The political bunfight over negative gearing has been framed by some as a generational conflict. And if home ownership is a battle, many older Australians have by far the most formidable arsenal. Generations X and Y may have sharper eyesight and less creaky joints, but their parents and grandparents often own swanky houses in desirable streets, writes Campbell Fuller.
Owning a million-dollar home doesn’t necessarily allow you to live like a millionaire, as many an asset-rich, cash-poor retiree has discovered. But the advent of the sharing economy has created the means by which home owners can extract revenue from their place of residence without having to sell it.
The past few years have seen a proliferation of website platforms that allow homeowners to rent out their home, or just a bedroom, to short-term holiday-makers. For empty nesters looking to cash in on the kids’ now-vacant bedrooms, or just seeking some company, the appeal of these platforms is clear. But allowing strangers to stay in your home, especially on a commercial basis, may have implications for your insurance arrangements.
HERE’S WHAT YOU NEED TO CONSIDER:
Am I allowed to let my home for short-term holidays?
Despite thousands of Australians already renting out their homes through home-share platforms, the laws governing the practice are still being ironed out. Just as ride-hail services remain technically illegal in some states and territories, the law hasn’t quite come to grips with the boom on home-sharing. Local bylaws may not allow it. Several local councils have banned or restricted the practice in response to anger from apartment residents who resent suddenly finding they live in a hotel.
Many strata residences do not allow short-stay letting, although it’s not clear whether those by-laws would stand up to a court challenge. In April the Victorian Civil and Administrative Tribunal ruled Owners Corporations didn’t have the power to prevent residents renting out their homes to short-term tenants. The New South Wales Government is conducting a review into the adequacy of regulation for short-term holiday letting in that state.
Where can I find an insurance policy to cover home-sharing?
Policies are available to cater for this growing sector, though the insurance market for home-sharing is still developing. Expect insurers to rapidly roll out more products catering to the demand once governments clarify the laws and regulations in this area.
You can find insurance specifically for short-term holiday letting at www.findaninsurer.com.au.
Won’t my normal home building and contents insurance cover me for home-sharing? And what about landlord’s insurance?
Neither standard home insurance nor landlord insurance are designed for short-term letting so you could be left exposed if your guests leave you an unpleasant surprise. The key issue is that you have that you have entered into a commercial short-term letting arrangement with these holiday-makers. They are not just private guests in your home. Standard home insurance policies may therefore not cover you if your guests steal or cause damage to your property. There is also the serious consideration of public liability insurance, and whether you could be vulnerable to a lawsuit should your guests be harmed while on your property. Though home insurance does include public liability coverage, the commercial nature of home-sharing may invalidate any arising claims.
Landlord’s insurance is typically designed for longer tenancy periods and may require a documented tenancy agreement. If uncertain, read your home insurance product disclosure statement (PDS) or contact your insurer.
Don’t these home-share websites have their own insurance arrangements?
Some short-term rental platforms do include their own insurance cover for hosts that can cover them for claims from third parties (including guests) for bodily injury or property damage. The amount covered can be limited. Other platforms partner with insurance companies to offer policies for hosts to purchase, and there are some other platforms that offer a limited amount of protection for the hosts’ own property, but typically advise that this should not be seen as a replacement for homeowners’ insurance.
Given the wide-range of short-stay websites available, don’t make the mistake of assuming the one you’re using will automatically protect you against all possible risks. This is one time when you’ll want to put on the reading glasses to check the fine print.
What if I only “swap” homes?
Of course, letting strangers into your home doesn’t need to involve a commercial transaction. In recent years there’s also been a growing trend of families “swapping” homes for a period of time. It’s a mutually beneficial arrangement designed to save each party on accommodation costs.
Once again, it’s advisable to check with your insurer whether your policy provides appropriate protection for potential damage to property and third party liability.
They say travel broadens the minds, and it can now also fatten the wallet if you’re willing to open up your home to paying guests. But if you let the potential rewards blind you to the risks, it could also empty your bank account.
“In recent years there’s also been a growing trend of families “swapping” homes for a period of time.”
ABOUT
Campbell Fuller
Campbell Fuller is Understand Insurance’s spokesman. For more tips about insurance issues, visit www.understandinsurance.com.au. Understand Insurance provides practical information to help you find out more about insurance and make decisions that meet your needs. Understand Insurance is an initiative of the Insurance Council of Australia, the peak body for the general insurance industry.
Website insurancecouncil.com.au
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