Insurance gaps within the property sharing market

Pikl highlights the potential pitfalls in standard home and landlord policies

With the pandemic making travelling abroad more complex during 2020 and 2021, holidaymakers have been opting to explore all the sights that our very own UK shores have to offer.

As of July 19th, quarantine-free travel has now resumed for UK residents who are fully vaccinated. However, according to a survey by Timetastic.co.uk earlier in the year, 73% of Brits said they will choose to holiday within the UK, even after Coronavirus travel restrictions have been lifted.

With the rise in staycations, more people may be tempted to rent out their spare room or landlords might want to let empty properties on a short-term basis via sites such as Airbnb. As the sharing economy has grown it has unfortunately created some gaps in insurance coverage. Specialist provider of Short-Term Let Insurance in the UK, Pikl, looks at where different property insurance policies fall short.

Home Insurance

If a property is being used for short-term letting some insurers will not provide full cover for a property being let out on platforms such as Airbnb. In addition, if this has not been disclosed to an insurer it could potentially invalidate your existing standard Home Insurance policy or lead to a claim not being settled for any guest related incidents whilst they are staying in the property.

Landlord Insurance

Short-term tenants are not always covered by standard Landlord Insurance products, which specifically require a certain type of tenant, background checks, referencing, and a minimum of six months assured shorthold tenancy (AST) with the tenant. In most cases, sub-letting is excluded.

Second-home and holiday homes

Policies sometimes allow guests to stay in properties for a small period of time, but insurance cover is usually inadequate, often excluding cover for malicious damage and theft from guests, for example. Further complications are likely to occur if a professional company were to offer short-term lets for their property on a full-time basis.

Blocks of flats

Most providers will not allow short-term letting or holiday letting within a block of flats, however, that wording is often vague. Some insurers have rules that allow coverage if less than one quarter of the block uses Airbnb, but in practice how this is monitored and enforced is unclear.

Leasehold agreements often add to the problem as many contracts were written a long time ago before home sharing became widespread and therefore have not accounted for the concept.

Furthermore, residents’ associations that are not in favour of short-term letting have been known to try and use the argument that insurance policies would be invalidated as a reason to prohibit the practice within their block of flats.

Guest houses and B&Bs

Some customers who offer short-term stays have been placed on guest house or B&B policies when they are not such businesses full time, burdening them with unsuitable terms and conditions such as inappropriate health and safety requirements, and the commensurate charges. This potentially leaves the customer inadequately covered for personal contents.

Some insurance providers have products which allow Airbnb-style hosting, but they are primarily designed for B&Bs, holiday homes or simply provide Home Insurance which is not voided by the insurer when there is short-term letting, without actually providing coverage for the short-term letting activity. These products often fall short of the customer's expectations of cover and are not tailored to meet the needs of sharing economy hosts.

Peace of mind with Host Insurance

As you can see, short-term letting activity will likely not be covered by traditional Home or Landlord Insurance and in some cases, offering these types of holidays could leave you exposed to insurers not settling claims for guest related incidents or potentially invalidating your policy.

If you are renting a property out on a short-term basis, Short-Term Let Insurance, or Host Insurance, can protect you and your property. A policy can cover you against fire, escape of water and accidental or malicious damaged caused by guests, as well as theft by a guest, any injuries they may sustain while staying in your property and any damages they make to third party property.