The Insurance Information Institute released a report on Mar. 11 highlighting the insurance challenges faced by homeowners who operate short-term rentals. The report explains that standard homeowners’ policies often do not cover losses from commercial activity, which includes short-term rentals, and this can lead to denied claims or reduced liability coverage if owners do not update their policies.
This issue is important as more people turn to short-term rentals for extra income, but may be unaware of the risks and requirements involved in insuring such properties. The report notes that operating a rental without proper coverage can result in higher deductibles and other serious consequences.
For those renting out units in multi-unit dwellings, the risks are even greater because uncovered incidents can affect the master insurance policy shared with neighbors. This could impact policy terms and premiums for all residents. Additionally, engaging in commercial activity may violate state or local permit requirements, potentially leading to policy cancellation or nonrenewal.
The Insurance Information Institute recommends several steps for homeowners planning to rent out their residences: notify their insurer before starting rentals, comply with existing policy terms including guest limits and rental duration restrictions, and obtain appropriate commercial or short-term rental-specific insurance if needed. In multi-unit buildings, all unit owners must work together to secure new coverage when necessary. Consulting an insurance professional is advised to ensure adequate protection.
Triple-I’s latest Outlook builds on testimony from Chief Economist and Data Scientist Dr. Michel Léonard to New York City committee members last year regarding proposed legislation on expanding homeowner income opportunities through short-term rentals. Léonard addressed the potential insurance gaps facing residents using homes for commercial purposes; neither bill advanced past the city council.
The Insurance Information Institute supports stakeholders including consumers, media and policymakers by providing resources in English and Spanish according to the official website. It established ties with The Institutes in November 2020 according to the official website and represents more than 50 member companies including regional, national, and global carriers according to the official website. The organization aims to provide data-driven insights on risk and insurance according to the official website, ranks as a leading online source for insurance information according to the official website, and hosts events as well as partnerships focused on advancing understanding of risk management according to the official website.
