Take Care When Renting Out Your Residence

In recent years, it has become increasingly popular to temporarily rent out residential space. This may take the form of any of the following:

• Renting out an entire home for, typically, less than 30 days
• Renting out subparts of a home for, typically, less than 30 days
• Renting out all or part of an apartment or condo for, typically, less than 30 days
• Renting out a part of a room or even a single item, such as a couch (for sleeping) for, typically, a week or less

Providing residential space to others for income turns the events into business transactions. Such transactions may cause issues under several areas:

• The jurisdiction's laws
• Residential Insurance Policy
• Property Owner Association (including Condo or Apartment) Rules

Standard homeowners insurance policies do not provide any coverage for business activities conducted in the home. To be properly covered you would need to purchase a business policy—specifically either a hotel or a bed and breakfast policy.

Some insurance companies may allow a homeowners or renters policyholder to use their property as a short-term rental—assuming they have notified the company. Other insurers may require an endorsement (or rider) to the existing insurance policy in order to provide insurance coverage.  

Keep in mind that there are some insurers who will consider any rental of your home to be a business venture, requiring the purchase of a business policy—specifically either a hotel or a bed and breakfast policy—because a standard homeowners insurance policy excludes losses arising from the operation of a business.

Some jurisdictions require a license as a bed and breakfast operator to let out space. Besides licensing fees, there are other, related rules and regulations for operating as a bed and breakfast. Violation of such laws can result in significant fines. 

Property Associations create rules that are intended to address fairness and safety among its members as well as to preserve unit value. Temporary rentals may be considered a breach of rules that could result in financial penalties and/or eviction. 

If you are considering renting out your living space, take the time to make sure that you're not creating either legal or insurance problems. Discussing such coverage with an insurance professional is an ideal way to arrange for the proper amount and type of protection.