take a separate policy for the other matters, such as rental recovery and tenant eviction.

Renting out your home or property does come with considerable risk. In my personal opinion, a tenant will never look after your home with the same passion as you. This opens you up to risk. However, make sure to read through your policy very carefully before making the decision to rent out your home this holiday.

For more information regarding this matter, contact your PPS representative or visit our website today.