Airbnb: Are you insured to rent your home?
Renting out your home via Airbnb can be a confusing business. How will it affect your home insurance? And will your mortgage lender allow it? Read our guide and be confused no more.
Renting out your home has become an increasingly popular way of boosting the household income ever since the arrival of Airbnb.
The innovative company, which was formed just over a decade ago, puts homeowners in touch with people looking for places to stay.
But what are the risks involved? Are you actually allowed to give your home over to strangers – and what compensation will you receive if personal items are broken?
Here is our guide to ensuring you have the right permissions and protection in place before renting out your property.
Is your property freehold or leasehold?
If you are in a leasehold property, then you should take a close look at the agreement, advises David Hollingworth, spokesman for London & Country Mortgages.
“There might be a term in your lease saying no to any sub-letting,” he explains.
“There have been instances in flats where other residents have complained about a constant stream of people coming in using it as an Airbnb.”
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Will your mortgage company allow it?
You also need to find out whether renting your home is allowed under the terms of your mortgage agreement, warns a spokesman for UK Finance, the collective voice for the banking and finance industry.
“It is very likely that the terms and conditions of their owner-occupier mortgage contract make it clear that they are not permitted to let out their property on any basis except with their lender’s consent,” he adds.
Failure to seek permission could result in a number of potential consequences.
For example, the mortgage terms and conditions could entitle the lender to seek immediate repayment of the total balance for breaching this contract.
It will also depend on your plans. Are you just renting out a room for short visits or do you plan to hand over your entire home?
“Many lenders will be fairly relaxed about lodgers but that’s a situation where you’re still resident as the homeowner,” adds L&C’s Hollingworth.
Consider remortgaging your property
If going down the Airbnb route is likely to be a regular plan then you may have to consider remortgaging to a company that’s more conducive to the idea.
Metro Bank, for example, enables borrowers to rent out their homes for up to 90 days through sites such as Airbnb.
The bank just requests homeowners seek prior approval from their building and contents insurance providers and the freeholder if the property is leasehold.
Is the property your main residence?
It also makes a difference if the property in question is your main residence – or a weekend retreat from which you’re trying to earn some extra cash.
Tipton & Coseley Building Society, for example, has a mortgage for second homes/holiday lets that allows people to rent via home sharing.
“A feature of our holiday let mortgage is that people can rent out on an Airbnb basis, which isn’t allowed by a lot of lenders,” explains a spokesman.
Speak to your insurance provider
Once you have the green light from your mortgage provider, it’s time to consider the insurance protection you have in place.
The good news is you can find cover for such peer-to-peer arrangements, such as Airbnb, in a similar way to having guests or lodgers.
However, it’s important to check if it’s allowed under the terms of your existing building and contents policies, according to the Association of British Insurers.
“Your insurer will let you know about any specific conditions or changes to the policy cover,” said an ABI spokesman. “For example, theft or malicious damage may be excluded.”
There have certainly been some nightmare stories hitting the newspapers where people have suffered damage from unscrupulous paying guests.
One of the most infamous was when two London flatmates reported a limited edition £8,000 Banksy print was stolen from their Islington home.
Is there any protection through Airbnb and other sites?
Some home-sharing sites offer cover when you list your home, but the level of protection varies so make sure you check the details carefully.
Airbnb, for example, offers a couple of protection schemes that provide cover against third party claims – and damage to the homeowner’s belongings.
For example, the company’s Host Guarantee covers damage of up to US $1m to the host’s listing caused by a guest during a stay.
This covers damage to the property – including rooms and possessions – although documentation in the form of receipts and photos is needed for each claim.
However, the list of exclusions includes cash and securities, as well as damaged caused by pets, as well as to any common areas that aren’t part of the listing.
In addition, there are more limited protections when it comes to jewellery, collectibles, and artwork, so you’ll need to see if your belongings are properly covered.
Separately, Airbnb’s Host Protection Insurance covers third party claims of bodily injury for hosts and landlords up to US$1m.
This programme covers guest injury while staying in the host’s listing and third-party claims for property damage – meaning property that doesn’t belong to the host.
Exclusions, however, include intentional damage and any loss of earnings.
Buy specialist insurance
A number of firms offer cover.
As far as contents is concerned, you’ll need to assess what you are leaving in your home during the rental period as this will influence the terms of the policy.
The best advice is to see what’s available in the marketplace, according to a spokesperson for the British Insurance Brokers’ Association.
“We recommend speaking to a specialist broker so that property damage and liability aspects of this activity can be covered appropriately,” she says.
Admiral, for example, provide Host Insurance that’s aimed at people renting out their properties on sites such as Airbnb and Homestay.
This is a bolt-on that can be added to any of the company’s home insurance policies, with buildings, contents, accidental damage and home emergency cover available.
The Host Insurance provides protection for paying guest in your home for a maximum of 90 days during the policy – and you won’t have to tell Admiral every time you rent it out.
However, the number of paying guests covered to stay can’t be more than double the number of bedrooms.
For example, you can only accept up to four paying guests in a two-bedroom property – or a couple of guests in a one-bedroom accommodation.
The extent of the cover includes up to £5,000 for collective high-risk items if they’re stolen, vandalised, or broken - either maliciously or by accident.