Posted : 12/09/2010
Renting out your home for a few weeks or months might seem like an easy way to earn some extra cash. However, it's important to weigh the risks against the rewards and make sure you have adequate home insurance before handing over the keys.
Short-term home rentals fit best for homeowners willing to think of their home as a business as well as a personal residence, says Kimberly Smith, founder of CorporateHousingbyOwner.com, a website where owners can offer furnished homes to workers who are in a location for a limited time.
"If you love every last piece of furniture in your home and you'd be devastated if something was gone, you have to realize that that's a possibility," Smith says.
Some of the risks may seem like penny-ante stuff. Renters might take a book they didn't have time to finish reading, mistakenly pack a child's video game that duplicates one they have at home or burn out an electric tea kettle that shouldn't have been put on a stove, to cite a few of Smith's examples.
Those small losses typically aren't covered by any type of home insurance policy. Rather, Smith says, they are "a cost of doing business" that must be taken into account by owners who want to rent out their own home.
Bigger risks such as fire damage or liability can be covered by home insurance, subject to the policy limits and deductibles. Insuring against these risks when a renter is involved might require an endorsement or rider to the standard policy, depending on how the original policy is worded.
As an example of a bigger risk, Smith recalls one instance in which a renter adjusted the water pressure on a home's hot water heater. The heater exploded, the renter ignored the problem, and the homeowner returned to find the baseboards and walls had soaked up a week's worth of water.
That case resulted in an insurance claim, and the homeowner was fortunate in that the full cost to repair the damage was recouped from the renter. But there's no guarantee that others will be that lucky.
Some losses are accidental. Others are deliberate and potentially more difficult for homeowners to protect against, notes Robert Eisenstein, founder and CEO of HomeRun Homes, which operates a rent-to-own property website at Lease2Buy.com.
Examples of deliberate losses include stripped electrical outlets and wiring, and theft of copper pipes, light bulbs or kitchen appliances. Some of these types of risks may be insurable. Others may not be.
Here are some tips for homeowners hoping to avoid insurance problems when renting for the short term:
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