Closing coverage gaps for short-term rental owners – Canadian Underwriter

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As homesharing platforms like Airbnb and Vrbo become increasingly popular, one insurance expert warns homesharers might find themselves un- or underinsured when renting their units out.

For every one insurer who covers short-term rentals, there are five to six who don’t have the capacity to do so, said Daniel Ivans, insurance broker and Ratesdotca’s insurance expert.  

“We’re seeing somewhere between around 15% to 20% of insurers are willing to accept or accommodate short-term rentals as being part of their risk,” he told CU. 

That means brokers are more likely to have their homesharing clients turned down by insurers than covered by them. Which means many homesharers might be unduly exposed.  

Homesharing is a form of private, short-term rental (STR), wherein a homeowner lists their unit for rent. 

Private STRs have been accounting for a rapidly growing share of revenue for the Canadian accommodation services sector, compared to their hotel or motel counterparts. In 2021, STRs accounted for 15.2% of revenue in the sector; more than double 2017’s 7.0%, according to a summer 2023 Statistics Canada report. 

However, brokers are finding it increasingly difficult to secure coverage for their clients.

“What we are definitely seeing is, over the years, a really sharp increase in short-term rentals,” Ivans said. For insurers this means “a lot of unknowns, especially in terms of the exposures. 

“Determining risk and understanding the right amount of premium to charge can be rather difficult when there are so many unknowns,” he said, “Who’s going to be in a unit and how often they can be in the unit [are] potential risks associated with that.” 

And while Airbnb, for example, provides rental listers with host liability insurance and host damage protection, coverage is limited.  

Clients are advised to tell their broker when they’re renting out a property. That way, even despite low market capacity, brokers can seek the best coverage for their clients.  

That means brokers must ask one crucial question before they can give quotes to a potential homesharer, said Ivans.  

“They should be confirming the number of families in any household that they’re insuring, in addition to permanent residents and potential temporary residents, and get an idea or line of sight of any potential exposures that they might need to run by the insurance company to gain approval.” 

That’s because listing a unit for rent means the space is open for commercial use, which can open homesharers up to increased risk if they haven’t properly disclosed this with their insurance provider. 

Essentially, if they don’t tell a home insurance provider they are renting out part of their home, it could void the home insurance policy.  

While it might be advisable for a homesharer to increase the coverage, most insurers aren’t requiring it from their clients.  

Clients may need to increase coverage for the contents that are in their unit, Ivans said. Otherwise, “there’s no additional coverage set that’s required, or no additional endorsements that are required to be added to the policy. 

“Usually, we’re required to give our [insurance] partner a quick shout and just make sure everything’s on the up and up and that [their] questions are answered.” 

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