I’m still living in my home, so why do you need to know that I’m also renting it out? Unfortunately, this seems to be a common question ‘after’ a claim, not before.
This question has become much more common with the home sharing phenomenon that began just 10 years ago. Today, companies like Airbnb and Couchsurfing book over 15 million travelers around the world to stay in privately owned buildings. Now when vacationing, you don’t have to stay in hotel rooms, which can sometimes feel quite drab and boring. Now you can stay in fully furnished and stocked homes where you can cook a full meal without having to bring your own cookware and utensils. Makes eating leftovers from the night before much easier than it would be from a hotel room without a kitchenette.
Locally, here in Traverse City, a search for rental homes for a week in July shows over 300 available places to stay; everything from a farmhouse to a cottage, from condo units to quaint homes near downtown, from apartment units to massive lake front estates.
I know this may shock some of you, but insurance has simply not kept up with the advent of home sharing, and I know that many homeowners simply don’t think it’s necessary to contact their agent when renting out their home. It’s only at claim time, and unfortunately, claim denial time, when these things are discovered. We are an agency that believes strongly in educating clients to avoid claim denials, so let’s look at the issues that occur when a home is not being used as a full-time residence by the owner.
Traverse City has become a major tourist town, and as an agency that writes a lot of property insurance for clients relocating to Northern Michigan or purchasing rental property here, we thoroughly discuss this issue with perspective clients. We are in the business of taking care of people, so it’s important for them to understand the coverage gaps and exclusions when renting a home, even if they don’t purchase their coverage from us.
A homeowner’s insurance policy was never intended to cover homes that are not owner occupied. The coverage form and rates were developed for people living in their home full time. Insurance companies know from experience that owners take better care of their property than tenants who have no financial interest in the well-being of the dwelling. Therefore, rental dwelling insurance is more expensive than homeowners. It is written and rated for non-owner occupancy. (This even applies when you are not charging rent, hence why I prefer to say non owner-occupied vs rented).
When we have a claim in a home protected with a home insurance policy but that is not owner-occupied at the time of loss, claim denials can be everything from no liability to protect the owner for wrongful eviction; to no coverage for theft of your personal property in the home that your renter just skated off with; to a denial of a total fire loss because you were living elsewhere and renting out your home full-time.
There are very few companies that allow a home to be rented out and remain on a home insurance ‘form’, and although we represent one of those carriers, we still need to endorse or amend the form to allow for the incidental rental exposure, and even then, the number of days the home can be rented out is limited.
As always, we are here for your questions regarding home, rental, auto, business or life insurance, and would be happy to assist with any of your insurance needs.