Nasty sting in holiday rentals as insurance won’t cover in a crisis

Property owners across Australia are chasing extra income through short-term holiday rentals, but they could be in for a costly surprise.

Exclusive: Tens of thousands of homeowners who plan to earn extra cash over Christmas by renting out bedrooms or their homes are being warned of a potentially painful insurance sting.

A boom in short stay rental platforms such as Airbnb has put an estimated 140,000 short-term landlords at risk because guest damage or theft is most likely not covered by their home and contents insurance policy.

The Insurance Council of Australia is issuing a fresh warning after hearing “frightening stories” of properties being stripped or trashed by short-term renters.

Its Understand Insurance initiative says people should phone their insurance company and check their cover before opening their home to strangers, because only a small proportion of policies will protect them.

Understand Insurance spokeswoman Lisa Kable said one recent case involved a couple offering a weekend rental of their “beautiful beachside property” with rear lane access.

MORE: Airbnb couple’s chilling discovery

It’s horrible to find that holiday renters have trashed your home, and worse when your insurer won’t cover it.

“That rear lane access made it easy for the people who shipped in for the weekend to ship everything out of the home through the back lane,” she said.

The owners returned to find their property completely empty, lodged an insurance claim for hundreds of thousands of dollars, but found they were not covered.

“Owners may not realise that most insurers regard short-term holiday rental as a commercial use of the property because the likelihood something will go wrong is higher,” Ms Kable said.

Short-stay rentals have surged through platforms such as Airbnb, Stayz, Homeaway and Flipkey, and even global hotel accommodation site Booking.com has expanded into the arena.

Ms Kable said potential landlords should not rely on a rental platform’s host protection insurance, because there were gaps in the cover, and should read their policy’s product disclosure statement.

“There are ways to cover yourself and your belongings. There are products out there,” she said.

A house trashed after it was hired via Airbnb.

However, only about 5 per cent of property owners use them despite costing just $5 a day.

Landlord insurance company Terri Scheer says its short stay insurance policies only apply when an entire property is rented out, not a spare bedroom.

Terri Scheer executive manager Carolyn Parrella said damage by tenants was not always malicious or intentional.

“Even the best behaved guests can accidentally cause damage, such as spilling a drink on carpet,” she said.

“As an Airbnb host of a CBD apartment myself, I’d encourage other property owners to check guests’ prior reviews and references before accepting bookings, and enforcing strict check-in processes and house rules, to help prevent potential tenant-related issues.”

Ms Kable said the insurance issues could also work in reverse, with travellers who stayed in accommodation offered through home sharing platforms less likely to be covered by insurance if they suffered injury or theft.

@keanemoney

Short-stay rentals have surged through platforms such as Airbnb, Stayz, Homeaway and Flipkey. Picture: iStock

TALES OF RENTAL TORTURE

1. Owners of an apartment returned home to find it had been used by mail thieves who had ransacked neighbours’ letterboxes and left thousands of discarded mail items and damaged furniture. Neighbours suffered stolen credit cards and spare keys and potential identity theft.

2. A beachside home was rented for a weekend using a popular website, and when the owners returned home they discovered it had been completely emptied. Their claim for a home insurance payout was denied because the property had been used for commercial purposes.

3. A family of seven that had rented a home through Airbnb were unwittingly caught in a police raid and questioned for five hours by officers investigating a sophisticated drug lab in one of the locked bedrooms.

Originally published as Nasty sting in holiday rentals as insurance won’t cover in a crisis