For those looking to make a quick buck, home-sharing and short-term rentals are an easy way to make some extra money. But if you’re thinking of signing up for a service like Airbnb or Vrbo, you need to be prepared for the risks that come with inviting strangers to stay in your home. And what many potential hosts don’t know is that as soon as someone starts paying to stay in your place, your home insurance can be impacted, too.

Before you jump into your new hosting role or if you’ve already rented out your place, we want to help you understand how renting on a short-term basis affects your home insurance.

Heads up! Insured with Sonnet? Check out our FAQ to find out how your Sonnet home policy covers you for short-term renting. And, don’t hesitate to contact us if you’ve got any questions for us about short-term rentals. We’re here to help!

Does my homeowners insurance cover the short-term rental of my home? 

If you plan on renting your home regularly, the very first (and probably most important) thing you need to do is contact your home insurance company to learn if short-term renting is acceptable.

What you might find out is that your home insurance policy could actually exclude short-term rentals – many do, in fact. This is because listing your private residence for short-term rentals in exchange for payment essentially turns your home into a business. And, commercial activity isn’t covered by a standard homeowners policy.

You also need to remember that your homeowners policy is reflective of your unique personal details, with the expectation that you, the owner, will be living there full-time. Having a rotating roster of people stay in your home while you’re not there isn’t exactly the most appealing situation to an insurer – it’s just too risky. Changes in occupancy affect your coverage and, in most cases, traditional home insurance won’t cover anything that happens to your personal belongings, damage to your property, or personal liability for injury to guests resulting from short-term rental activity.

So, what does this mean for you? Well, it means that your home insurance on its own might not cut it, depending on who you’re insured with. Every insurance company has different rules for short-term rentals – this is why it’s so important to contact your provider. The best thing you can do is to find out what they will and won’t cover ahead of time so you’re prepared, and have time to get extra protection if you need it. You might require special short-term rental insurance to handle the new risks that hosting short-term guests brings.

Why do I need insurance to cover short-term rentals?

Having people you don’t know stay in your house, cottage, or vacation home while you’re not there means anything could happen. Let’s say you’re going out of town for the week and decide to rent out your place while you’re away to make a little extra cash. But when you return, your home has been destroyed by partiers who have left thousands of dollars in damage.

This cautionary tale might seem extreme – but it happens! And so can a whole lot of other things. If you’re renting out your home on a short-term basis, you need protection that includes (but is not limited to):

• Coverage for property damage caused by a short-term tenant or their guests. As we’ve shown in our example just above, renters could damage your property. You’d end up paying out of pocket to repair or replace it if you’re not covered.
• Coverage for theft or attempted theft caused by short-term tenants or their guests. Although you want to make sure you don’t leave your valuables lying around, you could still have your personal belongings stolen. (Keep in mind, theft or attempted theft by any tenant, roomer, boarder, or members of their household are generally excluded on most home insurance policies.)
• Liability insurance for short-term rentals. This is a big one. If a short-term tenant or guest is injured on your property, you could be sued for their medical expenses.

Did you know? Depending on where you live in Canada, “short-term renting” could be a period of anywhere from a day to six months. Some big cities (like Toronto) limit short-term rental periods to 28 days – make sure you know what’s allowed under your local bylaws before listing.

I want to rent out a portion of my house. Will my home insurance cover that? 

Your home insurance could cover the short-term rental of a portion of your house (like a bedroom) or a separate unit (like a basement apartment) – as long as you’re living there year-round. But again, make sure you call your insurer to find out what is and isn’t covered.

Do home-sharing services (like Airbnb or Vrbo) provide short-term rental insurance?

Online home-sharing networks may offer additional coverage for hosts. Their coverage isn’t meant to replace an actual insurance policy, so you need to make sure you have the right protection in place either through an endorsement on your own policy or through an additional policy.

The smart move here is – you guessed it – to speak with your insurer to find out your exact needs, and how the hosting platform’s coverage could work with yours.

If you’re renting your place through an online classified service (like Craigslist or Kijiji), they probably don’t provide insurance coverage at all. You’ll have to rely entirely on your home policy (if coverage is offered) or you may need an additional policy. A word of warning: renting short-term from a service like this is extremely risky. It’s best to use a certified home-sharing service (like Airbnb or Vrbo) where they vet the customers based on the experience of other hosts.

I’m a tenant. Can I list my apartment or condo as a short-term rental?

Want to rent out your apartment while you’re jetting across Europe? This is considered subletting and doing it without your landlord’s permission could violate the terms of your lease. Review your lease agreement and the rules for renting in your province, to make sure it’s allowed before handing over your keys.

When it comes to your condo, home-sharing or short-term rentals could also be in violation of your condo board’s policies. Make sure you’ve read all the fine print on your condo agreement.

In either case, you need to contact your insurer to discuss what your condo insurance or tenant insurance does and doesn’t cover regarding subletting or short-term rentals.

How much is short-term rental insurance in Canada?

There’s really no straightforward answer to this one. Depending on which insurer you’re with, you could be charged based only on the number of days you have paying guests. Or, you might pay a flat rate on top of your regular monthly premium. Regardless, you’ll be paying more since you’re now riskier to insure in the eyes of your insurer.

To determine the cost of your short-term rental insurance, an insurer will consider things like:

• The amount and duration of rental activity you’re expecting
• The address of the short-term rental property
• Details about the property – including a cost list for the contents in the short-term rental property
• Your past claims

Since platforms like Airbnb are relatively new and come with some risks, short-term rentals are still a grey area when it comes to home insurance. No matter what, you need to let your insurer know about it to make sure you have the right coverage in place – and, most importantly, that you’re not voiding your current coverage.