Condo Rental Insurance and What it Covers
Navigating rentals in a condo association is already hard enough; adding insurance can be maddening. Yet, condo rental insurance is a significant asset every condo rental owner should get.
What Condo Rental Insurance Is
Condo rental insurance is a type of insurance that applies explicitly to condo units and the owners who rent them out. As with homeowners insurance, unit overs purchase their own condo insurance.
Insurance for condo units works differently than homeowners insurance because owners are not responsible for the structure itself. Instead, condo associations take out a master policy that includes coverage for the condo building. Then, individual unit owners will have to purchase their insurance policies to cover their personal belongings.
But, in the case of condo rentals, owners need to purchase landlord insurance that applies explicitly to condos, which usually comes in the form of a rider. If you already have condo insurance and plan to rent out your unit, talk to your insurance agent about adding condo rental insurance.
What Condo Rental Insurance Covers
The difference between condo and renters insurance mainly depends on the person they protect. Unit owners buy this insurance to protect themselves from liability if something happens to a tenant or another person while on the property. Apart from this, tenants will most likely need to purchase renters insurance.
Condo insurance protects the unit owner's personal belongings, while renters insurance protects the tenant's personal belongings. Private condo insurance covers the dwelling itself, whereas renters insurance does not. The condo association's master policy will come into play for the building or structure.
In the case of personal liability, renters insurance covers the cost of property damage and medical expenses for circumstances for they are found personally liable. Private condo insurance covers any legal fees related to someone getting injured while in the unit.
Because not all insurance policies are made equal, the exact coverage can differ from one provider to another. As such, you are asking your insurance agent what coverage your condo insurance offers is essential.
Can Condos be used for Airbnbs?
You could put up your condo for rent on Airbnb and other online rental platforms. But it all comes down to whether you are allowed to do so. For that, you need to check the laws in your area and your condo association's governing documents.
Governing Documents for Condo Associations
Several homeowners and condo associations have devised HOA Airbnb rules that restrict short-term rentals or outright ban them. Some require tenants to have a minimum stay of 30 days but prohibit anything less than that. Beyond state and local laws, condo unit owners must also refer to their association's governing documents.
You may be wondering whether your condo board even has the power to restrict rentals in your association. Unfortunately, most boards do. Remember that the board has a duty to the community and should make decisions for the community's best interests. If that means disallowing or regulating rentals in your association, then owners will have to comply.
How Associations Should Handle Short-Term Condo Rentals
Homeowners and condo associations should approach this topic with open ears and an unbiased stance. Board members must analyze the situation from all angles and consider every perspective.
When examining whether to allow short-term condo rental, ask the following questions:
How will short-term rentals affect the community at large?
What exposure to liabilities will the association deal with?
Are there any requirements or restrictions that are worth putting in place?
What will the association do about condo owners and renters who violate the rules?
If your condo association has yet to decide on the matter, boards should carefully consider its Airbnb condo bylaws. Condo boards must consult with their management company and attorney and solicit input from the unit owners before deciding. Setting up a rental policy is essential if your association chooses to allow rentals. This policy can differ from one association to another, primarily influenced by your community's unique factors and circumstances.
As for specific HOA rental rules, tenants should only use the unit for residential purposes. If they have a vehicle, they must comply with the association's parking restrictions and work out the details with their landlord. Any other rules that apply to residents — such as use of amenities, alcohol use in common areas, and noise hours — also apply to renters.
How to Deal with Rental Policy Breaches
The association should impose a penalty if unit owners violate the rental policy. The harm can come in the form of a monetary fine or, for more frequent offenders, revoking their ability to rent out their units. Start with a warning letter on the first offense to give the owner some consideration before applying more severe punishments.
When developing these policies, it is always best to consult an attorney or your HOA management company. That way, the association can protect itself from potential liability.
Condo Insurance is Necessary!
Renting out condos on short-term rental sites is common practice among many owners. It benefits both parties — unit owners get to earn extra money. At the same time, renters see it as a cheaper hotel alternative. But, as with any rental, there are perils involved. To protect yourself, your dwelling, and your tenant, condo rental insurance is necessary.
Finding the right management company for your condo association can be challenging. Condominium Associates is here to help you answer questions and make a plan! Contact us today!
