Insuring a short-term rental apartment: why an ordinary policy does not protect you

Most owners of nightly rental apartments have some sort of policy, usually the one taken out with the mortgage or renewed every year out of habit. The problem is that such a policy normally covers a flat occupied by its owner for their own needs, not a property let commercially to strangers every few days. Those are two completely different risks. When a loss occurs, the insurer will check what the property was actually used for, and can refuse to pay on the grounds that you never declared that you were renting it out.

This article will not replace a conversation with a broker, but it will show you what to ask about and what not to let slide, so that the policy actually works when you need it.

Why an ordinary home policy is not enough

Standard property insurance assumes the flat is occupied by the owner or by a long-term tenant you know. Short-term rental changes the risk picture:

• Guest turnover. Several dozen strangers pass through your apartment each year, each with their own habits and level of care.
• A higher chance of damage. Floods, burnt-out appliances, damaged furniture, a fire started by carelessness. The more people use the property, the higher the probability.
• Commercial activity. From the insurer's point of view this is no longer a "private flat" but a property providing services. Many sets of general terms and conditions explicitly exclude liability if the loss arose during a letting and the policy said nothing about it.

The worst case is not having no policy. It is a policy that gives a false sense of security. You pay premiums for years, then at the first serious loss you discover the contract never covered nightly rental.

What a good policy should contain

1. Cover for the structure and fixed elements

The foundation: protection for the property itself and for so-called fixed elements (fitted kitchen, floors, doors, plumbing fittings) against fire, flooding, power surges and other events. The critical point here is that the sum insured matches the real reinstatement value of the property, not a figure from ten years ago.

2. Cover for movable contents

Furniture, electronics and appliances, crockery, bedding, decoration: everything you bought so the apartment could be let at all. In a nightly rental the contents wear out faster and get damaged more often, so this component matters more than in an ordinary flat.

3. Liability cover, private and letting-related

This is often the most important element and the one most often skipped. Liability cover protects you when your property causes damage to someone else. The classic case is flooding the neighbour below because a guest left a tap running or a pipe burst. Without liability cover you pay for someone else's renovation out of your own pocket, and such losses can run into tens of thousands of zloty. Make sure the cover extends to damage arising in connection with the letting, not merely to "private life".

4. A clause for damage caused by tenants

Some insurers offer an extension covering vandalism or theft by guests. It complements a deposit nicely: the deposit covers small and obvious damage, while insurance steps in where the amount exceeds the deposit or the guest denies responsibility.

What the insurer may not cover

Before you sign, read the exclusions in the general terms. The most common traps:

• An undeclared letting. If the policy lists the property as residential while you actually let it by the night, the insurer can refuse to pay.
• Gradual wear and neglect. Mould, a trap that has leaked for months or worn seals are not sudden events, they are a lack of maintenance.
• Cash, jewellery, valuables. Usually excluded or covered by a very low limit.
• Damage arising from gross negligence, such as leaving the flat open and unsecured.
• The excess. The amount you always bear yourself. The lower it is, the higher the premium, so choose the level deliberately.

What it costs

The premium depends on the value of the property, the location, the sums insured and the scope, but for orientation: a policy for a typical short-term rental apartment with sensible liability cover usually costs a few hundred zloty a year, often in the PLN 400 to 1,200 range, and more for expensive properties and higher sums. Measured against one or two nights of annual revenue, it is a cost that pays for itself at the first serious loss. For comparison, drying out and repairing a neighbour's flat after a flood can cost anywhere from a dozen to several dozen thousand zloty.

A policy is not the place to save a few dozen zloty a year. The cheapest contract, the one that excludes letting, is more expensive than having no policy at all, because it creates an illusion of protection.

What to watch when taking out the contract

• Say plainly that you let by the night. Do not assume it will somehow be fine. That one sentence decides whether the whole policy is valid.
• Check the sums insured separately for the structure, the contents and liability. Too low a liability sum is the most common mistake.
• Read the exclusions, not just the table of amounts. The most important information is usually in the small print of the general terms.
• Document the state of the apartment. Current photos of the contents and a handover record make it much easier to prove a loss and its value.
• Combine insurance with a deposit. They are two different tools: the deposit works immediately on small things, the policy rescues you on large events.

In short

Insurance is one of those costs that is easy to forget about while everything works. But short-term rental means, by definition, more people, more events and more risk than a flat you live in yourself. Make sure your policy expressly covers nightly rental, has solid liability cover and realistic sums insured. It is a few hundred zloty a year that may one day save you from an expense larger than the apartment's annual income.