Darren:                                 00:00                     Three months after that tenant moves into the property. They slipped in the bathtub and they seriously injured themselves because there’s soap scum all over the bathtub. Whose fault is that? Is that me? The landlord’s fault.

Julian:                                   00:16                     This is episode number two eight of the short term rental success stories podcast. He what is going on in host nation. I am just so grateful for everybody that was leaving so many awesome, nice reviews. Congratulations to our winners. Amy Cameron and Bethany on the vacation giveaway. That is so awesome. You guys are going to some cool places like Las Vegas in Orlando, so I am super excited. I’m planning on going over to Tennessee pretty soon for an event, a bigger pockets events, so if anybody is going to be going to the bigger pockets event is coming. I think it’s beginning of October. It’s like October 4th through the ninth or something. I’m going to be there. It’ll be so cool if you are going to be going there, shoot me a message. I’d love to be able to meet up and talk and you know that’d be just so cool to meet some more people at the host nation family.

Julian:                                   01:01                     But we are going to be doing another giveaway guys because we are reaching a big milestone. We are at around 900 members right now and we’re approaching that 1000 Mark. So we’re getting so many people every single day like it’s just growing so, so fast that I want it to be able to do something, you know, give back for the milestone. So we’re going to be doing another vacation giveaway. So in order for this one just go to shorttermsage.com backslash giveaway we’re going to be giving away some awesome vacations to either like Las Vegas, again Orlando because those ones are popular Myrtle beach or Daytona beach. So these ones are all going to be within the U S we’re going to be giving this to three people. If you are interested in participating, you want a short term sage.com backslash giveaway. For more instructions. This is going to be going on until we reach that thousand Mark.

Julian:                                   01:48                     But I imagined that this is going to be very quickly by the end of the week, once we reached that thousand, I’m going to announce who the winners are and you guys can pick wherever you want to go from these destinations. So thank you so much everybody that has been contributing and commenting in the group and we have some really cool stuff going. If you don’t already know John Bell and I, we have another podcast called vacation rental machine and we’re actually looking to, you know now that there’s a good amount of engagement in the group and a lot more questions being asked. We’re actually going to start doing some live like Q and A’s like get in the community helping people out because that’s what we want to do. We’re not just doing this other podcast just to give you education, but we’re looking to help teach people like how to be able to operate their vacation rentals.

Julian:                                   02:30                     So some really cool stuff coming guys. So if you haven’t done so, go to the host nation Facebook group, participate in giveaway. We do some fun stuff in there. We’re going to be doing weekly Q and A’s and doing some live stuff. So this will actually end up being like another podcast episode on vacation rental machine. So awesome stuff. But let’s go into Darren. Teddy, John because today I had the honor of speaking with the one known mr Darren, Betty John, founder of proper vacation rental insurance. So Darren founded proper at the end of 2014 and is now servicing over thousand hosts in all 50 States with plans to move to Canada and the Caribbean in the near future. This episode is going to be one of my top favorites because Darren just lays out so much knowledge and not just on the insurance information, but key things that you need to know if you plan on operating a business in general.

Julian:                                   03:16                     Now proper isn’t just in the business of insurance but also education. So if you want to support the show and speak with an agent from proper, because there’s a lot of information in this episode, guys that you know there, there’s just so much in there, but a lot of the things that I bring up, maybe they bring up more questions to you, so if you do have any other questions that you want answered, then go to short term sage.com backslash proper. That’s P R. O. P. E. R. They can speak with you for free. Darren says that, you know sometimes you be called and like 45 minutes just answering questions so that that’s like a whole podcast episode right there and that. Those are your questions that get to be answered, but we cover a lot of really good things in here, some really awesome points that maybe you didn’t even realize going into this. So definitely one of my favorite episodes. I know that you guys are going to enjoy this. If you want my show notes for this episode, my success secrets, the thing that I’ve taken away, and go to short term sage.com back slash STR 28 Or if you’d like to sign up for the email, then go to shorttermsage.com back slash shownotes with all that being said on to this week’s conversation,

Julian:                                   04:16                     Hey, welcome back host nation to another episode of short term rental success stories. In this episode we have these special special honor of speaking with the man himself, mr Darren Pettyjohn, the co founder of proper insurance proper being one of the leaders in a vacation rental insurance. I’m sure that you’ve heard of them, but if you haven’t, this is going to be a really good episode because we’re going to be diving into what proper is, what it covers, the differences between your regular and just a whole lot of really good information. So therein, would you please introduce yourself and let the audience know who you are and what inspired you to start this company.

Darren:                                 04:51                     Yeah, thank you. Appreciate it. Narrowed, petty, John. And as as you were told there, we founded proper insurance at the end of 2014 and I’ve had the pleasure of being in the insurance industry for the most part, my entire professional career, which is about 15, 17 years now and would the explosive growth of Airbnb and VRBO, we really saw an opportunity to come in and, and become a market leader specifically for these short term rental properties. Cause there’s a lot of gaps in coverage, which I’m sure we will get into there. But I’m proud to say that and the programs then the only for over four full years now and we’ve raised over 30,000 insurance policies and four years in all 50 States. So it’s pretty incredible.

Julian:                                   05:44                     Now your, your guys’ growth because you guys are a relatively newer company, your guys’ growth, is that just been really organic word of mouth or how have you guys been able to expand so quickly?

Darren:                                 05:54                     Yeah, great question. And in the beginning like entrepreneurial, it was myself at my home with a cell phone waiting for waiting for him to ring of course. And really where we started to grow was with professional property managers. So we know that the costs was of the world who manage 15,000 rentals all the way to the small mom and pop professional manager who has 50. They’re a great lead source and insurance has always been a friction point for them when they’re dealing with their owners, onboarding new clients state farm and all state nationwide USA. Go on down the list. Every carrier treat short term rentals differently, especially in the last five years. And so we really just started contacting property managers throughout the country and milling and packets to let them know that we had a product available to their owners. And then obviously we have a big internet push like most people, a lot of organic traffic through the internet as well as paid advertising. We sponsor a lot of local and national shows and are part of a lot of organizations. And then as I tell any business owner, your best referral is the clients that you already have. So we actually circle back to all of our clients and honestly ask them for referrals because we sell very unique product and it’s been kind of just the snowball, honestly for the last four years.

Julian:                                   07:17                     Now I imagine in the space vacation rental insurance is probably that got a lot more headache to it. What is the difference between maybe regular homeowners insurance versus vacation rental insurance?

Darren:                                 07:30                     Yeah, of course. Another great question that really fundamentally is the fundamental question of our entire product. And easiest way to explain it would be how much do you charge for insurance premiums? So most people who own a home have a homeowners insurance policy. If you own a business, you have a business insurance policy. If you own a longterm rental property like myself, you would have what’s called a dwelling landlord policy. Those can vary from $500 a year to $5,000 a year. And when you fill out your request for a quote from your agent or the company, they ask you questions like, how big is your house? So if it burns down, we need to rebuild it. How old is your roof? What type of construction does it happen? All these types of questions go into the premium. So obviously a 5,000 square foot house is going to be much more expensive to insure than a 500 square foot condo.

Darren:                                 08:24                     But when you flip over to the short term vacation rental side, it’s not so simple because there’s a lot of moving parts. You’re essentially turning a normal dwelling, if you will, into a mini hotel. Where are you have guests coming and going, which dramatically changes not only the property coverage because there is damage to the property and could be to the property itself, but really the liability as well. If someone’s injured in that property and they Sue the owner. So virtually all of those policies, you, you only have three options. So let’s, let’s use an example. Let’s should say on a single family home, he wanted to turn it into a short term rental property. You can insure it on homeowners policy. You can insure it on a blowing landlord or you could essentially ensure it is this business. The issue is there’s gaps in coverage in all three of those insurance policies.

Darren:                                 09:19                     You really need a piece of each policy. There’s aspects you need a homeowners, fire coverage, wind, hail, but normal stuff you think of that insurance would cover a, he need to contents of the landlord policy from a liability perspective. And then you need components of a business policy because it’s an income generating property. So you need to protect your income and liability, etc. So basically what we did is we took components of all three of these insurance policies, wrapped them into one comprehensive policy that a short term rental purchase. Again, not easy to do. We’ve learned, we’ve learned a lot over the years. We’ve made minor adjustments to the policy. I can say though that that we do, I know all of our competitors and we do have the most comprehensive product in a short term rental homeowner can purchase. So that’s kind of the 30,000 foot view on, on what you need is a short term rental owner.

Julian:                                   10:19                     Now you said that you started in 2014 so a little bit after Airbnb started gaining a lot more popularity. What about this type of insurance though would make you want to go into something because it does seem like it is a lot more complicated, a lot more moving pieces. Like you said that you’re now operating at like kind of like a mini hotel. So why not stick with [inaudible] regular insurance? What, why jump into this very complex type of business model?

Darren:                                 10:44                     Well, there was a need for it and the kind of million dollar exclusion from the homeowners policy is it excludes business activity. So if you own a home and let’s say you, you’re a woodworker and you like building furniture in your house and you have a little shop in your garage and a client of yours comes over to your house to pick up the chair that you made for them. If they slip in the driveway and fall and get injured because there’s, there’s ice in your driveway and he didn’t salt your driveway or something and they Sue you, your homeowner’s insurance is not going to respond to that because that’s considered a business activity. That bodily injury was in relation to business activity. You run into the same issue with a landlord policy and then when you go to a business policy, a business policy isn’t designed to cover contents of a residence.

Darren:                                 11:36                     So all of your personal property in the home and things like that. And really there was just a need for it. It’s what’s called program insurance. So everybody should understand that there’s commodity insurance and then there’s niche insurance. So combined insurance be auto insurance, own insurance, life insurance, very, very cookie cutter and insurance policies that virtually you can buy from any agent United States. Very competitively priced, very comparable coverages. But then there are programs or niche insurance policies for thing like a winery. Let’s say you own a winery, are you going to call your local agent and buy an insurance policy free winery? The answer is no, you’re going to use that agent to find a niche insurance program specifically tailored for wineries, whitewater rafting company, then breakfasts and and so on. And so the question was, is a short term rental really a niche product? Does there even need to be a niche product for this industry? The answer was yes because there’s so many gaps in these other policies, you know, who was the move of the lifetime for me? I mean you work your whole life, you know, you hope that you get one opportunity to really get into a really good business venture. And I’m fortunate that we put it together.

Julian:                                   13:06                     Now you were saying that this is a very niche type of policy, but people have been staying in other people’s homes for you know, centuries people have been, you know, subletting their homes or just, you know, renting longterm renting. So why haven’t other insurance companies, major ones like let’s say Geico or any other type of major home insurance company provide short term rental insurance?

Darren:                                 13:28                     Well, and that’s an excellent question. And the reality is is yes, short term rental properties have been in Hawaii and in the California coast in Florida and Martha’s vineyard in places. Correct. And they’re mostly all insured on what’s called a dwelling landlord policy. So a landlord, your landlord, and you have someone stay at your property, they sign a lease. And that product is how most people are insured across the U S on Airbnb. And it’s not that it’s entirely wrong, there is decent coverage in there. The issue was because of the internet and because of Airbnb and VRBO, there are now short term rental properties in every community across the United States. So these companies who have good handle on the landlord exposure and should we deny a claim because it’s a short term rental or there’s liability off-premise. So it just really was a non issue. I mean, let’s just call it what it is.

Darren:                                 14:32                     They’re bad, happy, everybody’s making money, it’s not an issue. But then all of a sudden they’re known insuring properties in urban areas and in small towns like where I live those than Montana, there’s a thousand short term rentals in our college town. You know, when that happens, domestic insurance carriers get get nervous because now there’s all this new exposures. So they’ve come out a lot of different ways to address it. Some, some of them cancel it, they have a question, do you use short term rent your property? Others have written very very inexpensive writers to a homeowner’s policy that provides very limited coverage because they don’t necessarily want to lose all this business. So it’s a, it’s an absolute battle out there and I don’t know what’s going on with it with the short term rentals when it comes down to exposure and there just really wasn’t that much exposure up until the phenomenon of, of Airbnb and VRBO.

Julian:                                   15:29                     Now what’s the difference though from like a short term rental insurance versus like a longterm rental because a longterm rental, you are still conducting a business, like you said, if someone slips and falls, you know, there’s going to be some type of coverage for that. But what is the real difference between the two then?

Darren:                                 15:43                     So another great question and the, the way you explained it from a liability standpoint is a dwelling landlord policy. Actually does exclude business activities. So the same thing. If you want a longterm rental, and let’s say it’s a duplex, you know on one side you have a tenant in a college kid who rents it out on the other, you have that woodworking shop that we talked about earlier. There’s going to be no coverage for that woodworking shop because that’s deemed business. So the million dollar question is, is it short term renting your property E business transaction or is it not? And that’s still up for debate. I can tell you most owners when they talk to us and our insurance, they agree it’s a business. Look, I have to get a business permit. I file taxes differently. I do write offs. There’s no arguing, it’s not a business.

Darren:                                 16:37                     So that’s number one. It could just fundamentally be wrong from the bit from the beginning because you’re kind of rolling the dice. Okay, if someone gets injured at my property and they Sue me, is my landlord insurance carrier going to respond or not? That’s a great question. So let’s, let’s look at one liability example. Let’s say you own a longterm and all that guy do and somebody signs a one year lease and they say, I’m going to stay at the property for a year and pay 1000 bucks a month. Okay, great. Three months after that tenant moves into the property, they slept in the bathtub and they seriously injured themselves because there’s soapstone all over the bathtub. Moose faults. Is that, is that leave the landlord’s fault that my tenant is too lazy to clean their bathtub and they fell and got injured in that property? No, of course it’s not my responsibility.

Darren:                                 17:35                     They’re taking ownership of that possession of that property for one year. Now let’s slip it in, say a short term rental, guess checks into a property for three nights and they go to take a shower and they fall in the shower because there’s soapstone all over the bathtub, native side. Just shoo the owner. The landlord isn’t the landlord’s fault. You’d have a pretty good argument that it is because this person thought they were checking into a very clean, safe property, just like a hotel. So again, you’ve got confusion there. Is it a business? Is it not? Is it my liability, is it not? And these are the kinds of issues you run into when your properties insured on a landlord policy. And really the biggest difference is, is the liability. So a landlord policy carries what’s called premise liability. So any bodily injury or property damage that happens on that trend, this is covered.

Darren:                                 18:35                     So a slip in the driveway, the roof collapses, the landlord is too cheap to fix the roof, it collapses and injures that tenant covered, covered, covered, fall down the stairs, no railing, et cetera, et cetera. But what is some bodily injury that can happen off the premise that could be tied back to that short term rental business? There is a lot of stuff. And the easiest example is a dog. So let’s say you own a short term, you doing a lot of dogs, but a guest decides to bring their dog to the rental for the weekend. Regardless, they go out and walk their dog and their dog bites a kid in the neighborhood. The family not only sues the guests, but they also Sue you because you own the property and you’re the one that’s allowing short term rental guests to stay in property. Well guess what, that was bodily injury that you could be found liable for that happened off your property.

Darren:                                 19:32                     That can be tied back to business. There’s simply no coverage under your landlord policy. The only way I have coverage for that incident would be to have commercial general liability, which is what we sell and no animal or pet exclusion. So that was a long winded answer and there’s a lot more things in the landlord policy, loss of rents versus business income, backups of sewers and drains and you really could go on down the list. But fundamentally, again, if you have a listener that has a dwelling landlord policy, which you have a lot they really need to reconsider their insurance and ask the tough questions to their agent to go, look, you know, I’m running a business, why do I have business insurance? This landlord thing makes me nervous.

Julian:                                   20:19                     I think it was really good to kind of address the point that you know, the, your insurance is there to be able to protect your business. But you also mentioned something that was pretty key that maybe not allow a whole lot of people realize is that loss of income because you are operating a business. Do you mind explaining that a little bit and how proper is different from let’s say your regular landlord or a regular homeowners in the, in the case of loss of income?

Darren:                                 20:40                     Yeah, so another great example as you said is, is, is the income that your property generates. So in a landlord policy, they have coverage that’s labeled loss of rent. So I own a short, a longterm rental property here in Bozeman. If that property catches fire and it needs to be rebuilt, which is a covered insurance Mohs, I would be paid my loss of rent. Okay. Now that sounds great for a longterm rental, but really the coverage isn’t that great because what happens is the insurance carrier pays you what’s called fair market value of that rental property. So my rental is 1500 square feet. It’s a three bedroom property in the neighborhood. What they will do is they will look at all the comparable properties in my area that will determine what is the fair rental value in that area. And they will say it’s $1,000 a month.

Darren:                                 21:37                     Okay, great. And they will pay me an insurance claim or $1,000 a month while my home or my rental property is being rebuilt. That’s issue one with the short term rental because you make a lot more money, short term renting, you know, seize. Now the second issue is it’s capped at 12 months and a lot of people don’t know this, but we’ve been through the forest fires in California and and severe County versions. When you the total loss on your property, you have to file an insurance claim, there’s an investigation, there’s permanence to get, there’s usually a shortage of labor in the area. It’s actually 18 to 24 months until your properties actually fully back up and running through the level it was before the loss. So the fact that the landlord policy and one is fair market value and only pays for a 12 month period is a real gap in coverage.

Darren:                                 22:31                     If you a coffee shop and your coffee shop burns down, do you want the insurance carrier to look at every other coffee shop in your town and say, well the fair income value of every coffee shop is 10,000 a month. When you said that when you have worked extremely hard to advertise your property, sell better coffee and have a better customer experience. No. And so what we sell is what’s called business income insurance, just like a coffee shop would have. And it’s different in two ways. The first is we pay what’s called actual loss sustained. So we will look at your past bookings, your future bookings. We take seasonality into effect and we actually look at comparable short term rental properties. If you don’t have the rental history, we actually have a couple clients in Tennessee that just purchased short term rentals and a month later all of them burned down in the Gatlinburg fires. So we obviously look at comparable properties and say we can’t take your financial history. We need to take comparable financial districts. So number one, you get paid what you’re actually losing. And number two, there is no time limit on the on the business income. You’re only subject to the limit that you choose in your policy. So fundamentally kind of the same. They look the same on our panel and loss of income, business income, but completely different when it comes to claims time.

Julian:                                   24:00                     No, that’s really good that you addressed that. The different side. I think that that’s pretty key that maybe a lot of people don’t realize. I want to go back because we have a lot of a really a diverse group of listeners. Some of them are property managers, some of them aren’t. So rental arbitrage cohost thing. How does proper and vacation rental insurance work? If you are a property manager though, and going back to that example where you have someone that slips in the tub, where does it fall, the liability? Does it fall on the property owner? Does it fall on the property manager? Where, where does that kind of lie?

Darren:                                 24:31                     That’s a great question and when that happens, so we’ll just keep it simple and there’s a slip and fall in the bathtub. Not only is the owner of the property going to be sued for the bottling injury, but the professional property manager as well. And most of your listeners, if they’ve been in the business for a long time, they’ve probably been involved in something like this. It’s unfortunate because it just happens, but it really makes sense too because the property manager is the one managing the property again, who’s supposed to be cleaning the bathtub. It’s just the way lawsuits work though, that the person on the deed, whoever owns the property is getting sued no matter what. And then the property manager gets tied in as well. So the, the way that it works is if you’re a professional property manager and you manage, let’s say a hundred homes, you have what’s called a business owners insurance policy that’s going to cover the equipment at your location, slip and fall at your location.

Darren:                                 25:24                     You may have Eno insurance, you might have work comp. Obviously if you have workers, you have kind of this package policy for your business. The problem with it is the liability, which is the bodily injury that you could be found liable for, does not extend to the properties that you manage. So in that example, if you were pulled into a suit, your business insurance is not going to respond on your behalf. Is that all of these property lines? So how do you get coverage been in the district forever? And most of your PM’s and property manager would be familiar with this, but it’s called getting additionally insured onto the owner’s insurance policy. So when property managers onboard new clients or they renew contracts with current owners, one of the things in there, a rental agreement is that the owner carries the right insurance. Hopefully they usually require some type of liability. And then that the property manager is added as additionally insured under that policy. And we actually automatically add every PM onto our policies that are professionally managed. And we’ve had lots of claims and some open claims right now where a property managers are, are being under our insurance policy happens all the time.

Julian:                                   26:46                     Now Darren, how does this work now though? Because with Airbnb they, you know, they rolled out this new cohost thing. So basically anybody is coming in, they’re basically being like a, like a property manager. And in a sense, how does that work if you are maybe just temporarily managing something or if you don’t have like a professional property management company and you’re just maybe starting off with like a property that you’re co-hosting, maybe like co-hosting for a friend or someone else.

Darren:                                 27:11                     Yeah. And and there the word cohost, I assume you mean as sort of the rental arbitrage model, rebrand type model, fine.

Julian:                                   27:22                     Co-Hosting. Like if I wanted to manage your property for you not subleasing it, this is the, the split income where where you get like a property management percentage.

Darren:                                 27:30                     Yeah, I mean it’s the same thing. And again, I like your word cohost because it fits nicely into Airbnb sort of ecosystem. But being a cohost is no different than being a property manager. The way that you structure your payment might be where you say, Hey, let me host your property cohost, or you and I will split the commissions with you, or I will rent the property from you for a thousand and I’ll take anything above that or however you want to split it up. But at the end of the day, the person that is hosting the property is managing that property. They’re advertising it, they’re doing the key exchange or delivering the code to the rental. They’re potentially cleaning the property or outsourcing the cleaning of the property. Somebody is overseeing the management of this property, and I mean call it what it is, but it’s professional management. So if you’re in a cohost environment, it’d be no different than the property manager because at the end of the day, someone owns the property, right?

Darren:                                 28:36                     Whoever owns it needs to have the right insurance. And when you go into a cohost opportunity where you say, look, I would like to cohost your property. Here’s the outline of how it’s gonna work. Okay. Some part of that onboarding process. We need to talk about insurance and you need to contact your agent and make sure everything’s on the up and up and then usually the agent will come back and go, well, we don’t cover Airbnb or you need this. We knew that regardless, the cohost needs to be added as additional insured onto that insurance policy. That’s option one. That’s the most up and up way to do it. The other option would be what we call re-read policies, so we have a lot of people, and I believe it’s called the arbitrage model. There’s a lot of different words for it, but what happens is companies or individuals will longterm rent properties and then they will turn around and short term rent them on Airbnb.

Darren:                                 29:38                     It’s been happening and we read a lot of those insurance, so what we do is we write a commercial renter’s insurance policy, which is basically $500 a year. It’s inexpensive, 50 bucks on for insurance and that will cover your income. Just like we talked about, you have a vested interest in you protecting income with your water damage or something a your contents because usually you will furnish the property and then the them on is obviously the liability. So two ways to do that. As a cohost you can be very upfront with the owner, look, you need to contact your carrier, you need to do this, we need this a partnership, let’s work it out together. Or you can just go out on your own in purchase a colo slash re-read and business commercial renters insurance policy from proper. And what I advise your listeners to do is to call us because we worked through all these different scenarios and there’s lot of them.

Julian:                                   30:35                     Now I want to hit on what is the difference between proper and maybe some of these other major vacation rental type of insurance companies. Are you guys doing something different or is it all basically the same? How do, how do you, how do you compare? Like what, what would be a good vacation rental [inaudible] company to go with?

Darren:                                 30:52                     There’s really two markets, so there’s the big domestic market which is one is the landlord policies and we’ve kind of covered that and they’re not really doing anything to address the short term rental aspect of it. In fact, there is a article that we send around a lot about a guy who has a landlord policy and then he had some guests throw a party at his house, $13,000 in damage and the policy that he has is specifically branded for short term rentals. It says right on there short term rental use and he thought he was covered, everything was good, he filed the claim, no coverage. So you go, Whoa, how can it not be uncovered again and landlord says short term rental. Fundamentally when you short term renting your property, you are in trusting that property to someone else. You’re saying here are the keys, you take ownership and take care of it for three days and then you pay me 1000 bucks.

Darren:                                 31:50                     Okay, great. Well when you entrust your property to someone else, there simply is no coverage for intentional acts or vandalism of that property. So unless your contract is specifically endorsed, there’s just no coverage that the guy who went out and did this big news article in Atlanta on it was very upset because he felt like, man, I bought a specific policy for short term rentals. They’re just big gaps in coverage. I mean had the house burn down, would it be covered? Probably. Could they add a claim? I mean who knows, but looking at it from a 30,000 foot view, there’s a lot of domestic carriers that are just patching leaky raps. Honestly, I’m not trying to say we’re the only one out there that does it on this level, but we really are. And to give you a couple of examples, let’s talk about liquor.

Darren:                                 32:44                     So liquor is excluded from virtually all insurance policies, but the exclusions specifically States the furnishing or contributing of alcohol. So you met a lot of listeners out there that say, well wait a second, I don’t furnish alcohol on my short term rental. Why do I need liquor? Here’s the reality. Short term rental guests drink on vacation and the alcohol that they decided not to consume, they leave that there short term rental property. So unless you can 100% say that my post stay inspection community, it goes through every cupboard, every drawer, it looks under every bed, make certain there’s no alcohol on this rental. When the next group checks in, well guess what? If they miss it, you’ve now furnished alcohol. And if a group comes in there and they have a kid that finds a bottle of whiskey in a cupboard and drinks and gets hit by a car, it’s so, so what if property, we actually entirely removed the liquor exclusion from our insurance policy, which not only protects you for that example, but also if you want to leave a six pack of beer, you know, a couple of bottles of wine, et cetera, we allow for that.

Darren:                                 33:58                     So again, I don’t want to say we’re the only one, but there’s a lot of people below us. We’re kind of fighting for this business. And they all have weaknesses on some level. I mean, I can tell you right now, we’re the only company that moves the liquor solution period. End of story. We’re the only company that provides bedbug business income coverage. It’s pretty cool actually up to 15,000 with no deductible, no other carrier in the United States offers that, but we’re more expensive than anybody, so not everybody wants to buy our insurance because it’s very expensive, but I can tell you most people want the education regardless and then they can decide, well, you know what? I bet a landlord policy, it’s $1,000 less than proper. I don’t think someone’s going to bring a dog. I don’t think someone’s going to furnish alcohol. I don’t think I’m going to get bed bugs and on and on and on. Well then they have a choice, but they need to be educated on what do I have or what do I not have and that’s what we do and our company, we just educate them and let you decide whether you want to upgrade.

Julian:                                   35:01                     No, I think, I think you brought up a really good point there in that short term mentors, these, these operators that are getting into the space, that they’re coming up with some really creative and unique ways to be able to attract people to their rentals. Now let’s say like I had a guest on the, on the show that they were actually cooking for people. Like they would leave food in their fridge and the guests that would stay there would eat. Now let’s say someone gets sick and they, they, you know, now they’re gonna Sue because like they have a, a peanut allergy or whatever. How does that work when people are doing something that is different if they’re providing chocolates, if they’re providing liquor, if they’re providing food or like a bike, amenities like that where you’re incorporating other aspects of a business into that?

Darren:                                 35:41                     Well, the way that they’re going to have coverages with commercial general liability without a communicable disease, exclusion and other types of exclusions, a hundred percent so what that is, is that’s actually, that’s a bed and breakfast. I mean, you’re serving food to people. Imagine what restaurants have to go through. It’s absolutely crazy. Whoever is doing that is literally completely rolling the dice with their financial future. And unless they have business liability and they have an email from their insurance carrier that says yes, it’s okay to provide food to guests. So we allow certain levels, but we underwrite, there’s certain people who live leave a basket and they leave a couple bottles of wine and we’re okay with it. But the beauty is, is the online listing allows us to have a snapshot and you, each property we ensure, which is key and part of the only reason we can do this, but for your future previous podcasts, for Airbnb guests who are doing that, they are absolutely out of their mind to be doing that unless they know they have insurance coverage. I mean that’s, that’s scary stuff.

Julian:                                   36:51                     Now I want to roll into, because a lot of hosts host in their own home. You know, I rent out a basement unit. So let’s say though, if someone is just staying in a room and they go into the kitchen and they eat some of the food from the fridge because they say, Hey, you can help yourself to, you know, maybe some snacks or whatever, where does the line cross with that

Darren:                                 37:10                     Again and just have to, you have to ask your insurance carrier, is there coverage for this or is there not? Is there an exclusion in my policy for this? And most carriers, if you were to write them an email and say, Hey, I have a question. I’m renting out my basement and I allow my short term rental guests to eat food and drink coffee from my kitchen. They’re going to cancel your insurance. They’re going to say, we had no idea this was the exposure that was going on at your property, et cetera, et cetera. Well, you need to dig into the fine details about the exclusions. Cause if they come back and say, look, we sold you a home sharing endorsement, it gives you 10,000 in property coverage, which is pretty minimal, but it doesn’t address the liability at all. Whoa. Okay. I just realized, well now I know I was only a hundred bucks a year because all it’s doing is giving me a property coach. There’s no endorsements and the liability aspect of it. So bottom line is you need answers in writing from your insurance carrier and ask these tough questions. That’s a great example. Yes, I’m going to get sick and they go to the hospital and they Sue me. Do I have coverage? That’s a great question to ask your insurance carrier.

Julian:                                   38:24                     Now what about for those people that do host in their own home? Let’s say it’s not on the short term rental side, but like what if it’s on my side, let it say I accidentally leave the kitchen stove on and the house burns down. Is my short term rental insurance gonna cover that if it was not due to a guest or if it was like a separate part of the house?

Darren:                                 38:45                     Good question. Again, and it all depends on the insurance carrier interpretation and there’s a section in every insurance policy that basically States if there is any miss representation or misleading information regarding this, this, this property and this policy. And we reserved the right to avoid coverage. And so you have to be very, very careful on, you know, people think they’re flying under the radar and I don’t want to tell my agent because I haven’t been canceled. So here’s a great example. There is another public, a story out there about a gal who’s suing travelers insurance before denying her insurance claim in relation to Airbnb. So the way that it was set up is she owns a home and she has a guest house. A tree fell on her guest house and damaged it, $80,000 in damage that’s covered under all insurance. It’s one of the reasons you have insurance.

Darren:                                 39:47                     The adjuster came to her house and started asking questions in found out that her guest house was rented on Airbnb for 14 nights. Actually that’s it. She booked it for 14 nights. Over the past few months. They flatly denied the claim. They said, we’re not rebuilding your roof 80 thousands on you. And she said, how can you possibly be denying this plane? This was roof damage. The reason is that she violated her insurance contract. She was doing something not permitted in here. Insurance contract into defending insurance carrier. Let’s think if that would’ve been a fire. Well how does the carrier know that the short term rental guests will have kids that mess with the wire? How do they know that the integrity of the deck is there when they have parties? So there’s 25 people on a deck, you know, on and on and on. It all comes down to underwriting and the premium being charged and she didn’t notify her insurance company, Hey, I’m violating my insurance contract.

Darren:                                 40:50                     And that’s a tough one because I think the claim should be paid because it had nothing to do with a short term rental guess. Just like you said in your question, the tree ha the ranch, the guests didn’t cut the tree down. The tree just stuff didn’t have to do with the rental, but they’ve been insuring her this whole time and it’s a partnership. And she’s violated her insurance contract and not notified her insurance company of a fundamental change in the exposure of the property. If you want a thousand square foot house and you’re going to put a 500 square foot addition onto your house, what’s one of the first things you’re going to do? You’re going to call your insurance agent and say, Hey, I’m adding a room on my house, my cupboard for this up. What’s going on? If you’re going to short term rate your property on Airbnb, you better call your insurance agent. It advise them that the exposure your properties changing. Otherwise you might be subject to the claim denial on anything.

Julian:                                   41:48                     No, that’s really good, Darren. I think that that you have to have a level of trust with your agent. Your agent isn’t there just to make sure that you’re not covered. They want to make sure that you’re covered and you know that might have to be, you know, maybe increasing the policy, maybe maybe charging a little bit more. Right?

Darren:                                 42:02                     That’s exactly the right answer. And because insurance is there to protect you, but the carrier needs to charge the appropriate amount of premium for the risk. And no one can argue that by this Zhao, short term renting her guest house, she did not increase the exposure of her property. So why should they pay for any claim? I mean, you can really argue with both ways, but you have to look at your insurance agent and carrier as a partnership. I mean, I’m paying a premium for coverage 100%

Julian:                                   42:33                     Now going back because there are hosts and there’s a lot more type of unique and creative ways for people to be able to rent out spaces. I’m sure, I don’t know if you’ve heard of like glamping or people renting out air streams. How do you get covered? Because I’m sure that car insurance doesn’t cover that. What type of insurance would you need for those types of creative ah, uniques stays.

Darren:                                 42:55                     Yup. And so when we developed our insurance program four years ago, it was really designed as a vacation rental program, short term vacation rentals. And obviously with the growth of Airbnb primarily, we now see a lot of tiny houses that are being put in the backyard. And so people, we’ve actually seen an app company who is, makes a custom fit tiny home that slides into your garage. So think of your home and you have a garage facing. They’ll have a rental unit that will slide into that garage space that you can now run out on a short term basis. And then as you said, the streams, we see a old on railroad cars that are put on properties and on and on and we insurance on them. I can tell you from our perspective, it all just depends on the online listing. And are the owners co-mingling?

Darren:                                 43:50                     Isn’t that a separate space? Do they offer food and these kinds of things? Is there zip lines into a Lake? I mean, we look at everything and we get to decide, yes we want to share there’s or no we won’t, but what do they need? Any business insurance? I mean, no different. I mean, you know, at the end of this podcast really the whole thing was down to one question. Is short term rental activity in business or is it not? And if you say it is, then you need business insurance. I mean this is as simple as that. The problem, my friend is you can’t call all state nationwide USA, Liberty mutual on and and on and say, Hey, I have a tiny home in my backyard. I live in the main dwelling and then short term rent. My tiny home on Airbnb, I needed a business insurance policy, mango. We don’t do it, we don’t touch it, we don’t want to deal with it. Or they may be appointed with proper insurance. And there are a few other companies that are trying to do what we’re doing. Commercial level, not quite as good a coverage, but you know it cause that’s it. You need business insurance and the Indus story online.

Julian:                                   45:00                     Going off of that, the type of coverage, when would it be a good time for someone to reach out to proper for a claim? Because Airbnb has their their hosts guarantee up to a million dollars, but I’m sure that maybe people are thinking, Oh well, you know, they ruined my linens or they peed on the bed or they did all this stuff. When is it a good time to rely on your insurance as opposed to Airbnb or some of these insurance [inaudible] companies that cover the in between?

Darren:                                 45:27                     Yeah, a good question. And all of our policies from a property coverage standpoint have a deductible. The lowest deductible we have is $1,000. And the reason for that is to obviously bring down the cost of the insurance so we don’t get a hundred dollar insurance claims and have the human element and the payroll and the expense of dealing with $100 insurance claims. So anything under a thousand dollars, there’s no coverage anyway. But what I would say just as an insurance person anywhere you can find coverage coverage, I mean, we get a lot of people who submit claims to the host guarantee. And to us, we see it both ways. And why wouldn’t you? And you know, a lot of people ask, well, I’m covered by the host guarantee, so why do I need your insurance? And the reality is if your name’s not on it, you should be nervous because they ultimately can determine what’s covered, what’s not covered.

Darren:                                 46:20                     Things have to re reported under a certain timeframe. There’s a big news story out about a 1,000,000,001 point $6 million house that burned down in Napa, California, and it was 16 months and Airbnb had not responded to them from the host guarantee. Then they finally reached out to NBC Bay area news story out. And apparently Airbnb stepped up a little bit and they weren’t disclosed what happened. So I’m not saying that coverage isn’t there or you know, sheets and thousand dollar claims, but if someone gets drunk and burns your house down, if you think you’re going to send Airbnb an email, they’re gonna rebuild $1 million house. You just on that, Brian, I mean that, that’s not the way reality works, but it is there and it’s a good second level of protection. But you need insurance with your name on it because that means you have policy rights and you have a contract that you can ultimately rely on. But bottom line is anywhere you can submit it, dance and then it, you know, regardless whether it’s 2000 bucks submitted to us minutes here, other chairs, minutes and a host guarantee.

Julian:                                   47:28                     Now what for hosts that do have like those extra amenities in their home? Let’s say they do have like a pool or something. Let’s say the guests ruins the pool, they have a party and now they just ruin the pool. How does insurance work when you, do you have things like that?

Darren:                                 47:43                     Well, I mean cool. It depends. How are you going to ruin a pool? It’s underground. It’s concrete and spilled water. We do and shoot ensure pools and believe it or not, we actually see some theft stuff, pool pumps in Palm Springs and, and, and Nevada and Scottsdale and places where it’s hot. So obviously that’s covered theft, property damage. But the pool itself, there’s, there’s really nothing to cover. I mean that, that’s there’s waters. So what would be an insurance claim when they ruled in the pool? If they destroy your decking around the pool, that would be property coverage. You could file a claim. But there’s really not too much from a property standpoint. If there was an earthquake and there was a crack in the pool that would fall under earth movement insurance. So is that really a too much people didn’t do too well.

Darren:                                 48:34                     You have to be worried about with the pool is, is viability the number one things people dive into a pool and, and hitting their head and ultimately injuring themselves. We underwrite for those we insure, but we make all of our clients have objective markers on their pools. Just like killing, I mean take, when you go to Hilton, there’s a sign by a guard on duty, not on duty. There’s a fence. We don’t require fences, but there’s depth markers life safety equipment. So we treat it exactly like that. So if your listeners are out there that have swimming pools but not depth markers and life safety equipment, that needs to be something they put on their checklist. And on our blog@proper.insure we actually just published a lawsuit that came out that was awarded to a gentleman for 11 point $6 million. Now Alabama. So what happened is he got drunk and he dove into a shallow lagoon and there was no depth marker or no swimming.

Darren:                                 49:31                     You’re on risk or warning signs. He’s now paraplegic. He should the condo association, your one 11.6 million. So it’s a big deal when you are offering these as entities, whether it’s exercise equipment swimming pools, hot tubs, saunas, or another one. Think of a pregnant woman getting into a sauna. That’s a big deal. You have to have a warning on the outside of your sauna that says, you know, be where pregnancy, et cetera, et cetera. Otherwise you just, you’re open for 10 mil. I mean, pretty much can’t do it. You’ve got gotta be smart about it and you gotta use your insurance agent as an ally to say, again, here’s what I’m doing, what, you know, where’s my covers

Julian:                                   50:15                     Now? What are the steps that someone should be taking in order to best protect themselves when they do need to file a claim, whether they need to file an insurance claim? Right? So like let’s say there an incident that happens at the property or with a guest and I want to get all my ducks in a row. I want to make sure that I’m going to be squared away so that I will be able to be covered. I’m sure that there are ways things that could happen where maybe identifying things or maybe you’re not including enough information, but how would you best protect yourself to be able to have a claim go through properly?

Darren:                                 50:49                     Yeah. Number one, contact your insurance company. That’s the very first thing you do. If it’s involving staffed or significant property damage or something like that, you want to contact the police immediately because you want to get a police report. And if it’s a bodily injury claim, you want to do your best to get as much contact information as you can so that your insurance carrier can reach out to the claimant and try to get a statement because people’s people’s stories change a lot over time and you want to get on that as quickly as possible. So the number one thing is contact your insurance company immediately and then contacted police and then preserve the property. So a great example would be if you had some broken windows at your vacation rental and you go, man, what do I need to do? Number one to call my insurance company number to call the police cause my property who’s analyze?

Darren:                                 51:46                     And number three is put a but a cardboard and tarps over my windows because I’m trying to preserve my property from future damage and pull out your insurance policy and control F which we all know PDF is fine. Judy’s in the event of a loss because believe it or not, insurance policies and 90 page contract. And this is a great question you asked me because you actually do have duties in the event of a loss of things that you need to do. Contact your agent, contact the police and preserve the property in any way possible. That’s reasonable.

Julian:                                   52:25                     Awesome. Thank you so much Darren. And what’s next with property? Is there anything that’s going to be changing? I know that you’re in the U S right now and you have a some, some hopes to go into Canada I believe is what you were saying. But is there anything maybe next that you guys are working on or looking to improve or looking to include in your insurance?

Darren:                                 52:44                     Yeah, thank you. And we are looking over the next few years to extend up into Canada because there’s a lot of interest. We get a lot of people who are dealing with the same issues with gaps in coverage. And then would be this thick extend down into the Caribbean. Our, our product is underwritten by Lloyd’s of London, which is very big in the Caribbean anyways. So that would be a natural extension. But, but truth be told as as any business owner, I mean you don’t want to spread yourself too thin and that’s such a good thing going here in all 50 States. That really for us it’s just maintaining our loss ratios, continuing to grow our book of business and ultimately really goal is to become sort of the Kleenex if you will, or insurance on short term rental properties, whether it’s a homeowner or a property manager, rental arbitrage pillows. Just pick up the phone and call us. Our average phone call is 45 minutes. We don’t want to build relationships, educate people and if we cannot ensure you, which a lot of people we can’t, we’ll give you a lot of good information so at least you can, you can have an understanding of your exposure.

Julian:                                   53:53                     No, I’m pretty curious. Coming from your perspective, where do you see short term rentals going in the future with, with Airbnb getting popularity with, you know, the Marriott coming in and they’re going to start incorporating their type of you know, the Marriott stays. Where do you see short term rentals going?

Darren:                                 54:08                     All right. I have no accent this on a podcast yet, but I’m going to let you or anyone who wants to steal it, steal it. The sharing economy is green. Why is nobody keen on this? Okay, think about it though. When you look at the United States from space, okay, you see all the lights on the West coast, you see lights of the Midwest around Chicago, obviously the East coast down in Texas and Arizona. It’s pretty dark in the middle where I live in Montana. But there’s these lights. Now let’s have that same overlay, but let’s only have the lights on of properties that are unoccupied. There’s nobody in a, the map looks exactly the same. So when you look at the carbon footprint or economic footprint of building a home in the Yellowstone club or big sky Riley or spot stale or wherever, it’s massive.

Darren:                                 55:07                     So why are these unoccupied properties not being used? Why are we building big hotels when the inventory is already there? So, I mean, I’m kind of being funny, but at the same time, the sharing economy is very green if you think about it. And it’s not going anywhere. I think it’s the coolest thing ever, myself included. I mean the American dream 25 years ago was to, you know, get a house, get married, have kids and buy a vacation rental. You know, you don’t have to buy a vacation rental now you can, you can buy on it as an investment property or you can just go stay in your short term rental. Is this really the coolest thing ever and it’s going to grow and grow and grow. I’m telling you and there’s no reason not to label it a little green so I’m just throwing it out there for anybody who wants to steal it is is a green, green business

Julian:                                   56:03                     That is very hopeful because we have been hearing a lot about regulations, you know California, Hawaii, they’re coming down really hard. Do you have any thoughts about that and how the regulations are expanding?

Darren:                                 56:12                     That’s a great way to wrap things up and I actually just got back from Austin a week ago. I was a speaker at the first ever, ever short term rental regulation held in Austin. It was facilitated by Matt Curtis, the founder of smart city policy group. And he’s been all over this. And we had people from all over the nation talking about common sense regulation. And the reality is the arguments against it don’t really hold up. It’s a very difficult issue. But in my experience and what I’m seeing is common sense regulation will prevail and it will be legal in virtually every community in the U S Santa Monica is a great example. They banned it. Black man, short term renting. Well there’s still 3000 listings on Airbnb and VRBO. So they just drove it underground. They’re losing out on all the tax revenue. It just doesn’t make sense. But there’s the argument of there’s noise.

Darren:                                 57:15                     The guys that noise aware are really good partners of ours gave. So they’ve got that covered. We’ve got insurance covered, we’ve got other companies that have safety inspections. You just put common sense regulation and treat them a little bit like a hotel and as a business. And then so it’s a win win for everybody. And here’s the example that, that no ever talks about. So noise is actually a nuisance. One of the biggest shouting, short term rentals. My neighbors parties. Well, would you rather have a neighbor that owns a short term rental and there’s two parties a year or would you rather have a neighbor with a longterm rental that has college kids move in and party every night? I mean, a study was done in Nashville where they looked at nuisance complaints for garbage, for trash, for noise, and the level is actually much higher for traditional longterm rental properties then short term now. So that argument just doesn’t work well. They should be taxed because they need to compete against hotels. It’s not fair. Make no mistake, they’re taking bookings away from hotels. They should be subject to insurance requirements, tax requirements, safety and safety requirements and things like that. So we’ll get there over the next five years. But it’s green. I love that it can be regulated. Your common sense and the industry is, is hot man. I mean, you know that it’s a really fun industry to be a part of right now.

Julian:                                   58:46                     Well great. Thank you so much, Dan, that that was a very optimistic, that is very, very good to hear. Especially, you know, for someone like you that, that you know, you’ve invested so much into this sharing economy. So hearing your perspective is very enlightening. But thank you so much Darren. I’ll include everything in the show notes, waits to reach out to proper. I’ll include my links down below and until next time, host nation, keep on hosting. Hope you host benefited from the show. If you found value, please go on over to iTunes, leave us a review and let us know what you enjoy about the show. If you’d like to talk to hosts that have been featured in these episodes as well as the community, go on over to our Facebook group, the host nation. Talk to you host in the next episode. Keep on hosting.