30A Real Estate

THE SHORT TERM RENTAL CONUNDRUM

There is a lot of smoke out there about Short-Term rentals specifically rentals of less than 7 Days.  The idea that a Condo cannot be rented for seven days is problematic, always has been and always will be.

Now with the expansion of popularity of the “shoulder seasons” as the property management business calls it, being the Spring and Fall months with various festivals and other events going on, the demand for three day or long weekend rentals is growing and will continue to grow.

There is a lot of incorrect information out there about insurance and the Short-Term rentals. Rumor has it that insurance companies will no longer provide coverage for rentals of less than 7 days. This is causing mass hysteria in the rental community and a lot of stress on real estate agents trying to sell homes with good rental history or potentially exception rental potential.

Here are the real facts :

When a customer purchases a home or a condo it is in fact an option for them to go this route.

Why do some insurance companies refuse to insure homes and condos rented less than 7 days?

Florida domiciled, admitted insurance companies have never been crazy about short-term rentals, but in the past some would insure them. TODAY, no Florida domiciled admitted carrier that we are aware of will knowingly insure a home or condo rented for less than 7 days.  They do not like the increased exposure of transient rentals but more importantly, their re-insurance companies and specifically the Florida Cat Fund ( Re-insurance source for most if not all admitted carriers including Citizens) specifically excludes short-term rentals. In other words, the insurance company’s Insurance Company will not let them insure them.

Will some insurance companies write policies for rentals of less than 7 days?

Insurance for homes and condos rented for less than 7 days is most often available through Coastal Insurance Agency and our agreements with several SURPLUS LINES companies in what we call the residual market. These companies are typically very large national insurance companies that are not dependent on the Florida Cat fund and underwrite everything from Ship Yards to Race Tracks, to guess what Short Term rentals.

Does insurance for short-term rentals cost a lot more than a traditional home or condo policy?

In all cases it cost more. In some cases it can be as little as 20-30% more and in isolated cases we have seen it cost three or four times more. On average, it is probably about 50% more. 

When a buyer is trying to make a decision on whether to rent for 7 days or more or allow short-term rentals.

When we have a buyer call us for insurance, one of the first questions we ask is “are you going to rent the home”?  If the answer is yes, we ask if they are going to entertain rentals of less than weekly. If they want to consider the option, we give them quotes for both 7 days or more and less than 7 days. We recommend that they visit the issue with their real estate agent and prospective rental Management Company and make a business decision based on projected rental income breakdowns.

What happens if they purchase a home or condo and rent for less than 7 days even though the agreement with the insurance company is only to rent for 7 days or more?

Many insurance companies are doing internet searches after the client buys the home and if they find that it can be rented for less than 7 days they are cancelling the policy. Others will just wait until there is a claim and the client has a great risk of having a claim denied.

If you or your clients have any questions, please do not hesitate to call Kim Shahid Sales and Marketing  of Coastal Insurance Agency at 850-837-4653