Must-knows when insuring a vacation rental

Some types of claims may not be covered

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Sep. 5, 2012

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Some types of claims may not be covered

Tom Kelly
Inman News®

A few of my siblings used to rent cottages at Lake Tahoe and then attempt to earmark a few days for family members to gather. Traditional scheduling (there are seven siblings) became too difficult. We were all given the dates and anybody who was free could show up.

Attendance has dwindled since all the cousins have gotten older and have been tugged away by summer jobs and school. But one incident also didn't help. While we always religiously locked down the garbage at night, one day my sister Maureen returned from a midday swim to find a black bear in the kitchen, making the most of the peanut butter and jelly left on the dining room table. No garbage for this bear. The bear entered the cabin by climbing a huge fir, then opened a sliding-glass door on a second-floor bedroom deck.

"Thank goodness nobody was hurt and nothing was really damaged," Maureen said.

But what would have happened if the bear attacked a family member or destroyed the cabin? Who would be responsible to shoulder the liability?

"In most cases where an owner is renting out a cabin as a commercial business that type of loss would not trigger a claim," said Scott Wolf, senior vice president of CBIZ Insurance Services Inc. "It is a common misconception among owners that their vacation rental homes are adequately covered by traditional second-home insurance policies."

CBIZ recently partnered with HomeAway, a leader in online vacation rentals, to offer members a plan that would cover the homes they rent out and the people who use them. Annual polices range from $500 to $3,000 a year, depending upon the size of the unit and number of guests. Consumers do not have to be a HomeAway member to subscribe to the CBIZ coverage.

The program, HomeAway Assure, not only covers theft, damages and injuries, but also protects against lost income if your home is deemed unable to rent due to an occurrence such as a natural disaster.

"Vacation rental owners have such a strong, personal connection with their homes," said Brian Sharples, chief executive officer of HomeAway. "It's important for us to offer an insurance product that helps protect our customers' properties and preserve the vacation experience they share with their guests."

The vacation rental industry continues to thrive. More and more owners are operating small vacation home businesses, especially in retirement. They are finding that even in a down economy, families often find a way to get away. The "staycation" philosophy rarely lasts longer than one year; people tend to invest in family vacations and reunions consistently even if for shorter periods of time.

Maura Paler, a vacation rental owner who also books other properties for friends and business associates, opted to take the HomeAway Assure program and pay the $1,200 annual premium on her $300,000 property because of the price and coverage.

"Quite frankly, I couldn't get insurance agents to agree on what was covered and what wasn't under my homeowners policy," Paler said. "It greatly concerned me because some said 'yes' and others were absolutely certain I would not be covered if I rented it to others. What this plan offered was half as expensive, or less, than the other options I found."

Wolf said vacation rental coverage is not new, but CBIZ has had difficulty reaching groups large enough to offer a significant discount on a normal individual policy.

"We've been offering the coverage for seven years," Wolf said. "But the industry has been so fragmented that spreading the word had become a challenge. By teaming with HomeAway, we're able to hit a lot of people in the business that would have taken us a long time to find on our own."

The coverage for rental time lost usually must be exclusive to the home. For example, the oil spill in the Gulf of Mexico would not automatically trigger a claim for all beachfront owners in the region. A forest fire could possibly qualify, but only if the local jurisdiction closes local roads leading to your home.

"One of the things that is covered," Paler said, "is that if my house burns down, I'd be eligible for two years' loss of rental time. That's comforting, especially when you are in this business."

While bear damages also would be covered, it may take a while for some family members to return.

Next week: charging money for waterfront access.

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