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Ensuring Insurance for Asheville’s Vacation Rentals

For some residents of the Asheville area, the good fortune of living in a hotbed of tourism offers opportunity by the utilization of their home as a short-term/vacation rental.  Notice I said some residents.  This hotly debated topic has made headlines in the past year as city leaders decide where to draw the line on short-term rentals within the city limits.  Currently, there are no restrictions in the county related to short-term renting.

As of this writing, the practice of renting out what is deemed “accessory dwellings” (basement apartments and detached cottages, among others) is illegal and carries with it a $500 per day fine by the city.  However, a recent City Council vote amended a previous City of Asheville rule and now allows partial home rentals so long as they meet the conditions of the term “homestay.”  This set of circumstances describes a resident renting out part of their home while continuing to reside there.  By and large the recent changes set forth by the city creates more flexibility by: eliminating a minimum house size, eliminating a rental restriction cap of 25% square footage of the dwelling, and allowing for older “non-conforming to modern land-use rules” homes to be used for homestay purposes.  These changes did see a few restrictions, among them – the number of rental rooms allowed has been cut from 3 to 2.  On the whole, it appears that the City of Asheville is working to strike a balance in the availability of short-term renting by residents.

So you have run the City of Asheville gauntlet-  qualifying your home as an acceptable homestay and have paid $200 for a homestay permit (or have a residence in the unrestricted county). You say to yourself, “Yes, the hard part is over!”  The next stop is the bank, right?  Perhaps, but for more than depositing money from the rentals – it may be to borrow to cover for losses at the property.

Imagine you are one of the property owners I just described.  Now imagine that the unthinkable happens: the home burns to the ground because a guest accidentally knocked over a candle or an injured guest sues you for medical costs after tripping off of that last step you have been meaning to replace.  Now imagine your insurance agent or claims adjuster breaking the news that your policy will not cover this and that trip to the bank will be a sizable withdrawal and not a deposit.  It finally dawns on you that your hard work and property equity is gone in an instant.  Did your stomach just sink? 

 Conditions influencing properly insuring your property include, but are not restricted to:

 -         How the home is inhabited / average length of stay

-          How the property is managed (yourself, property management company, etc.)

-          How the property is marketed (yourself, Airbnb, VRBO, etc.)

-          How the property is owned (personal name, LLC, trust, etc.)

These are among the unique property characteristics that will determine which insurance company will accept your specific risk and offer a competitive price.  Proper coverage may come in the form of making small changes to your existing home insurance policy (called endorsements) or writing a different kind of policy altogether.   Keep in mind that standard home insurance policies are written with the intention of covering personal residential circumstances, not the property being used as a mini-hotel.   Do not wait until your first guests are unloading their cars to speak to your insurance agent about your options. 

Also, do not be surprised if your current home insurance carrier is not interested in these kind of risks.  Oftentimes this coverage is specialized and with so many factors potentially affecting the protection of such a large asset, you should always speak to an independent insurance agent.  Independent agents have access to a wide variety of options and solutions to account for individual situations and needs.  This may benefit you in the future, especially if you have claims or a change in the usage of the property.  In all of the cases described, multiple options are your friend and the only place you are assured of having them is with an independent insurance agent.

 If you are interested in renting out your residence, do your homework and talk to the experts.  With potential fines and gaps in your property coverage working against you, being smart and thoughtful will make all the difference in what that next trip to the bank will look like.

Anthony Mitchell – Insurance Service of Asheville - amitchell@isa-avl.com

Posted 8:44 AM  View Comments

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