Holiday lets are all the rage. During the COVID-19 pandemic, millions of people opted for a ‘staycation’ over their usual foreign holidays. The trend seems to have stuck: Visit Britain forecasts that inbound tourism visits will reach 26.7 million, with spending at £21.6 billion for 2022.
As a result, the demand for self-catering accommodation has surged. The flexible business model of Airbnb has been embraced by property owners and travellers alike, fuelling a rapid rise in short-term lets over the last decade.
For those with a property portfolio or second home, the potential of this increasingly lucrative market can be an appealing option. But, if you’ve been considering it, have you thought about what your insurance needs may be?
- What short-term or temporary insurance options are open to me?
- Can you get temporary landlord insurance?
- Is temporary landlord insurance the same as short-term let insurance?
- Can I use any other insurance when renting a property short term?
- How short can a short-term let be?
- Is renting short-term worth it?
The type of insurance you will need for your property depends on how you intend to let it out. For example, you may wish to:
- Let out a property long term, but currently have tenants who only want to stay for a short period.
- Let a property to students for most of the year, but rent it out as a holiday home in the summer months
- Permanently rent out the property as a holiday home (such as an Airbnb)
- Rent out a holiday home for periods when you’re not using it yourself
- Let out your own home to guests for part of the year
- Provide serviced accommodation for both short- and long-term bookings
In this article we look at which insurance policies are suitable for situations like these.
If your tenants only want to stay for a short amount of time (say six months), the best option would be to take out normal landlord insurance and cancel it when you no longer need it. This could also be an option if you wanted to let out your own home for a number of months, for example because you were travelling. There are other types of insurance that would cover this situation, however as you are effectively a landlord during these periods, landlord insurance would be most effective for protecting your liabilities. Bear in mind, though, that if your property is unoccupied for more than 60 days, you’ll need unoccupied property insurance.
On the other hand, if you went travelling and wanted to let your home as a short-let Airbnb, you’d need specialist holiday let insurance to cover that period. In a similar vein, if you wanted to rent a home to students for most of the year, but also use it as a holiday let in the summer, you’d need short-term landlord insurance that allows you to swap tenancy types between an Assured Shorthold Tenancy (AST) and a holiday let. However, some landlord policies will require you to have an AST in place as well as other terms and conditions, so it’s important to check the policy wording and make sure it meets your needs.
Temporary landlord insurance is normally buy-to-let insurance used to cover an AST for a shorter than normal period. However, it’s worth noting that these policies may have terms that state that there is an AST in place for a minimum of six months.
It’s important to make sure that the insurance you have protects your liabilities and your financial investment. Opening your doors to multiple, unvetted guests may mean the people staying in your property are less invested in it that a long-term tenant might be.
If you’re looking to rent out your property on a short-term let basis, there are two main types of insurance to choose from: holiday home and serviced accommodation. But what are they?
Serviced accommodation fits somewhere between a hotel and a traditional holiday let, combining hotel-like services, such as housekeeping, with added space and privacy, plus amenities such as cooking and washing facilities. They also tend to be available for short- or longer-term bookings, rather than in blocks of a week at a time.
Serviced accommodation insurance is tailored to this specific model of short-term letting. Key covers include buildings (if required), contents, business interruption, public liability, and employers’ liability. Add-ons such as legal expenses and terrorism cover can also be arranged.
At Alan Boswell Group, our serviced accommodation insurance is specifically designed to cover a serviced accommodation business and its associated activities and liabilities. The business interruption cover included in the policy is based on estimated annual turnover, which takes into account seasonal adjustments in income. This is a key point of difference compared with buy-to-let insurance, which only provides cover for standard loss of rental income and relies on an AST being in place at the time of the loss.
Holiday home insurance
Holiday home insurance is short-let cover designed for residential properties that are commercially let (or for the owner’s occasional use), but which offer no added servicing or amenities. This type of insurance is much the same as serviced accommodation cover, except it includes loss of rent/alternative accommodation rather than business interruption cover.
It’s also worth noting that overseas holiday homes also have specific insurance requirements. For instance, you may need to cover travel expenses incurred when reaching your property in the event of an emergency.
For more information on holiday lets, see our guide to renting out a holiday home.
Insurance for an Airbnb
Many people now turn to online platforms such as Airbnb and Vrbo as a convenient way to list their properties for short-term rentals. Other options include listing properties with sites like Booking.com, Homestay.com, Simplyowners.net, Flipkey.com and Onefinestay.com.
The big advantage of these services is the ease with which you can advertise your property and find short-term guests. Another attraction is that many platforms offer ‘free’ insurance. However, a quick comparison of the insurance offered by Airbnb and Vrbo shows neither is comprehensive or likely to meet your needs.
AirCover for Hosts is essentially comprised of two sections which cover property damage up to $1million, and your liability if a guest was injured, up to $1 million. However, Airbnb is very clear that AirCover is not a substitute for your own insurance, and therefore there are gaps in cover. Airbnb also states that AirCover isn’t actually an insurance policy. This means that, if there was a problem, you wouldn’t have any recourse through an Ombudsman, as you would with an FCA regulated insurance provider.
Vrbo also provides a similar level of cover, with both liability and property damage covered up to $1million.
However, there is much that needs to be covered if you own a rental property, including loss or damage caused by fire, theft / burglary, storm, flood, escape of water etc.
Bespoke insurance for properties let through Airbnb or Vrbo is designed to provide the widest possible cover, including:
- buildings and contents, including theft and damage by guests
- liability to guests and the public
- employers’ liability insurance for any cleaners or maintenance staff
- standard perils such as fire, flood, subsidence etc
- loss of expected rental income, based on past and future bookings
- the option to switch between different tenancy types within the same policy
- alternative accommodation for guests if the property is uninhabitable due to an insured event.
It’s also vital that you inform your insurer that you are renting out your home via Airbnb, Vrbo or a similar platform. Failure to tell your insurer exactly what your property is being used for is likely to invalidate any policy you hold.
- “Can you rent a property for 1 month?”
- “Can you rent a property for 3 months?”
- “Can you rent a property for 6 months?”
In England, under an Assured Shorthold Tenancy (AST) there is no minimum period for a tenancy agreement. When the Housing Act 1988 was introduced, there was a minimum period of six months for an AST. However, this rule was subsequently abolished for all new tenancies commencing on or after 27th February 1997. So, in theory, you can offer an AST for any period you wish, however landlords should be aware that Section notices cannot be served within the first six months, regardless of the length of the tenancy agreement.
There are similar rules for Scotland, Wales, and Northern Ireland.
- In Scotland, Private Residential Tenancies (PRT) are open-ended. Where the tenant has lived in the property for six months or less you must give at least 28 days’ notice when serving a section notice, and 84 days’ notice if they have lived in the property for more than six months.
- In December 2022, new rules came into force in Wales which mean that landlords must issue an ‘occupation contract’ in place of a tenancy agreement, which can be for either a fixed term or periodic. Notices cannot be served within the first six months of occupation.
- In Northern Ireland, there is no minimum period a tenancy agreement must be fixed for, but if the length of tenancy is not stated in the agreement, then it is six months by default. Notices cannot be served within the first six months of occupation.
Similarly, short-term lets of holiday homes can range from a single night to several weeks or even months.
This said, if you have property in London it is subject to the ’90-day rule’. This means that you can only let out a property on a short-term basis for a maximum of 90 days in a calendar year. The rule applies to all short-term lets, not just those advertised on Airbnb.
Renting short-term can be helpful in many circumstances, depending on your lifestyle. For example, it gives you the flexibility to rent out your own home or holiday home during periods that you aren’t in residence. This can be a useful source of income if you don’t use a property for long periods, whether through work or travel.
In addition, services like Airnbnb and Vrbo take away a lot of the hassle of letting to multiple short-term visitors. However, it’s essential to make sure you have the right insurance for your property. While home and buy-to-let insurance will cover your buildings, contents, and liabilities as a property owner, they don’t take into account the various liabilities associated with running a holiday home business. This is where specialised short-term let insurance is vital.
The best way to avoid any nasty surprises, and to safeguard your investment, is to consult an independent insurance broker with plenty of expertise in short-term let insurance and we have landlord insurance statistics to further help our clients.
The team at Alan Boswell Group has experience in dealing with all types of properties and will ask appropriate questions to fully understand the risk before advising accordingly. To find out more, contact our team on 01603 218000.