Renting out your home to holidaymakers could cause insurance issues
Warning to check and update policy before signing up to play host.
Over the last few years there’s been a boom in social travel websites such as Airbnb, Wimdu and Couchsurfing.
They act as online marketplaces that link people looking for a more affordable or unique place to stay on a short-term basis with those willing to rent out their sofa, a spare room or entire home.
Tourists get a better deal compared to the rates on hotels, as well as the chance to 'live like a local', while hosts can use the sites to boost their income.
According to Airbnb, the typical UK host earns £2,822 annually by letting their property for 33 nights per year. So it can be a lucrative venture!
But did you know that you could be invalidating your home insurance by opening up your home and playing host to strangers?
Stranger danger
Home insurance for buildings and/or contents is partly based on who lives in the property and what the property is used for.
So insurers will want to know if you plan to let out your home in part or entirely, even on a short-term basis, as there’s an increased risk of damage, fire or theft with someone you don’t really know.
Gocompare.com says some may refuse cover based on this type of use, while others could charge an extra premium or put restrictions on the cover provided. For example, cover for theft may be excluded unless there are signs of a break in.
If you don’t inform your insurer about how you are using your property and need to make a claim, your insurer may refuse to pay out and your insurance could be invalidated.
It’s also important have a policy in place that includes appropriate public liability insurance. This generally covers you if anyone is injured when in or around your property.
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Other things to consider
Renting part or all of your home may also impact your other financial relationships.
If you own your home with a mortgage, then you’ll need to check with your lender to ensure the short-term let doesn’t breech the terms of your mortgage agreement.
If you don’t let your provider know and it’s something mentioned in your contract you could be committing mortgage fraud. Lenders may be forgiving if owners rent out rooms and remain in the property, however they are likely to be tougher on those that rent out the entire property and go on holiday or stay elsewhere.
If you rent your property, you will need permission from your landlord to make sure you’re not breaking the terms of your tenancy agreement by sub-letting.
The Government announced in the 2015 Budget that it’s considering changing the law to make it easier for individuals to sub-let a room in order to support the “sharing economy”. You can read more in: Landlords face 'nightmare' after Budget sub-letting change. However the law hasn't changed yet so it’s best to double check.
The other danger is falling foul of the taxman. Though the Government allows people who rent a room to a lodger to earn up to £4,250 tax-free, it only applies if it’s your main home and only part of it is rented out. So the exemption doesn’t apply to those that rent out their whole home to people. Rental income that doesn’t qualify is taxable at your normal rate and would need to be declared on a self-assessment tax return.
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