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South Africa remains a popular tourist destination, having welcomed over 10 million visitors in 2017 alone. To capitalise, local homeowners have started to cash in on the short-term leasing trend. According to Airbnb, a leading international short-term lodging specialist, almost 400 000 guests were welcomed to South African Airbnb homes in 2017.
While the need to generate additional income through short-term holiday leasing is understandable, homeowners need to be aware of the insurance risks involved before they hand over the keys to their guests.
Be open about your intentions from the outset, suggests Nazeer Hoosen, CEO of PPS Short-Term Insurance, a subsidiary of PPS Insurance Company Limited. He explains that most policies don’t exclude homes being rented out, but it is advisable for homeowners to disclose this information beforehand.
“This way, all the risks are fully understood by the underwriters. Failure to disclose this kind of information may lead to issues down the line when it comes to claiming back should something go awry,” he says.
Furthermore, all policies carry a ‘non-disclosure/misrepresentation’ condition. “This means that if the insurer receives a claim for damages that is perceived to be prejudicial to them, a homeowner’s policy could be cancelled.”
Do you need a separate policy?
So, the question stands, should you take out a separate policy to cover your home and belongings if you rent it out? “Not necessarily,” says Hoosen.
“If your insurance provider is comfortable accepting the risks, then there is no need for a separate policy. Most policies include liability sections which you must opt for, such as injury, illness or death to a third party and damage to third party property.”
Moreover, should your tenant act in a way that could compromise your policy validity, the onus is on you, the policy holder, to immediately inform your insurance provider of these actions.
However, to provide homeowners with additional peace of mind, he advises to do take a separate policy for the other matters, such as rental recovery and tenant eviction.
To lease or not to lease… you decide
Renting out your home or property does come with considerable risk. “My view is that a tenant will never look after the home with the same passion as an owner, there is always a risk. Make sure to read through your policy very carefully before making the decision to rent out your home this holiday,” concludes Hoosen.
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