Jim owns a nice home near Old Town. He was offered a lot of money to rent his home out during the Sundance Film Festival. He didn’t know that the renters planned to use his home as a “lounge” and host a few parties there. Oops – one of the attendees wore crampons on the wood floors and ruined them. This is just one example of possible mishaps when you rent your home or condo. If you have a “rental endorsement”, you will most likely be covered for commercial activities, but not always.
Does Your Standard Homeowners Policy Cover You?
A recent article in “Utah REALTOR” Magazine startled me. I didn’t realize that a traditional, standard homeowners policy will not cover short-term rental risks because insurance companies consider short term rentals to be part of the business activity exclusion written into almost all homeowners policies.
Yikes! Business activity exclusion? Who knew? When I shared this revelation with my millennial assistant, Katye, she said, “I guess it’s like Uber drivers who are not covered under their normal auto insurance policy when driving around clients.”
According to Randall Smith, President of Financial Insurance Management Systems, Inc., “The minute you rent any portion of your house to anyone, it’s considered to be a business activity and any lawsuit that results because of the renter being on your property definitely leaves you open to unpaid claims.”
Essentially, you may need a commercial policy. Some online sites, like Airbnb and VRBO offer general liability insurance, but it can be limited.
If You Plan to Rent Your Property During Sundance
It’s not an uncommon practice for Park City homeowners to rent out their home during the Sundance Film Festival. After all, housing demand far surpasses supply, and a large amount of rental income can be made in 10 days or less.
If you are going to rent your property to short-term renters, you should talk with an experienced insurance broker to make sure you have the proper insurance coverage in place.
Bonita Vanderkooi with State Farm Insurance graciously contributed information to this article. Her office is located at Redstone, Kimball Junction. She can be reached at 435.657.2220 or firstname.lastname@example.org.