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Considering Short-term Rentals? Don’t get caught short on homeowner’s insurance coverage

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By Jennifer Roche, J.D.

(Editor’s note: Short-Term Rentals (STRs) include non-hotel options such as offered by Airbnb, VRBO, HomeStay and many other marketing companies. Homeowners, as well as investors, are renting rooms or entire houses to short terms such as 1-30 days, much like a hotel.)

Short-Term Rentals (STRs) are a hot topic in our area, with Knoxville looking to pass a STR ordinance soon and Farragut investigating possible regulations as well. I spoke with State Farm Insurance Agent Mansour Hasan who says he’s seen an uptick in clients inquiring about short-term rentals coverage. Beacon Insurance Advisors President Val Privett said she’s hearing more talk about STRs from clients and insurance companies, but what worries her most are the clients who assume the homeowner’s policy provides coverage for the STR.

Both Hasan and Privett said that if you’re thinking about operating a short-term rental in any of your properties it’s absolutely necessary to contact your homeowner’s insurance agent to confirm coverage. Privett said she knows of some major companies who won’t provide coverage for a STR if the policy is written as a primary residence. Hasan added that those homeowners who’ve taken a long-term rental (LTR) property and started using it as a STR property also need to check insurance coverage. The Rental Dwelling Policy used to cover the property as a LTR won’t cover it as a STR in many cases.

Privett noted that short-term rental policies can be written on a commercial policy which also allows for $1 million in liability limits should a renter be injured on the property. There is also a difference in premises liability and a commercial general liability policy. Hasan agreed, adding that non-owner/occupied STRs will need what’s called a STR Policy or Motel/Hotel policy from their carrier.

If STR operators don’t have proper insurance coverage and there’s a liability claim on the property, they could be stuck footing the bill for the claim. Hasan and Privett each recommended discussing all of the uses (LTR, STR, primary residence, etc) of the property with your insurance agent to make sure you don’t end up with gaps in coverage.

What about short-term rental tenants? Hasan stated that it’s unlikely that the personal belonging of STR tenants would be covered under any of the STR operator’s insurance policies. If you’re bringing valuable items to the STR or are concerned about personal property loss, short-term rental tenants should contact their insurance carrier about coverage before booking a STR.

STR operator or tenant, if you have questions about your coverage, contact your insurance agent or talk to one of KAAR’s Affiliate Member Insurance Agents at kaarmls.com/affiliates.

Jennifer Roche is the Governmental Affairs Director for the Knoxville Area Association of Realtors, the trade association for Realtors across 12 counties in East Tennessee. Mrs. Roche is a licensed attorney, graduating from the University of Tennessee College of Law, and has been with KAAR since 2014. Prior to KAAR, she was a real estate attorney and title curator with Adams Law Firm & Admiral Title. Mrs. Roche was a licensed real estate agent from 2007-2012. She can be reached at jennifer@kaarmls.com or 865.588.6350.

Disclaimers: Information deemed reliable but not guaranteed. Goldman Partners Realty has presented this article with permission from the author. All company names and logos are used solely to illustrate the market. These may be trademarks™, registered® trademarks or copyrights © of their respective holders. Use of these does not imply any affiliation with or endorsement of the holders and Goldman Partners Realty or the Knoxville Area Association of Realtors.
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