Holiday homeowners keen to capitalise on rentals from their properties over the holiday season should insure adequately against damage and liability.
Barrett explains that personal lines policies generally exclude any liability arising out of the letting and /or hiring out of any immovable or movable property for a fee, reward or any other consideration. As for contents, insurers will generally restrict theft cover to forcible and violent entry/exit only, so there would be no theft cover, if there were no evidence of this having taken place.
According to Mandy Barrett of insurance brokers Aon South Africa, holiday homeowners are naturally keen to generate cash flow from their holiday homes as these stand idle for much of the year and absorb money in upkeep, security and bond repayments.
She says while they are looking forward to a bonanza from renting out their coastal or mountain property over the festive season they could face losses that severely dent or exceed any profits.
“The problem is that the insured risk of your property and its contents change if you open it to visitors who may not show due care to avoid damages or loss.”
Barrett explains that personal lines policies generally exclude any liability arising out of the letting and /or hiring out of any immovable or movable property for a fee, reward or any other consideration.
As for contents, insurers will generally restrict theft cover to forcible and violent entry/exit only, so there would be no theft cover, if there was no evidence of this having taken place.
If there were such an incident, you may find your premium or excess is increased, she says.
Barrett says typically owners would insist on a deposit from the tenants but this may be woefully insufficient to cover any damages and the chances of recovering the costs of those damages are extremely slim and difficult to prove.
“The best option is to declare the changed risk to your insurance broker, to accurately scope cover for your exposure and so avoid possible later repudiation of any claims by the insurer.”
She points out that this will lead to a re-assessment of the risk and an adjustment of premiums. Alternatively one could exclude certain risks from the cover, meaning accepting the risk yourself and will not have a claim for those risks in the event of a loss.
“The homeowner could also accept a higher ‘excess’ (the initial portion of a claim that you would have to pay) or could ‘cap’ the payout on specified risks in order to moderate the premiums.”
She adds that the basic idea is to ensure that as a holiday homeowner, you are properly covered, or your risk is reduced and any claims you may have are not repudiated. It’s advisable to consult with your broker.
