Finding and maintaining proper property insurance and liability for renting your vacation can be a challenge. Most properties for renting real estate are located in high-risk areas, such as grass-roots beach towns or national forests, and this in itself can make it difficult to search for insurance. Add to the equation that the property will be rented on an incomplete basis, and everything can become really complicated. Here are some basic rules to follow to protect you and your property from insurance nightmares.
Rule one - honesty is the best policy.
It is imperative that you be absolutely honest with your insurance agent about your intention to rent your property on a short-term basis. If a guest in your property does damage or sues you, your insurance agent will be wise to your rental business. If you have not indicated that your property is a vacation rental, your insurance policy may be canceled and you will be fully exposed. Be honest from the start. Of course, this will mean a higher premium, but it is not worth risking your savings.
Rule two - if at first you do not succeed, try again.
When buying insurance, start with companies that have your current homeowners and autopoliticians. It is always cheaper to cover your coverage with one company. But do not be surprised if you reject. Vacation rental insurance is a specialized market, and most traditional companies will not have what you are looking for.
Ask your agent for help and contact other rental owners in your area. They will probably have several recommendations between them, and one of the companies will be well suited to what you need.
Rule three - ask the right questions, give the right answers
It is important to use the right language and ask the right questions when talking to an insurance agent. Never tell your agent that your property will be vacant. The correct term to use is "unoccupied." Empty property is a red flag that will scare most insurance companies.
Insurance for rental housing usually falls into the category of “surplus lines”. Companies that specialize in this type of insurance are Lloyd from London, AIG, Lexington and Allied Insurance. If your current insurer cannot cover your rental property, ask them to redirect the surplus.
Ask your insurance agent how much liability insurance you should wear. The minimum size is usually around 1,000,000 US dollars, but the amount may vary depending on your financial situation. It's just common sense, if you have more to lose you, you need more responsibility.
You will be prompted for the name of your property manager, and you need to be prepared. If you are "renting an owner" and you are asked who manages your property, give them the name of your housekeeper or service person. The insurance company will want to hear that someone is available in an emergency. If you do not have a third-party contact, you can potentially raise another red flag.
Rule Four - Check the financial condition of your insurance company.
There are hundreds of insurance companies trying to get your business. If you stumble upon a company with indicators and too good conditions to be true, be very careful. There are indeed "flying at night" insurance companies, and if there is a flood or an earthquake, they can be destroyed financially.
A place to check the financial status of the insurance company - www.ambest.com. Enter the name of the insurance company, and you can bring up a little history of this insurance company, how long they are doing business and what their financial condition is. What you are really looking for is a company with a rating. Do not go back to high school and consider that B and C are good. You really need a rating insurance company.
Insurance is one of the areas of vacation rental management where you cannot afford to cut corners. There are too many things that can go wrong, and the term “better safe than sorry” is the most important rule of the insurance game.
