Investing in real estate is one of the most popular and profitable ways to grow your money. From flipping houses to vacation rentals, capitalizing on real estate is endless.
With the burst of social media platforms and online rental listings, the attraction to get into the vacation rental or leasing business has also increased. If you’re eyeing this type of business, you may want to read on and digest these four tips for ensuring vacation rentals before jumping on the bandwagon.
1. Homeowners Insurance Is Not Enough to Cover Rentals
A homeowner’s insurance is a type of property insurance that protects an individual’s residence, furnishings, and other assets found inside the home from damage and losses.
Additionally, a homeowner’s insurance liability coverage protects against accidents that may happen inside the home or property.
For first-time landlords who would like to rent out a residential property – be it a vacation cottage, apartment, or house, a rookie mistake commonly committed is believing a homeowner’s insurance is sufficient for a rental business.
This type of insurance may be allowed for short-term rentals provided the policy owner acquires a rider to their existing homeowner’s insurance policy and has officially notified their insurance provider.
It’s important to remember that a homeowner’s policy only protects the property and other stuff that belongs to the rental owner but doesn’t cover a renter’s loss or damaged possessions.
If you plan to rent out your primary home for short periods of time on a regular basis, you’d need to purchase a commercial insurance policy to get better protection since you’re now operating as a business.
2. Know The Different Types of Commercial Property Insurance You Can Get
Any property that’s not a primary home and is operated frequently to profit can already be categorized as commercial property.
Hence, property owners who wish to lease or rent out their properties must know the different commercial property insurances in the market and which one would be appropriate.
If you’re unsure which type of insurance policy to get for your vacation rental property, hop on a call with a broker from commercial insurance provider Stratford to know your options. For the time being, here’s a list of some options for your vacation rentals:
Short-Term Rental Insurance
Typically, properties that are advertised on rental listing websites or other platforms would need short-term rental insurance outside of what’s offered inside these listing sites. It’s because the type of insurance provided by these rental listing platforms only covers liability and doesn’t cover damages to the property.
Short-rental insurance provides additional coverage you may need, that’s over and above a homeowner’s policy that can handle new risks that come with hosting short-term rental guests.
This type of rental insurance can also fill any coverage gaps between a landlord’s and homeowner’s policies.
Landlord Insurance Policy
A landlord insurance policy is applicable for properties like second homes or cottages which you don’t inhabit and frequently lease out for more than 12 months.
It means if you rent out a room or a portion of your property to vacationers or long-term renters, you don’t qualify for landlord insurance and would need another type of rental insurance to cover your needs.
A landlord policy conventionally covers loss of income, property damages, liability coverage, and other additional protection against natural disasters.
3. Increase Your Deductibles to Lower Your Costs
Decreasing the valuation of a building is typically done to lower the commercial insurance premium. And these days, underwriters can use technology to make their job easier and more accurate, unlike before.
Currently, underwriters can easily view images of your property through satellites and get property valuation analytics with a few mouse clicks.
To avoid being penalized by playing games with your property’s valuation limits, you may want to look for a fair building valuation and then change your deductibles to get the most value-for-money commercial insurance coverage.
4. Consider All Options Available
Operating a vacation rental means running it precisely like a business. It means you look around for all options available, read the entirety of a policy, and consult different agents like those from commercial insurance provider Stratford before signing up.
Making sure you’ve exhausted all your options to get the best bang for your buck is an excellent way to find the most suitable type of vacation rental insurance for you. Remember that insurance companies have different coverage, so don’t stop looking until you find something fit for your rentals.
Managing property rentals may sound glamourous and convenient sometimes. However, if you think about the responsibilities of managing rentals, you’d know that it’s not as simple as it may sound.
One of the priorities you should include in your business plan is vacation rental insurance, which you fervently hope will never be used but a safety net you are thankful to have in the moment of need.