What Is Condo Rental Insurance? What Does It Cover?

Navigating rentals in a condo association is already hard enough; adding insurance on top of it can be maddening. Yet, condo rental insurance is a significant asset that every condo rental owner should get.

What Is Condo Rental Insurance?

Condo rental insurance is a type of insurance that specifically applies to condo units and the owners who rent them out. As with homeowners insurance, condo insurance is usually purchased by the unit owner.

Insurance for condo units works differently than homeowners insurance because owners typically 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 own insurance policies to cover their personal belongings.

But, in the case of condo rentals, owners need to purchase landlord insurance that specifically applies to condos. If you already have condo insurance and are planning to rent out your unit, talk to your insurance agent about adding condo rental insurance. This usually comes in the form of a rider.

What Does Condo Rental Insurance Cover?

Unit owners buy this insurance to protect themselves from liability in case something happens to a tenant or another person while on the property. Apart from this, though, tenants will most likely also need to purchase renters insurance. The difference between condo insurance and renters insurance mainly has to do with the person they protect.

Condo insurance protects the personal belongings of the unit owner, while renters insurance protects the personal belongings of the tenant. Additionally, personal condo insurance covers the dwelling itself, whereas renters insurance does not. For the building or structure, the condo association’s master policy will come into play.

In the case of personal liability, renters insurance covers the cost of property damage and medical expenses for circumstances that they are found personally liable for. As for personal condo insurance, it covers any legal expenses 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, it is important to ask your insurance agent what type of coverage your condo insurance offers.

Can You Airbnb Condos?

Generally speaking, you can 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 two things — the laws in your area and your condo association’s governing documents.

State and Local Laws

There may be laws in your state or city that specifically govern how owners can rent out their units. For instance, in some major cities like Austin, Boston, and Seattle, you need to have a license to rent out your condo. San Francisco, on the other hand, requires owners to register as a business before they can rent out their units for short term durations. In Los Angeles, condo owners are limited to renting out their units for up to 120 days per year.

Legislators all over the country were quick to adopt new restrictions as the popularity of Airbnb grew. This is partly due to the negative effect it had on hotels. In fact, the Bureau of Labor Statistics indicated in May 2018 that Airbnb caused a 3.7 percent drop in profits for the hotel industry. For specific local regulations on Airbnb, visit the website’s help center.

Condo Association’s Governing Documents

Beyond state and local laws, condo unit owners must also refer to their association’s governing documents. Several homeowners and condo associations have come up with 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.

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 it 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 Should Associations 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 take every perspective into account. When examining whether to allow condo short term rental, ask the following questions:

• How will short term rentals affect the community at large?
• What liabilities will the association be exposed to?
• 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 as well as solicit input from the unit owners before making a decision.

Condo Rental Restrictions to Apply

If your association ultimately decides to allow rentals, it is essential to set up a rental policy. This policy can differ from one association to another, largely influenced by the unique factors and circumstances in your own community. But, at a minimum, condo and homeowners associations rental restrictions should include the following:

• Require unit owners to complete an application form consisting of pertinent details such as the tenant’s name, contact information, length of stay, start and end dates, etc.
• Require unit owners/landlords to enter a lease or rental agreement with their tenant/s. This agreement must also include the association’s rules which the tenant/s must agree and adhere to.
• Impose occupancy limits.
• Require unit owners to purchase landlord insurance and the tenant/s to purchase short term renters insurance.
• Determine who will be responsible in case the tenant/s violate the association’s rules — will the tenant or condo owner/landlord answer for it?
• If you only allow long-term rentals, consider charging unit owners a nominal fee for stays under 30 days.
• Determine whether long-term tenants have voting rights, can act as proxies of their landlords, and can attend meetings and social gatherings.

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.

Dealing With Rental Policy Breaches

If unit owners violate the rental policy, the association should impose a penalty. This can come in the form of a monetary fine or, for more frequent offenders, revoking their ability to rent out their unit. Start with a warning letter on the first offense to give the owner some consideration before applying more severe punishments.

It is always best to consult an attorney or your HOA management company when coming up with these policies. That way, the association can protect itself from potential liability.

Is Condo Rental Insurance 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 while renters see it as a cheaper alternative to hotels. But, as with any rental, there are perils involved. To protect yourself, your dwelling, and your tenant, condo rental insurance is a must.

Finding the right management company for your condo association can come as a challenge. Make the process easier by starting your search using our comprehensive online directory.

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