Renting out your home is a great way to make some extra cash. However, as with any type of business, make sure you go into your lucrative venture with your eyes open to ensure you’re not faced with a court case and left bankrupt. When you deal with customers – even if they just stay in your spare room – there are always a number of risks involved, such as theft, damages and injuries.
Three main types of risk
There are three distinctly different types of risk related to renting out a home:
- Liability towards the tenant, should he/she suffer any damages or injury. For example, your dog bites them, they fall on a broken floorboard, or they trip over a step outside because it was too dark to see.
- Damage to/loss of your property: This could either be caused by the tenant (e.g. by spilling red wine on a carpet, or stealing your music docking station), or be the result of the tenant’s negligence (e.g. leaving the house unlocked or not activating the alarm) – which may also have relevance to a claim being paid or not.
- Damage/injury caused to another property (a third party) by the tenant for which you can be held liable. E.g. if your tenant fires up your braai and the fire spreads to your neighbour’s fence or roof.
It’s all about timing
The amount of risk you are taking depends on what basis you are renting out your home, spare room or even couch. If you are still the main occupant of the home and only rent it out on an ad hoc basis, the liability cover in your home contents’ insurance should pay out in the event of a claim. However, if your property is mostly used for short-term rentals, your insurance provider will view it as a commercial risk and suggest that you take out business cover.
At Santam, our Personal Lines policy makes provision for limited bed and breakfast cover under the household contents section for up to three rooms that you rent out on this basis while you are permanently residing on the premises. It also provides for your stock-in-trade – all the equipment, materials and goods you need to run your business –up to the insured amount shown on your schedule.
Santam provides cover for the loss of or damage to paying guests’ personal effects (excluding money and items of an exchangeable nature, such as train tickets). You further have cover for external signs, at your premises or elsewhere, blinds and canopies. If you offer a laundry service and your guests’ clothing is lost or damaged, that will also be covered.
As a Santam policyholder, remember to make use of our 24/7 SOS services. The home assistance service offers much-needed support for emergencies related to plumbing, electrical and locksmith requirements, as well as repair work to essential appliances. Should your guests suffer any trauma such as theft, burglary, hijacking or fire, we also offer a trauma benefit – the services of a registered professional counsellor.
Finally, remember that Santam automatically provides an additional 10% cover on household contents between 15 December and 31 January annually, free of charge.
How to cover your back
Speak to your insurer: Tell them exactly what you are renting out (e.g. a granny flat, spare room, or your entire home for the months of December and January). Rather be transparent than be caught off guard when it comes to claim stage. Even though some accommodation providers offer a type of host guarantee, don’t rely on this. This should not be considered as a replacement or stand-in for homeowner’s insurance.
Maintain your property: Make sure your home, garden, steps, paths, etc. are kept in a good condition, free of any hazards which could cause injury. Walk around your property and see it from a tenant’s point of view. Make sure areas are well-lit, dangerous objects are locked away from small children, etc.
Communicate clearly with your tenants: Should there be a break-in, most insurance policies will require visible and forcible entry in order to pay out. If your guests forgot to activate the alarm or left your front door unlocked, you might not be covered. Therefore it is a good idea to have a signed agreement with your guests so that they are made aware that they will be held liable for any stolen or damaged items if there are no signs of forced entry.
Write it all down: Overseas visitors don’t always understand the risks of crime in South Africa, so it’s a good idea to give them a few pointers on staying safe – e.g. don’t leave any items in your car, don’t put valuables near an open window, lock doors – and also specific written instructions on activating your alarm. Include this in your welcome pack along with important numbers such as those of your security company and the local police station.
If you have any questions about your insurance or want to amend your cover, call your Santam broker or get in touch with us on 0860 444 444. You can also get more tips about safely dealing with tenants in this article: How to safely rent out your holiday home.