Air B&B: For Everyone… except most personal insurance policies in SA. Take note.
As the use of Air B&B grows ever more popular and investment property owners are often seeing higher revenue when letting property via Air B&B versus long terms tenanting, I’ve begun to feel concerned about what this means for the property owners insurance cover.
Being Insurance Brokers we know that properties used as B&Bs are required to be insured of a commercial (or niche) B&B insurance policy because most insurers will not cover the property on a standard personal insurance policy type. I’m referring to all sections and benefits such as cover of the Buildings, the Contents, Theft and Malicious Damages, Guests belongings and Public Legal Liability of the landlord.
Insurers consider that a property is utilized as a B&B when the owner lets the property regularly for Short Term periods (a few days or a few weeks) to strangers for financial / monetary gain. This applies to Air B&B and the likes of Bookings.com landlords.
I asked a handful of leading insurers who had the following to say:
- “We don’t yet offer cover at all for short term rentals like AirBnB.”
- “We do not offer any cover with regards to Air B&B’s. This sort of risk needs to be placed on a commercial policy.”
- “The client need to disclose what the property will be used for as it is a material fact that changes the risk. In the event of the property being used as an AirBnb we exclude any malicious damage and liability cover.”
- “The only cover available is under the Household Contents, business goods up to R50 000. Other than that, no cover.”
Of all the insurers asked, only one confirmed that they will cover Air B&B risks / losses under their Personal Lines insurance policy. However, they are a high net worth insurer who will only take on a policy where a building is worth more than R5 000 000 which leaves little options for owners with properties worth less than this.
The same goes for a Body Corporate. If you own a unit in a body corporate, you MUST contact the Trustees and ask them to find out what the Body Corporate insurers will or will not cover when a property is being let through the likes of Air B&B. Trustees… you have a big legal responsibility to ensure that a body corporate is sufficiently covered under the Sectional Titles Act. As such, you need to determine if the insurer will cover this type of use of the property (or units therein) and if they will not cover, you’d need to inform the unit owner that they may not let the property as short term rentals until it is confirmed that insurance will cover losses. In fact, it may be wise to incorporate it into the Body Corporate rules as many Trustees are doing already.
If you let your property out via the likes of Air B&B, or any other short term letting sites, and would like to have a B&B policy quoted for your property, contact us today.
