Latest / Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights / STR Insurance Myths That Cost Hosts Thousands

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STR Insurance Myths That Cost Hosts Thousands · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

• 0:00
  Hello and welcome to House Planet Bite Size, the podcast
• 0:03
  brought to you by House Planet and House Philly.
• 0:06
  My name is James Farley, the founder of House Planet, and our
• 0:09
  goal is to share everything you need to know about buying and
• 0:11
  managing short term rentals. Today's guest is Nick Massey
• 0:15
  from Proper Insurance and he'll be sharing 5 myths about STR
• 0:19
  coverage that every host needs to hear.
• 0:22
  OK. Real talk now for all you hosts.
• 0:24
  Out there. You know that moment when your
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• 1:46
  Nick, thank you for joining us on host Planet Bite Size.
• 1:49
  You've got 5 facts that every house needs to know about short
• 1:54
  term rental insurance. So take it away with fact #1
• 1:59
  Thanks, James. Yeah, for everyone.
• 2:01
  Just real quick, my name is Nick Massey.
• 2:02
  I'm with Proper insurance. I'm our chief sales officer.
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  Spent a lot of my time travelling around doing
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  podcasts, doing things like this to help people understand a bit
• 2:12
  more about risk management. Full disclosure, my expertise is
• 2:16
  in the insurance markets in the United States just for everybody
• 2:20
  listening. So I think it's not so much
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  facts, I think it's more myths, James that we run into.
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  And you know, myth #1 is going to be that my regular
• 2:33
  run-of-the-mill standard homeowners insurance or condo
• 2:36
  insurance or whatever is out there in the general market is
• 2:41
  going to be substantial enough to cover the exposure that we
• 2:45
  face as host with vacation renting.
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  And, and the fact of that is that it is untrue.
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  Insurance is written very specifically for the exposure at
• 2:53
  hand and it's underwritten that way by the carrier and priced
• 2:58
  according to the risk that they're taking on.
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  So your regular homeowners insurance are really just meant
• 3:05
  for it to be your primary home. They have very, very restrictive
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  business activity exclusions. There's a lot of limitations in
• 3:13
  those products for the the different types of things that
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  we do and offer at our vacation rental properties, whether they
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  double as our primary home or they're an investment property.
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  And so we need to be sure that we're, we're attacking this risk
• 3:27
  management equation, starting with the fundamental knowledge
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  that your standard run-of-the-mill insurances are
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  not going to be satisfactory for cover from a property damage and
• 3:38
  a liability perspective in this market.
• 3:41
  Absolutely. The same here in the UK as well.
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  Yeah, a, a bog standard insurance policy is not going to
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  be enough. Even if you are maybe just
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  renting a room in your own property, a normal home
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  insurance is not going to be relevant.
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  You need to get specific cover for holiday letting, as we call
• 3:58
  it here, or short term rentals or serviced accommodation,
• 4:00
  whatever the term is, you're going to need a, a specific
• 4:03
  policy. OK, then Nick, myth #2 myth #2
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  is going to be the quote UN quote free insurance provided by
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  the OTA, the online travel agent, your Airbnbs, your VRBOS,
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  your booking dot coms, your on and on and on down the line.
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  They all have or provide some level of protection to the host
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  that's in place really to protect them.
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  It's more of a, it's more of a good branding protection.
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  I'm not saying that they don't pay, that they don't cover.
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  They do. But think of it more as a, as a
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  promise. And unfortunately, promises can
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  be broken. So it's, again, it's going back
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  to #1 it's really important that you're making sure you have the
• 4:50
  right, right insurance. Yeah, I think it's, it's very
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  much a nice to have, you know, like air covers probably the
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  most famous out of out of all these OTA insurance policies.
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  And, and we use the insurance policy term quite loosely.
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  I, I've used air cover myself as a host.
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  You know, sometimes when I guess there's damaged something or
• 5:08
  broken it, you know, if you send the photos.
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  And to be fair, most of the time Airbnb have been very quick to,
• 5:15
  to pay whatever the damage is. If you say the cost of this is
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  £50 or $100 or wherever you are, generally that will go straight
• 5:22
  away if you've got proof that that the damage is caused by the
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  guest and, and the guest has accepted that they've caused the
• 5:27
  damage. But yes, it is not a substitute
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  for a proper insurance policy. That is for sure.
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  Myth #3 then Nick myth #3 is going to be related to those out
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  there who are using a professional property manager to
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  assist with their bookings and guest communications and all of
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  that. And it comes to something we get
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  quite often, which is, well, my property manager has insurance.
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  So why do I need insurance? And the truth of the fact is
• 5:55
  that your property manager's insurance doesn't extend to
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  cover you. So think of it like you were a
• 6:00
  general contractor building homes.
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  You might hub the higher subcontractors come in and do
• 6:05
  the plumbing, the electrical work, etcetera, etcetera.
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  And they need to have their own insurance or will have their own
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  insurance to protect them and their work product.
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  So it's the same here as a short term rental host or midterm
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  rental host, you are the general contractor and any other
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  contractors that you bring into your business need to have their
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  own insurance. Now on top of that, it's very
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  common, at least in the United States, for property managers to
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  require you list them as additional insured.
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  And so if you go to your current insurance product and say I need
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  to add XYZLLC as additional insured, they're a property
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  manager and they tell you they can't list commercial entities
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  as additional insured, then that should be kind of red flag
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  number one, that it's time to really go out and shop and make
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  sure you have the right product because that should be the
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  telltale sign that you probably have the wrong product in place
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  right now. Yeah, I think the the common
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  theme is here is that don't think that insurance is somebody
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  else's responsibility. It's not the responsibility of
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  Airbnb. It's not going to be the
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  responsibility of your property management company.
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  You've got to take responsibility for your own
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  property. OK, then Nick myth #4 myth #4 is
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  going to be that umbrella insurance.
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  It covers everything. It's another thing that we get
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  quite often and and comes into the misnomer of current
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  insurance marketing and consumer psychology around the use of
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  umbrella. Now I'm not saying umbrellas
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  aren't needed. You should, if available, buy
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  umbrellas. As a risk manager, I tell
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  everybody buy as much insurance as you can afford, especially
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  liability insurance. Your liability insurance should
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  be at a minimum, more than enough to cover the the worth of
• 7:50
  the asset at which this business is being conducted.
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  But umbrellas don't work in the business world as they do in the
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  personal world. So in the personal world you
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  could have multiple cars and multiple long term rentals and
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  multiple homes and multiple kids and on and on and on and on.
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  And you get this umbrella and it goes over to the top.
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  And that umbrella is an extension of liability coverage
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  to what all of them provide. So a standard limit of liability
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  in the US for home insurance on your primary residence is
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  300,000. On a car, it typically maxes out
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  at 250,000. That's not enough if somebody is
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  seriously injured. So you get an umbrella and that
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  gets you up to 1,000,000 or more dollars in that protection.
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  The problem is, is those still carry personal side, they still
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  carry this business activity exclusion.
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  So if you're operating a quote UN quote short term rental
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  business and making more money than defined in that contract
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  about what is defined as a business typically 2500 or more
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  in earnings, then it's simply not going to respond.
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  The other part of umbrellas that everybody needs to understand is
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  they're what's called follow form coverage.
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  So in the amenities arm race that we have in the vacation
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  rental world of people trying to add and add and Add all of these
• 9:10
  attractions to bring host, you need to understand that if that
• 9:14
  amenity, let's say a canoe or a kayak or some type of paddle
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  boat for waterfront property is excluded in the base form of
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  your coverage, the umbrella doesn't come in and cover over
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  the top of it. And so it's really important
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  when you're thinking about risk management that you very much
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  separate your personal assets that you have and then these
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  money generating assets into a different bucket and make sure
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  that you're insuring those correctly.
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  You can still get umbrellas over vacation rentals.
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  You just got to make sure it's the right umbrella that follows
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  the right form underneath what the base product is.
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  So if you got personal liability over here and you have say
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  commercial or business liability here, the personal stuff doesn't
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  extend over the commercial stuff.
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  Again, going back to my general contractor example, if I have a
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  contracting business, my home insurance through an Allstate or
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  a State Farm and that umbrella doesn't extend over the top of
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  my my work vehicle, all my employees and the general work
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  and labor that I do on a day-to-day business, a
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  day-to-day in that business, excuse me that.
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  So I got to have my own stuff in this bucket and I have my own
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  stuff in that bucket. And I think that's really
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  important for people to understand.
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  Yeah, very important. Yeah.
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  And yeah, you got to get specific.
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  It makes makes a lot of sense. OK then Nixo 5th and final myth.
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  The last 1 is really important and it comes to a question we
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  get quite often which is I cannot be held liable for the
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  negligence of my guest. And the simple truth of the
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  matter is you can be and you will be.
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  So it's goes far beyond the slip and fall accident.
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  The number one claim that we see at vacation rentals is a slip
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  and fall and it typically happens within the 1st 24 hours
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  of the guests arriving at a property and at least that's the
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  data we have in our book of business for the US based
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  properties. So what happens here is any time
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  there's a lawsuit that comes down to who is negligent or who
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  is responsible. And unfortunately what we see on
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  and on and on again in these cases is well, if the argument
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  is, well, if you didn't have a public listing for this person
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  to come and stay at your property, this incident would
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  not have occurred. And so that's where they can try
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  and get you in, in a, in a personal injury, you know,
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  lawyer type situation in the US. Other markets around the world
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  may not be as litigious. The US is very litigious, yes,
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  and going to shows and doing these types of interactions, we
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  start hearing that other parts around the world are starting to
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  get more and more litigious as well.
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  So there's two very important things to make sure you have,
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  and we already stated one of them was make sure you have the
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  right insurance for what you're doing.
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  That way a liability type claim in a lawsuit is being responded
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  to. And then #2 to this is making
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  sure that you have very robust coverage and that coverage is
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  extending not just to cover you on the property line, but also
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  when, when those guests vacate your property, when they go out
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  and about in the world that you were introducing them to in your
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  micro community or in the grander scope of things.
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  I mean, we have the World Cup coming to the US.
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  These folks are going to be traveling all over the place.
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  They're not just going to be staying in your little
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  community. They can rent your house for
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  weeks and weeks at a time and use that as their base camp hub
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  to go out and about and do other things.
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  So make sure you're covered off the property line as well and
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  also make sure you're covered for your amenities.
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  You need to have a list of the amenities that you're providing
• 12:59
  outside of kitchen utensils and coffee makers.
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  Things like I have a pool, I have a hot tub, I'm pet
• 13:05
  friendly, I'm waterfront and I have Canoes and kayaks.
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  I have a dock, I have a sauna, I have workout equipment.
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  I advertise that there's this wonderful park down the down the
• 13:16
  street for our guests to take their children to.
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  You need to make sure that you're covered for all of that.
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  In the unseen circumstance of something coming up and that
• 13:24
  letter shows up in the mail, you know you can pick up the phone
• 13:27
  and, and call your insurance provider and, and know with
• 13:31
  confidence that you have protection against that legal
• 13:33
  case. This type of insurance does cost
• 13:37
  more, but when you look at the difference in cost versus the
• 13:41
  standard markets to what defending yourself and paying
• 13:45
  for your own lawyer may end up cost, which is hundreds of
• 13:49
  dollars an hour if you've never paid 1 before.
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  The difference in premium. It takes one case and you make
• 13:55
  that up and then some over over a very short amount of time with
• 14:01
  making sure that you have the right protection in place. 100%
• 14:04
  yeah. And five brilliant myth busts
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  there. And I think they're relevant
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  just about wherever you are in the world, Obviously specific to
• 14:12
  the US market, but I think a lot of these are very relevant
• 14:14
  whether you're in the UK or anywhere else.
• 14:17
  I'm wondering, Nick, is there a a case that you share with
• 14:20
  people when you're on your travels, if you want to, you
• 14:24
  know, frighten them into, you know, making sure that they've
• 14:27
  got the right insurance. There's, there's two that one is
• 14:33
  very close to me because it's one of my, one of my personal
• 14:37
  clients from a long time ago. He's, he's gone and sold this
• 14:40
  property now, but he, he had an Airbnb booking and they showed
• 14:46
  up on a Thursday and the neighbor let him know that they
• 14:50
  were throwing a party little 2 bedroom cabin, nothing crazy.
• 14:55
  And they, he ended up getting in contact with Airbnb.
• 15:00
  They canceled the booking. They kicked them out the next
• 15:03
  day, Friday night. There is now way, way more
• 15:07
  people at his property. There's fire in the backyard,
• 15:11
  which turned out to be a number of furniture pieces that they
• 15:15
  decided to burn. Virtually every window in his
• 15:18
  home is broken. They found buckets of paint in
• 15:21
  the shed and threw these buckets of paint all over the house
• 15:24
  cabinets, ripped off the wall. They ended up causing about
• 15:27
  $102,000 in damage and that doesn't include the lost revenue
• 15:32
  behind the restoration period. So because of the booking was
• 15:37
  cancelled, air cover doesn't respond because there is no
• 15:40
  active booking in relation to this.
• 15:44
  So that was one case and where it's very important to make sure
• 15:46
  you have damage caused by guests maliciously and intentionally on
• 15:51
  on your coverage. That is something that that we
• 15:53
  cover. So we end up paying on full plus
• 15:55
  plus his lost business revenue. He was shut down for about four
• 15:58
  months for home repairs. And then on the liability side,
• 16:03
  it has to do with every a lot of liability things are highly
• 16:08
  preventable. But what you need to realize is
• 16:11
  that a lot of our markets are drive to.
• 16:15
  And so folks could be driving to your property and that means
• 16:18
  you're going to get there later at night and it's going to be
• 16:20
  dark. In this particular case, this
• 16:23
  home beautiful spread large property on a lake and gentlemen
• 16:29
  had who was hurt ended up he was in the back seat of the car.
• 16:33
  He had been drinking on the drive down there.
• 16:35
  They get to the property as it's as it's dark out and he goes for
• 16:40
  a walk in the backyard to check out the property and just off
• 16:42
  the side of the pool is a gravel pathway and he starts walking
• 16:46
  that gravel pathway and it terminates at a Cliff about a 30
• 16:49
  foot fall down rocks into a lake.
• 16:52
  Ultimately, he was life flighted out of there.
• 16:56
  He spent about 8 or 9 weeks in the ICU, racked up about
• 17:00
  $780,000 bill there amongst other damages, you know, some
• 17:05
  permanent injuries, on and on and on.
• 17:06
  It was turned into a very large settlement.
• 17:10
  We responded to that to our full policy limits.
• 17:14
  Air cover actually responded to that as well due to the size of
• 17:18
  the claim to their full limit on the guarantee as well.
• 17:24
  And that's one where it's really kind of opens up the door of
• 17:27
  like you need to go check out your property in multiple
• 17:30
  scenarios, which is walk your property during the day, walk
• 17:34
  your property at night. If you have an exposure like
• 17:37
  that where there is a fall hazard, it's time to invest in a
• 17:41
  fence and and put that up because you don't want that
• 17:45
  happening to you. You don't know who these folks
• 17:47
  are. You don't know what they're
• 17:48
  doing on their way to your property.
• 17:51
  Are they showing up intoxicated? Are they getting intoxicated
• 17:54
  while they're at your home? And This is why these things
• 17:57
  happen within the 1st 24 hours, most commonly because they
• 18:00
  simply don't know their way around the property yet.
• 18:03
  And so that's when an injury is going to happen most likely.
• 18:08
  So those are the 2 ones. When I'm sitting at a, at a
• 18:10
  conference or speaking on stage, I, I tend to bring those two up.
• 18:14
  They are very extreme examples, yes, but those are examples of
• 18:20
  if you don't have the right coverage, the standard home
• 18:24
  insurance policies are going to deny that particular claim on
• 18:27
  both, both accounts. And that can cause some serious
• 18:30
  financial turmoil for the vast majority of us in this
• 18:34
  marketplace. Yeah, don't be liable for that
• 18:37
  $780,000 ICU bill. Get the right insurance, people.
• 18:43
  And Speaking of the right insurance, Nick, tell us about
• 18:46
  proper insurance and where people can find out more.
• 18:48
  So proper insurance, we specialize solely in insuring
• 18:51
  vacation rental, short term rental, mid term rental, rental
• 18:55
  arbitrage, anything to do in the in the short term or vacation
• 18:58
  rental marketplace, namely in the United States right now,
• 19:03
  hopeful future expansion to other markets can come.
• 19:06
  You can find us at www.proper.insuretheresno.com.
• 19:11
  You can call us at 888-631-6680. Our team is here to help and and
• 19:18
  walk through what current policy that you have, what these
• 19:22
  differences are, get you a proposal on what our coverage
• 19:25
  not only would look like for you, but also kind of the
• 19:29
  premium. So you can take an in depth
• 19:31
  comparison to what you're doing now versus what this upgrade
• 19:34
  would look like for you. It's 100% free for our
• 19:38
  consultations and any follow-ups that you want, any questions
• 19:41
  that you have. And then if this is an upgrade
• 19:45
  for you, we can work very quickly with our position within
• 19:49
  the market with Lloyd's of London and our other partner
• 19:51
  concert specialty. We can turn coverage around as
• 19:54
  soon as same day if this is of utmost urgency for you.
• 19:58
  So we look forward to to you guys reaching out and you know
• 20:02
  at the very least walk away from a conversation with a much more
• 20:06
  firmer understanding of of risk management and how these
• 20:09
  insurance products work. Fantastic.
• 20:12
  And we'll put all those details in the show notes.
• 20:14
  Nick, it's been a real pleasure. Thank you for joining us on host
• 20:17
  Planet Bite Size. Thanks for having me, James.
• 20:20
  All right, that's it for today's episode.
• 20:21
  My thanks to Nick for joining us on today's show and sharing
• 20:24
  those five insurance myths. Remember, this podcast is
• 20:28
  brought to you in collaboration with House Fully, which is
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  trusted by short term rental professionals across the globe.
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  To grab these deals, click the link in the show notes or head
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  to housefully.com. For more free education tips and
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  trends from the STR industry, visit Houseplanet dot Club,
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  where you can sign up for our newsletter, listen to our
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  podcasts and download a suite of ebooks for hosts and property
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  managers. That's it for today's episode.
• 21:08
  Until next time, happy hosting.