Renting Out Your Cottage? Be Aware Of Potential Liability Issues

For a lot of families, a summer cottage is a great investment. It’s a secondary property that gives them the perfect summer getaway out of the city.

However, the days where at least one parent could take the kids up north for two months at a time are long past. And unless you’re a very determined cottager, battling traffic heading North every Friday night like clockwork, there will be times when your little oasis by the lake might be sitting empty.

It’s a tempting idea for many such families to cash in on the AirBnB market and offer up their vacation space on the rental market. If you have a prime location, like Muskoka or the Haliburton Highlands, you can charge a premium for what is essentially a cabin in the woods, making up some of the maintenance costs that come with any property.

There are a lot of things to consider before you take pictures of the dockside sunset and put up your rental listing to ensure that your property is covered in the event it is damaged by renters, or worse, that you become liable because a renter is injured while on your property.

A Standard Cottage Owner / Seasonal Property Policy Will Not Necessarily Cover Rentals

In fact, some seasonal property policies specifically exclude damage caused by renters. A seasonal property policy will have third-party liability, to cover someone who is visiting your cottage, in the event of injury, but you need to verify whether this extends to a person who is paying to be at your property.

While a standard policy for a cottage will vary a lot depending on heating sources for the building, security concerns from vandalism and whether or not the property is on a year-round serviced road, the one thing all of these policies will have in common is that they don’t typically cover renting your cottage to a third party as part of the standard form.

You can, with most insurers who already do business in cottage country, buy up an addition to your policy to cover short term rentals. This will bump your premiums up by as much as 25%. You might also have to consider how much bump you’ll have to soak up if you have a separate marine policy for watercrafts.

There are several considerations in determining how much insurance you need to carry, for renting out the cottage, including:

  • Who you are renting to: is it friends and family or total strangers?
  • Whether you have someone in the area who can check on the property between rentals, or even during, if there is an issue? Some insurers are fine with an agency or for you to hire someone; others want the owner to be checking in on the property themselves.
  • How long a period you rent for, or how many weeks in a season? Some insurers will want to switch you to a commercial policy if you rent for longer terms throughout the year. These premiums can be double a standard homeowner / cottage owner policy.
  • You have to be aware of the limits of your policy. For example, if you can rent for up to four weeks a year and you decide to rent for six, an accident that occurs during the fifth or sixth week might not be covered.

One common aspect to most insurers of seasonal properties that allow you to rent is that you need to have signed rental contracts with each of your renters.

It’s Not Just The Cottage And Its Contents That You Have To Consider

Liability is a crucial component and one area that is not automatically provided for is liability with regards to the use of watercrafts. While it is possible to get an endorsement to cover liability issues and motorized watercraft (or ATVs on land, for that matter), it’s probably best NOT to offer these items at all and instead direct your renters to the local marina. There, they can rent a boat with all the proper coverage, equipment and licensing all addressed and managed.

What You Can Do To Mitigate Possible Claims

  • Make sure each new set of renters signs a rental agreement. You can also request a security deposit from your renters to offset any damage they cause, so that you don’t necessarily have to make a claim.
  • Remove or lock away all valuable items before you rent and secure others, like the television or BBQ.
  • Make sure that your cottage is in excellent repair:
    • the docks, steps to the beach and all decks are safe and secure;
    • the roof and chimney are in good shape;
    • all window latches are working;
    • All appliances are in good order.
  • Make sure someone is checking the property, if you are unable to, between EACH rental period. They will be looking for damage, items missing and so on. If you don’t do this, it’s hard to attribute any vandalism or other issues to the party that was just renting the property.
  • If you’re renting to families with children, make sure that the space is as safe as practicable. Have outlet covers for wall sockets handy, for example. The one item you should not offer, according to Cottage Life magazine, is personal flotation devices for kids. The possibility that it won’t be the right fit for a child and not work effectively can open you up to a liability issue. Instead, advise renters with kids that they need to provide their own PFDs for the kids.
  • Provide a clear guide to using the cottage, including using all the appliances, BBQ, rules around wood usage / open fires, non-motorized boat safety, garbage disposal and so on. People who aren’t used to the cottage or rural life might be unaware of a lot of issues, like the sensitivity of septic systems, potable water issues, and so on.
  • Make sure you’re clear about the house rules on smoking (cigarette or pot), extra guests and so on. These should all be part of your rental agreement, so there is no confusion!

A straight talk with your insurance broker should help you avoid most issues regarding damage claims and liability when renting your cottage. Just be upfront with what you want to do and they’ll help you make sure you’re covered.


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