The advent of platforms such as Airbnb and Bookabach have been great for property investors; often more lucrative than standard rental agreements, you can maximise financial returns on your investment, even if the property remains empty for significant periods of time. Known as rent arbitrage, it provides an easier way for investors to capitalise on higher daily rental rates compared to a fortnightly or monthly rental cost.

There are fundamentally different risks to using these platforms and renting your property out in the shortterm. Aside from the typical local government crackdown on these types of arrangements, there are insurance considerations which you may not have taken into account. Unlike when you enter into a long-term rental agreement, there is usually limited vetting done on the person or people staying in your property. Airbnb and Bookabach do cursory checks and of course there are in-app ratings systems, but those pale in comparison to the detail required to get a regular lease or residential tenancy on a property in most places in New Zealand.

Does Landlord Insurance Cover Short-Term Rentals?

A landlord insurance policy will typically provide cover, but will also generally come with associated landlord obligations. These obligations include things like reference checks, credit checks, regular inspections and rental history detail. Upholding your landlord obligations would be virtually impossible for holiday rentals, but without these checks in place, the insurer may deny any claim arising from a situation involving a short-term tenant.

How Do You Ensure A Short-Term Rental Is Insured?

Some risks and expenses can be managed by choosing the right insurer and the policy. Most short-term and holiday accommodation insurers recommend a commercial insurance policy to ensure you’re covered for a variety of scenarios. Unfortunately for most investors, these policies can cost thousands of dollars, and can be surplus to requirements with features that aren’t necessary for private rental arrangements.

The good news is, whilst scarce, there are insurance policies designed specifically for holiday homes and other property types that are rented out on a short-term basis. In addition to providing cover for your holiday home and its contents, a holiday home policy extends to cover intentional damage and theft by paying guests

. Unlike other policies, when the home is occupied by guests as a holiday home, the landlord obligations do not apply. Loss of rents is also covered, with the policy allowing for the lost income to be calculated using a combination of factors. These include losses associated with confirmed future bookings, and rent received in the 12 months preceding loss or contamination damage. As for meth contamination, it is covered in connection with the manufacture or distribution of methamphetamine at the home.

In the past, there has been confusion about whether holiday rentals are covered by the Earthquake Commission (EQC). Provided that it is your intention to live in or holiday at the property in question, you will be covered under the EQC Act.

What ABout Provider Insurance And Guarantees?

Importantly, the Airbnb “Host Guarantee” is not an insurance policy, so it should not be treated as such when claiming for loss or damage to your property.

Bookabach’s “Owner Protection” does provide a locally supported “backup” insurance policy.

This covers owner’s liability and property damage protection and just like Initio, is underwritten by NZI. In order for cover to apply, the guest booking must be booked and fully paid for online through Bookabach and a current house insurance policy is needed.

What Is Best Practice For Holiday Home Landlords?

It’s best to have a proper holiday home insurance policy in place. To protect you from any losses, damages, theft or other issues at your property, you need a tailored policy that understands how you use these spaces. This means you’ll be covered, just in case.

Initio is a New Zealand based online property insurance provider. Founded in 2011 by a couple of Kiwis, Initio set out to change the broken insurance industry by putting control back into the hands of the customer. Covering landlord insurance, short-term holiday rentals and home and contents, Initio specialises in tailored insurance, including a rented holiday home policy providing $2 million of liability cover. Initio’s market-leading policies can be quoted, bought and amended online – all in an instant. Initio is underwritten by NZI, a business division of IAG New Zealand Limited. www.initio.co.nz