Overstaying Their Welcome: How Squatters in Short Term Rentals Can Affect Insurance

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The last time you went on vacation, did you stay in a hotel or did you opt for a trendy little place you found on one of the popular short term rental apps?

Who wouldn’t want extra income (for the hosts) and unique accommodation options (for the guests)? With every benefit, however, comes a new set of challenges.

One of these challenges is the issue of these short-term rental guests overstaying their booked reservations, which can have significant consequences for both hosts and their insurance coverage.

Sounds crazy, right? However as I type this, there is a woman in Los Angeles who has been overstaying her welcome since APRIL OF 2022. Without paying. Check out the full article here.

The Growing Problem of Overstaying Guests

Overstaying guests are individuals who remain in a short-term rental property beyond their original booking period. This can happen for a variety of reasons, such as a delayed flight, a change in travel plans, or simply a desire to extend their stay. While these situations are often innocent and unintentional, they can lead to complications for hosts, particularly when it comes to insurance.

As insurance agents, it’s more important than ever that you’re asking the right questions when reviewing client’s accounts. Remember: They don’t know what they don’t know. Often clients assume they have coverage for something – but as risk advisors, we need to make sure we cover all the bases in order to ensure our clients are covered as well as minimizing errors and omissions issues.

So how can guests overstaying their welcome affect a client’s insurance? While every company is different, here are some common issues that can arise, so you’re prepared if you ever get the call.

The Impact on Hosts

When a guest overstays, hosts may face several problems:

Loss of Income: Short-term rental hosts rely on their properties for rental income, and an overstaying guest can prevent the host from accommodating new bookings. This results in lost income that can be detrimental to hosts, especially if they rely on this income to cover mortgage payments or other expenses.

Potential Legal Issues: Overstaying guests can create legal complications for hosts. Depending on local laws and regulations, evicting guests can be a complex and time-consuming process. Hosts must tread carefully to avoid potential legal disputes and maintain a positive reputation.

Increased Expenses: Hosts may incur additional expenses when guests overstay. This can include cleaning fees for extended stays and potential damage to the property. These unexpected costs can eat into a host’s profits.

The Impact on Insurance

Short-term rental companies typically provide Host Guarantee and Host Protection Insurance to help address some of the risks associated with hosting. However, these policies have limitations, and overstaying guests can affect the coverage hosts receive:

Liability Coverage: Host Protection Insurance provides liability coverage for hosts, but it typically only covers incidents that occur during the guest’s booked reservation. If an overstaying guest causes damage or injury after their reservation period has ended, the host may not be covered.

Property Damage: The Host Guarantee covers property damage caused by guests, but it requires hosts to report incidents within a specified time frame, usually 14 days after the guest’s checkout date. If a host doesn’t notice damage until after an overstaying guest finally departs, they may miss the window for filing a claim.

Loss of Income: The coverage that short-term rental companies provide such as Host Guarantee doesn’t cover loss of income due to overstaying guests. Hosts are left to bear this financial burden on their own.

Preventing Overstaying Guests

Hosts can take steps to minimize the risk of guests overstaying:

Clearly Define House Rules: Be explicit about check-in and check-out times in your house rules. Communicate these expectations clearly with guests.

Communicate: Stay in communication with your guests throughout their stay. If they wish to extend their stay, handle it through the Airbnb platform to maintain a record.

Monitor Your Property: Regularly check your property during the guest’s stay. This can help you detect any potential overstays early.

Use Automation: Short-term rental company apps allow hosts to set up automated messages and reminders for check-in and check-out times. This can help guests stay aware of your expectations.

Let’s Sum it Up

While short-term rental companies offer insurance coverage to hosts, it’s essential to understand the limitations of these policies, especially when it comes to overstaying guests. Hosts must take proactive measures to prevent and address this issue, from clear communication and house rules to regular property inspections. By doing so, hosts can protect their income and minimize potential headaches associated with guests who overstay their welcome.

More importantly, as agents, it’s incredibly important to be having these conversations with your clients and making sure you’re asking the right questions to uncover exposures such as short-term rentals that they otherwise may assume they have coverage for.

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