Short Term Rentals And Airbnb – What Kind Of Insurance Do I Need?

What is a Short Term Rental?

A short-term rental describes a furnished self-contained apartments that are rented for short periods of time, usually by the month as opposed to annual rentals in the unfurnished apartment rental market. They are seen as an alternative to hotels

What is Airbnb?

Airbnb, Inc. is an American online marketplace company based in San Francisco, California, United States. Airbnb offers arrangement for lodging, primarily homestays, or tourism experiences.

How does it work?

Airbnb allows people to rent out their properties, or spare rooms to guests and provides a platform that connects willing hosts with guests. Airbnb makes money by taking a commission both from the host and the guest.

Mass Law for Airbnb/ Short Term Rental:

On December 28, 2018 Gov Baker signed a new bill in the Commonwealth of Massachusetts.

Under the new law, all short-term rentals must be registered and insured, but only people or businesses that offer rentals for more than 14 nights per year are subject to the State 5.7 percent hotel tax.

The tax and registration requirements applies to all short-term rentals, which are defined as:

An owner-occupied, tenant-occupied or non-owner occupied property including, but not limited to, an apartment, house, cottage, condominium or a furnished accommodation that is not a hotel, motel, lodging house or bed and breakfast establishment, where: (i) at least 1 room or unit is rented to an occupant or sub-occupant; and (ii) all accommodations are reserved in advance; provided, however, that a private owner-occupied property shall be considered a single unit if leased or rented as such.

Insurance Requirements:

All hosts offering a short-term rental must obtain $1 Million in public liability insurance. However, insurers that write homeowners and renters insurance may exclude any and all coverage afforded under the policy issued to a homeowner or lessee for any claim resulting from a short-term rental of any accommodation. Insurers that exclude short-term rental coverage shall not have a duty to defend or indemnify any claim expressly excluded by a policy.

Although short-term rental platforms such as Airbnb, VRBO, HomeAway, and other are becoming more popular – insurance companies have been slow to adapt to this home-sharing economy. As such there are very few carriers that are actually willing to insure short-term rentals. This is primarily due to the fact that there is no screening of the tenants, no background/criminal checks, and no way to know exactly who will be occupying the premise.

Accordingly it is vital that all property owners that rent their property on a short-term basis conduct a thorough review of their policies with their agent to ensure that they have the proper property and liability insurance and that these policies are compliant with the law.

Not only could you be subject to regulatory fines & penalties, but any potential property or liability claims could be denied as well.

Kovalev Insurance has extensive experience with short-term rental insurance and has aligned itself with progressive carrier partners who are willing to insure these types of risks.

We would love to answer any questions that you might have. Contact Kovalev Insurance today and request a complimentary consultation to ensure your property and finances are properly protected.