Landlords, is your rental insured to be a holiday let?

Switching your private rental property for a short-term holiday let could leave landlords underinsured

Landlords who own private rental properties are having to re-evaluate their finances as a result of increasing mortgage rates which is leaving many considering the option of switching their long term private rental setup, in favour of short-term holiday lets to be listed on holiday accommodation websites such as Airbnb. As mortgage rates have steadily increased in the UK, potential profit margins from long term private rentals have started to decrease meaning that many landlords are exploring new avenues to generate a better return on their property investment.

Changing the use of a flat or house from a private rental to a holiday let can be a very exciting time for landlords, however in some cases, a change in use to a property can leave landlords either underinsured, or perhaps even without any valid insurance at all. Therefore, it’s crucial that if you are a landlord who is considering switching to a short-term holiday let model, you should consider the insurance implications of this in the first instance to ensure you’re not left unprotected in the unlikely event a claim is made against you.

Speak to an adviser if you’re unsure

The first step towards securing your property is to speak to an insurance broker who can discuss how changing the use of your property may impact your current insurance policy. At Premierline, our landlord insurance experts can review your needs and will be happy to provide quotes for suitable insurance covers should you decide to go ahead with a change to your letting model.

• Landlord insurance with Premierline
• What does landlord insurance cover?
• Diversifying your property portfolio

Typical landlord insurance is unlikely to cover short term holiday rentals

As a residential landlord with a long term private rental property, you’re likely to already have property owners liability cover in place, as well as a number of other covers such as;

• Employers’ liability cover (if you employ staff or contractors)
• Business buildings cover
• Business contents cover
• Commercial legal protection
• Loss of rent cover

Depending on your insurer, it’s very unlikely that for a typical residential landlord these covers will be valid for properties that are being let out as short term holiday rentals, potentially causing underinsurance (when your insurance policy won’t pay out enough to cover the full expenses of a claim) or in a worst case scenario, causing you to totally invalidate your insurance policy.

According to The Leasehold Advisory Service:

“Leaseholders must make sure that if they intend to let their property as a holiday let on Airbnb, their insurance is not invalidated by doing so. Property owners should inspect their policies to ensure that they are not in breach of the cover. Furthermore, they could be in breach of their mortgage terms if they do not have adequate insurance in place.”

So, not only could this move lead to your insurance being invalidated, but you could also be breaching the terms of your mortgage agreement which could lead to further complications should an insurance claim be made against you.

Don’t just rely on insurance cover provided by companies like Airbnb

Airbnb and many other holiday let websites offer protections and guarantees to landlords (or hosts) which provide some basic covers in the event that something unexpected happens to their guests or their property. Covers such as ‘AirCover’ (provided by Airbnb) may not always provide adequate protection and therefore landlords shouldn’t simply rely on these covers when deciding to let their home out as a short-term holiday rental.

The Airbnb website itself states that AirCover doesn’t take the place of adequate liability coverage and that landlords may have other insurance obligations to meet outside of those provided by Airbnb, highlighting that even with AirCover in place, ‘hosts’ should ensure they also have their own additional covers to protect their property investment:

“Work with your insurance agent or carrier to determine what kind of obligations, limits, and coverage are required for your specific circumstances. AirCover for hosts includes host damage protection and host liability insurance, which provide you with basic coverage for listed damages and liabilities. However, these don’t take the place of homeowner’s insurance, renter’s insurance, or adequate liability coverage. You might need to meet other insurance requirements as well.”

Furthermore:

“We strongly encourage all Hosts to review and understand the terms of their insurance policy coverage. Not all insurance plans will cover damage or loss of property caused by a guest who books your accommodation. Review your homeowner’s or renter’s policy with your insurance agent or carrier to make sure your listing has adequate liability coverage and property protection.”

Speaking to an advisor or insurance broker is the best way to ensure that your insurance requirements are still met when switching to letting your private rental property out as a short term let or holiday rental.

Letting on Airbnb without the right insurance could invalidate your policy and breach your mortgage terms

Overall, listing your rental property on a website like Airbnb is an attractive prospect when you consider mortgage rate hikes. Short term lets may yield a higher rental income than long term private rentals over a shorter period of time due to the nature of holiday lettings. However, this may not always be a solution for landlords who are looking to improve the return on their property investment. This is because in switching to a short term let, landlords could be exposing themselves to greater risks and possibly even legal challenges if they inadvertently breach their mortgage agreements and insurance policies, even when a holiday letting agency has their own insurance offer in place.

If you’re a landlord who is thinking about changing up your portfolio, you should ensure you do your research first, cover all bases and ensure that no matter the outcome, you have the right insurance cover for your property. We would always recommend you speak to an insurance broker to review your needs and help you to understand the costs associated with any additional insurance covers you might require. Your property portfolio may well be your life’s work and that’s why it’s so important to ensure that you, your tenants or guests and your properties remain protected.