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Renting out your vacation home is an amazing way to generate some passive income. However, like many money-making ventures, it comes with its risks. Let us have a look at some of the risks you expose yourself to by renting out your vacation home.
Property Damage When Renting Your Vacation Home
In your absence, your property is at risk of damage caused by several factors. Negligence by a smoking tenant who leaves a cigarette on may end up burning your vacation rental to the ground. Or probably your tenant’s children could accidentally break your flat-screen TV while playing innocently.
Also, natural disasters and catastrophes like hail storms or floods could damage your property. These are usually unforeseeable risks, and we have no control over them.
Liability to Others When Renting Your Vacation Home
You could be held liable for injuries that occur on your vacation rental. Legal action can be taken against you, and you will have to incur the associated legal expenses. This can also happen because of damage to third-party property on your premises. Say, for instance, a loose tile on the roof of your vacation rental falls and crashes into someone’s windscreen. You will be held liable for the associated repair costs, should the other person decide to press charges.
By renting out your vacation home, you remain susceptible to losses by theft. This risk is heightened in areas with high crime rates, and you stand to lose a lot. No doubt, renting out your vacation home has risks, as we have seen above. This is why insurance is a necessity. Insurance is there to ensure that you maintain your usual lifestyle, even in the face of such adversities.
That being said, there are a lot of factors to consider when shopping for insurance for your vacation rental. Let us have a look at the four factors below, and why it is important to give them due consideration.
1. Location of the Home
The risks that you face as a vacation homeowner could reduce or increase based on its location. If it is in an area that is prone to flooding, you would want to consider an insurance package that covers floods.
Also, the property’s proximity to amenities such as a fire station could mean the difference between saving your house from fire and watching it burn to the ground.
2. What Do You Stand to Lose?
It is important to understand what inherent losses come with renting out your vacation home. Ideally, you should only buy insurance to maintain your existing lifestyle. You do not need to insure against events that will not put a financial strain on you.
You want to ensure assets that are of great financial and sentimental value to you. If recovering from losses on these assets would be too costly or even impossible without insurance, then this is a strong indication that you need to buy insurance for them.
3. Risk Management Measures
It is considered good practice to take measures that minimize losses or potential losses. This will make it a ‘good risk’ in the eyes of the insurer. For instance, fitting your property with sprinklers and smoke alarms is a great way to mitigate losses from fire.
Before buying insurance for your vacation rental, review your risk management policies. Even when insured, you are advised to act as though uninsured and take all reasonable steps to reduce losses.
4. What Are the Exclusions in the Policy?
It is extremely important to know what your policy does not cover before buying it. It would be tragic to spend money on insurance just to be informed at the time of claim that, say, loss from flooding is an exclusion.
In some cases, it is possible to include a previously excluded risk in a policy. This usually comes at additional costs. Therefore, before buying insurance for your vacation home, ensure you know, and are okay with, the exclusions.
Learn More About Renting Your Vacation Home
As evident, getting the right insurance package to comprehensively cover your vacation rental can be an uphill task. You are probably thinking to yourself ” where the hell do I start?”
Well, you can put your worry aside because IMA Select is here for you! We have a team of professionals that is always ready to answer any questions you might have, and walk you through selecting a policy that will suit your vacation home before renting it out. Contact IMA Select today to get a bespoke policy for your insurance needs!
Have questions? Want to know more?
Reach out! At IMA, we’re here to help safeguard your future!