STRSS 28 – How to choose the right vacation rental insurance w/ Darren Pettyjohn

Video Transcript

00:00:00

Three months after that tenant moves into the property, they slip in the bathtub and they seriously injured themselves because there’s so scone all over the bath, whose fault is that? Is that leave the landlords.

00:00:17

This is episode number two, eight of the shorter mental success stories, podcasts. What is going on in this nation? I am just so grateful for everybody that was leaving so many awesome, nice reviews. Congratulations to our winners, Amy Kameron and Bethany on the Vacation giveaway. That is so awesome. You guys are going to some cool places like Las Vegas and Orlando. So I am super excited. I’m planning on going over to Tennessee pretty soon for an event, a BiggerPockets event. So if anybody is going to be going to the bigger pockets event is coming, think it’s beginning of October, it’s like October 4th through the ninth or something I’m going to be there. That’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, but we are going to be doing another giveaway guys because we are reaching a big milestone.

00:01:06

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 Short Term, Sage dot com backslash giveaway. We’re going to be giving away some awesome vacations to either like Las Vegas, again, Orlando, cause 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, go to Short Term Sage dot com backslash giveaway for more instructions. This is going to be going on until we reach that thousand mark.

00:01:48

But I imagine that this is going to be very quickly by the end of the week. Once we reach 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 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.

00:02:30

So some really cool stuff coming guys. So if you haven’t done, so you’d 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 ended up being like another podcast episode on Vacation Rental Machine, so awesome stuff, but let’s go into there and petty John, because today I had the honor of speaking with the one and only Mr. Darren, Betty, Jon founder of proper Vacation Rental insurance. So Darren founded proper at the end of 2014 and is now servicing over 30,000 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, the key things that you need to know, if you plan on operating a business in general now, proper, isn’t just in the business of insurance, but also education.

00:03:20

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, they can go to Short Term, Sage dot com backslash proper that’s P R O P E R. They can speak with you for free. Darren says that, you know, sometimes he could call them 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.

00:03:57

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 and things that I’ve taken away, they can go to Short Term Sage dot com backslash SDR two eight. Or if you’d like to sign up for the email, then go to Short Term Sage dot com backslash show notes with all that being said onto this week’s conversation. Welcome back host nation to another episode of short term rental success stories. In this episode, we have the 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 Darren, would you please introduce yourself and let the audience know who you are and what inspired you to start this company?

00:04:52

Yeah, thank you. Appreciate it. Darren petty, John. And as, as you were told there, we, we founded proper insurance at the end of 2014, and I’ve had the pleasure of being in the insurance industry for the, for the most part, my entire professional career, which is about 15, 17 years now. And with 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, because there’s a lot of gaps in coverage, which I’m sure we will get into there, but I’m proud to say that the programs then going for over four full years now, and we’ve written over 30,000 insurance policies in four years within all 50 states. So it was pretty incredible.

00:05:46

Now your, your guys has 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?

00:05:57

Yeah, great question. And in the beginning, like any entrepreneurial, it was myself at my home with a cell phone waiting for waiting for it to ring with course, and really where we started to grow was with professional property managers. So we know that the cost is 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, Allstate, nationwide USA, go on down the list. Every carrier treats short-term rentals differently, especially in the last five years. And so we really just started contacting property managers throughout the country and mailing them 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 for 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 a very unique product. And it’s been kind of just the snowball, honestly for the last four years.

00:07:23

Now, I imagine in the, in the space Vacation, Rental insurance is probably got a lot more headache to it. W w what is the, what is the difference between maybe a regular homeowner’s insurance versus Vacation Rental insurance?

00:07:40

Yeah, of course. Another great question that really fundamentally is the fundamental question of our entire product and the easiest way to explain it would be how much do you charge for insurance premiums? So most people who own a home have a homeowner’s insurance policy. If you own a business, you have a business insurance policy. If you own a long-term 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 have? All of 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.

00:08:37

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 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 sued the owner. So virtually all of those policies, you, you only have three options. So let’s, let’s use an example. Let’s just say on this single family home, you want to turn it into a short-term rental property. You can insure it on a homeowner’s policy. You can insure it on a long landlord, or you could essentially insure it as a business. The issue is there’s gaps in coverage.

00:09:30

In all three of those insurance policies, you really need a piece of each policy there’s aspects. You need a homeowners tire coverage, wind hail, the normal stuff you think of that insurance would cover. You 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 viability, et cetera. So basically what we did is we took components of all three of these insurance policies, wrap them into one comprehensive policy that is short-term rental owner 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. And I can say though, that, that we do, I know all of our competitors, and we do have the most comprehensive product, short term rental purchase. So that’s kind of the a 30,000 foot view on, on what you need is a short term rental owner.

01:10:34

Now, you said that you started in 2014, so a little bit after Airbnb started gaining a lot more popularity. W what, what about this? 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 like, kind of like a mini hotel. So why not stick with regular insurance? What, why jump into this very complex type of business model?

01:11:02

Well, there was a need for it and the kind of million dollar exclusion from the homeowner’s policy is it excludes business activity. So if you own a home and let’s say you you’re over 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 you didn’t solve 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 to cover contents of a residence.

01:11:56

So all of your personal property in the home and things like that, and really there’s 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 commodity insurance would be auto insurance, home insurance, life insurance, very, very cookie cutter and insurance policies that virtually you can buy from any agent in United States, very competitively priced, very comparable coverage, but then there are programs or niche insurance policies for a thing like a wineries, let’s say you own a winery. Are you gonna call your local agent and buy an insurance policy for your winery? The answer is no. You’re going to use that agent to find a niche insurance program, specifically tailored for wineries, whitewater rafting companies, then breakfast 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 or this industry? And the answer is yes, because there’s so many gases that are policies and, you know, it was the move of a lifetime for me. I mean, you work your whole life and, you know, you hope that you get one opportunity to really get into a really good business venture. And unfortunately we put it together

01:13:35

Now, you’re you were saying that this is a, this is a very niche type of policy, but people have been staying in other people’s homes for centuries. People have been, you know, subletting their, their homes, or just, you know, renting long-term renting. So why, why having other insurance companies major ones, like let’s say Geico or any other type of a major home insurance company provide short term rental insurance?

01:14:01

Well, and that’s an excellent question. And the reality is, is yes, short-term rental properties have been in Hawaii and the California coast and Florida, and Martha’s vineyard in places forever. And they’re mostly all insured on, what’s called a dwelling landlord policy. So a landlord, your landlord, and you have someone someone’s state 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 a short term rental properties in every community across the United States. So companies who had a good handle on the landlord exposure, and should we deny a claim because it’s a short-term rental where there’s liability off-premise. So he just really was a, not an issue. I mean, let’s just call it what it is.

01:15:05

They’re happy, everybody’s making money. It’s not an issue, but then all of a sudden, they’re now insuring properties in urban areas. And in small towns, like where I live, those Montana, there’s a thousand short term rentals in our college town. And you know, when that happens, it, domestic insurance carriers get nervous because now there’s all this new exposure. 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 Short Term or your property? Others have written very, very inexpensive writers to a homeowners policy that provide 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 on what’s going on with it, with the short-term rentals, but it comes down to exposure. And there just really wasn’t that much exposure up until the phenomenon of, of Airbnb and VRBO.

01:16:06

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

01:16:21

So another great question. And the, the way you explained it from a liability standpoint is a dwindling landlord policy actually does exclude business activity. So the same thing, if you own a long-term rental, and let’s say, you know, one side, you have a tenant, 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 this. So the million dollar question is, is it short-term renting your property, 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 filed taxes differently. I do write offs. There’s no arguing. It’s not a business. So that’s number one.

01:17:18

It could just fundamentally be wrong 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 long-term rental. Like I do. And somebody signs a one-year lease. And they say, I’m going to stay at the property for a year and pay a thousand 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 so stone all over the bath tub, whose fault is that, is that lean. 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.

01:18:16

They’re taking ownership of that possession of that property for one year. Now let’s flip it and say a short-term rental guests checks into a property for three nights and they go to take a shower and they’ve fallen in the shower because there’s soapstone all over the bathtub native side, just shoe the owner, the landlord, is it the landlord’s fault? You don’t 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? These are the kinds of issues you run into when your property is 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 trendous is covered.

01:19:17

So a slip of the driveway, the roof collapses, the landlord is too cheap to fix the roof. It collapses and injures. The 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’s a lot of steps in the easiest example is a doll. So let’s say you own a Short Term. We don’t allow dogs, but a guest decides to bring their dog to the rental for the weekend, regardless, they can 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 at your property. Well, guess what?

02:20:08

That was bodily injury that you could be found liable for that happened off your property. That could be tied back to you business. There’s simply no coverage under the landlord policy. The only way to 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 landlord, policy loss of rents versus business, income, backups, and shooters and drains. And you really could go on down the list, but fundamentally, 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 don’t I have business insurance? This landlord thing makes me nervous.

02:21:02

No. And, and, you know, I think it was really good to kind of address the point that, you know, the insurance is there to be able to protect your business. But you also mentioned something that was pretty key that maybe not 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.

02:21:26

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 again, I own short long-term rental properties. You’re in boasting. If that property catches fire and it needs to be rebuilt, which is a covered insurance loss, I would be paid my loss of rent. Okay. Now that sounds great for a long-term 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 a neighborhood. What they will do is they will look at all the comparable properties in my area. They will determine what is the fair rental value of that area. And they will say it’s a thousand dollars a month.

02:22:25

Okay, great. And they will pay me an insurance claim or $1,000 a month while my home or my rental properties being rebuilt. That’s issue one with a short term rental because you make a lot more money, Short terrain seasonality. 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 in severe county hurricanes, when you have a total loss on your property, you have to file an insurance claim. There’s an investigation there’s permits to get. There’s usually a shortage of labor in the area. It’s actually 18 to 24 months until your property is actually fully back up and running from the level it was before the loss. So the fact that the landlord policy one is fair market value and only pays for a 12 month period is a real gap in coverage.

02:23:18

If you are 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 sit that you have worked extremely hard to advertise your property, sell better coffee and have a better customer experience. No you don’t. 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 had a couple of clients in Tennessee that had just purchased short-term rentals in 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 district. 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 or pay a loss of income, business income, but completely different when it comes Clemson.

02:24:48

No, that, that that’s really good that you, that you address 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 really a diverse group of listeners. Some of them are property managers, some of them aren’t a rental arbitrage cohost thing. How does a 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, 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?

02:25:22

It’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 bottle 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. And it’s unfortunate because it just happens, but it really makes sense too, because the property managers want to 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 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 owner’s insurance policy.

02:26:14

That’s going to cover the equipment at your location, slip and fall at your location. 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. It ends at all these property lines. So how do you get coverage been in the district forever? And most of your PM’s are probably 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 their 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 covered under our insurance policy happens all the time.

02:27:42

Now, now, Darren, how does this work now though? Because with Airbnb, they, you know, they rolled out this new co-host thing. So basically anybody is, is coming in. They’re basically being like, 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.

02:28:09

Yeah. And, and the word co-host, I assume you mean as sort of the rental arbitrage model or the rebrand type model.

02:28:19

Co-hosting like, if I wanted to manage your property for you, not, not sublet, not subleasing. This is the split income where, where you get like a property management percentage.

02:28:33

Yeah. I mean, it’s the same thing and I get it. I like the word co-host because it fits nicely into Airbnb sort of ecosystem. But being a co-host 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. Co-host for 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.

02:29:32

So if you’re in a cohost environment, if we no different than the property manager, because at the end of the day, someone owns the property, right? Whoever owns it needs to have the right insurance. And when you go into a co-host opportunity, where you say, look, I would like to co-host your property, here’s the outline of how it’s going to 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 to do this. And 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.

03:30:27

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 long-term rent properties, and then they will turn around and Short Term, rent them on Airbnb. It’s been happening. And we read a lot of those insurance policies. So what we do is we write a commercial renter’s insurance policy, which is basically $500 a year. It’s inexpensive 50 bucks a month for insurance. And that will cover your income. Just like we talked about, you have a vested interest in your income of your water damage or something, your contents, because usually you will furnish the property. And then they want is obviously the liability. So two ways to do that as a co-host, you can be very upfront with the owner. Look, you need to contact your carrier. You need to do this. We need this. The partnership was worked out together, or you can just go out on your own and purchase a co-host 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 lots of them.

03:31:42

Now I want to, I want to hit on what, what is the difference between proper and maybe some of these other major Vacation Rental type of insurance companies? Are, are you guys doing something different or is it all basically the same? How do you, how do you, how do you compare? Like what, what would be a good Vacation Rental company to go with?

03:32:03

There’s there’s really two, 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 being covered again? And landlord says short term rental, fundamentally, when you short term rental your property, you are entrusting that property to someone else you’re saying, here are the keys.

03:32:59

You take ownership and take care of it for three days. And then you pay me a thousand bucks. 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. 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. Th they’re just big gaps in coverage. I mean, had the house burned 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.

03:33:58

And to give you a couple of examples, let’s talk about liquor. So liquor is excluded from virtually all insurance policies, but the exclusion specifically states the furnishing or contributing of alcohol. So you may have a lot of listeners out there that say, well, wait a second. I don’t furnish alcohol at my short term rental, why do I need liquor coverage? Here’s the reality short term, rental guests drink on vacation and the alcohol that they decide not to consume. They leave at the short term rental property. So unless you can, 100% say that my post stay inspection Clooney goes through every cupboard, every drawer it looks under every bed, make certain there’s no alcohol in 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 and they’re covered and drinks and gets hit by a car it’s so, so what is proper, do we actually entirely remove 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 bottles of wine, et cetera, we allow for that.

03:35:18

So again, I don’t want to say that we’re the only one, but there’s a lot of people below us who are 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 exclusion period in the story. We’re the only company that provides that of business income coverage. It’s pretty cool actually up to 15,000 and 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 is a thousand dollars, 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 at our company. We just educate. And then let you decide whether you want to upgrade.

03:36:23

No, I think, I think he brought up a really good point there in that that Short Term enters 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 are, they were actually cooking for people. Like they would leave food in their fridge and the guests, I would say there, what are you now? Let’s say someone gets sick. And they, they, you know, now they’re going to Sue because like they have a peanut allergy or whatever. How, 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, stuff like that, where you’re incorporating other aspects of a business into that

03:37:05

Only way that they’re going to have coverages with a commercial general liability, without a communicable disease, exclusion and other types of exclusions are 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 leave a basket and we’re okay with it. But the beauty is, is the online listing allows us to have a snapshot. Each property we insure, 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.

03:38:16

Now. I want to, I want to roll into, because a lot of hosts hosts in their own home. You know, I rent out a basement unit. So let’s say, let’s say though, if someone is just thinking 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. W w where does the line cross with that?

03:38:38

Again, you 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. But you need to dig into the fine details about the exclusions, because 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 property coverage. There’s no endorsements in 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. Yeah. So 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.

03:39:53

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’s say I accidentally leave the, the kitchen stove on and the house burns down is, 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.

04:40:17

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 misrepresentation or misleading information regarding this, this, this property in this policy, then we reserve the right to void coverage and the, so you have to be very, very careful on why people think they’re flying under the radar. And I don’t want to tell my agent because I haven’t been canceled well. So here’s a great example. There’s a another public story out there about a gal who’s suing travelers, insurance for 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 in damaged it E thousand dollars in damage that’s covered under all on insurance. It’s one of the reasons you have insurance.

04:41:24

The adjuster came to her house and started asking questions in found out that her guest house was rented on 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 is roof damage. The reason is, is she violated her insurance contract. She was doing something not permitted in her insurance contract, into defending the insurance carrier. Let’s think if that would have been a fire. Well, how does the carrier know that the short-term rental guests don’t have kids that mess with the wiring? How do they know that the integrity of the deck is there when they have parties? And there’s 25 people on a deck, you know, on and on and on.

04:42:18

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. And this is a tough one because I think the claims should be paid because it had nothing to do with a short-term rental guess. Just like you said, with your question, the tree had, they ranked the guest in, cut the tree, the tree just 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 covered for this what’s up. What’s going on. If you’re going to Short Term at your property on Airbnb, you better call your insurance agent. It advise them that the exposure at your property is changing. Otherwise you might be subject to the claim denial on

04:43:26

No, that 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?

04:43:41

That’s exactly the right answer 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 job, Short Term, renting her guest house, she did not increase the exposure her property. So why should they pay for any claim? I mean, you can really argue it 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, a hundred percent

04:44:13

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 don’t know if you’ve heard of like glamping or people renting out Airstreams. How, how do you get covered? Because I’m sure that car insurance doesn’t cover that. So how, what type of insurance would you need for those types of creative unique stays?

04:44:35

Yep. And so when we developed our insurance program four years ago, it was really designed as a Vacation Rental program. Short-term vacation rounds. And obviously with the growth of Airbnb, primarily, we now see a lot of tiny houses that are being put in the backyard. 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 that will 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 Airstreams, we see a old railroad cars that are put on properties and on and on, and we ensure some, I can tell you from our perspective, all just depends on the online listing and are the owners co-mingling, isn’t there a separate space?

04:45:34

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 will ensure there’s her. No we won’t, but what do they need? They need business insurance. I mean, no different. I mean, you know, at the end of this podcast, really the whole thing boils down to one question is short-term rental activity business, or is it not? And if you say it is and 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 on and on and say, Hey, I have a tiny home in my backyard. I live in the main dwelling and I Short Term rent my tiny home on Airbnb. I need a business insurance policy. They go, 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 in the story

04:46:43

And, and going off of that, the, the type of coverage, when, when would it be a good time for someone to reach out to proper for a claim because Airbnb has their, their host guarantee up to a million dollars, but I’m sure that maybe people are thinking, oh, well, you know, they, they ruined my linens or they, they peed on the bed or they did all this stuff. When, when is it a good time to rely on your insurance as opposed to Airbnb or some of these insurance companies that cover the in-between?

04:47:16

Yeah, a good question. And all of our policies from a property coverage standpoint have a deductible. And the lowest deductible we have is a thousand dollars. 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 a hundred dollars 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 a coverage coverage. We, we get a lot of people who submit claims to those guarantee. And to us, we, 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.

04:48:10

What’s not covered. Things have to be reported under a certain timeframe. There’s a big news story out about a, $1,000,001.6 million house that burned down in Napa, California. And it was 16 months and Airbnb had not responded to them from the host guarantee. And then they finally reached out to NBC bay area news story out. And apparently Airbnb stepped up a little bit and they won’t disclose what happened. So I’m not saying the 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 and they’re going to rebuild a million dollar house, we just thought that brand, 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, then submit it. You know, regardless of whether it’s 2000 bucks, submit it to us, submit it to your other chairs, submit it to the host guarantee.

04:49:21

Now what about 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, they, they just ruin the pool. How does, how does insurance work when you do have things like that?

04:49:38

Well, I mean, pool depends. How are you going to ruin a pool it’s underground, it’s concrete and spill water. We do and shoot ensure pools and believe it or not. We actually see some theft of a 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’s, that’s there’s water. So what would be an insurance claim where they ruin the pool? If they destroy decking around the pool, that would be property covered. 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 birth movement insurance. So there’s not too much people can do to all the way up to be worried about what the pool is, is viability.

05:50:33

The number one things, people dive into a pool and hitting their head and ultimately injuring themselves. And we underwrite for those. We insure, but we make all of our clients have Geoff markers on their pools just like kill them. I mean, think when you go to Hilton, there’s a sign lifeguard on duty, not on duty, there’s a fence. We don’t require fences, but there’s depth markers, my safety equipment. So we treat it exactly like that. So if your listeners are out there that have swimming pools, but not depth markers, life safety equipment, that needs to be something they put on their checklist and on our blog, it proper.insure. We actually just published a lawsuit that came out that was awarded to a gentleman for $11.6 million now. So what happened is he got drunk and he dove into a shallow lagoon and there was no depth marker or no swimming, your own risk of learning science.

05:51:31

He’s now a paraplegic. He sued the condo association and one 11.6 minutes. So it’s a big deal when you are offering these amenities, 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 aware of pregnancy, et cetera, et cetera. Otherwise you’re open for 10 mil. I mean, pretty much can’t do it. You’ve got to 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 coverage.

05:52:14

Now, I’m going to, I’m going to start wrapping up. But w what, what are the steps that someone should be taking in order to best protect themselves when they do need to file a claim

05:52:28

When they need to file an insurance claim?

05:52:30

Right? So like, let’s say there is 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 you aren’t maybe identifying things, or you’re maybe not including enough information, but how would you best protect yourself to be able to have a claim go through properly?

05:52:59

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 contact the 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 because my property was vandalized.

05:53:57

And number three is put a, put 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 duties 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. And that would be it.

05:54:39

Awesome. Thank you. Thank you so much, Darren. And what’s next with proper? Is there anything that’s going to be changing? I know that you’re in the U S right now, and you have 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?

05:55:00

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 extend down into the Caribbean. Our, our product is underwritten by Lloyd’s in London, which is very big in the Caribbean anyway. 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 we’ve got 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 our goal is to become sort of the Kleenex. If you will, for 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 want to build relationships, educate people. And if we cannot insure 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.

05:56:10

Now, I, I’m pretty curious coming from, 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, where do you see short-term rentals going?

05:56:28

All right. I have notes said this on the 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 the lights up in the Midwest, around Chicago, obviously the east coast down in Texas and Arizona. It’s really 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 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 sale or wherever. So why are these unoccupied properties not being used?

05:57:39

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 violin it as an investment property or you can just go stay in your short term rental. It’s, it’s 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.

05:58:33

Yeah, I know that 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?

05:58:44

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 conference 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 in the reality is the arguments against it. Don’t really hold up. It’s a very difficult issue. But in my experience, 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 ban it ban 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.

05:59:50

The guys that noise aware are really good partners of ours games. So they’ve got that covered. We’ve got insurance covered. We’ve got other companies that have safety inspections. Can 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 nobody 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 long-term 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 long-term rental properties than short-term outs. So that argument just doesn’t work, but they should be taxed because they need to compete against hotels. It’s not fair, make a 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 I love that it can be regulated. Your common sense. And, 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.

06:01:23

Well, great. Thank you so much, Darren. Now 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, this, the sharing economy. So hearing your perspective is, is very enlightening, but thank you so much, Darren. I’ll include everything in the show notes, the weights to reach out to proper I’ll include my links down below, and until next time, host nation keep on hosting, hope he hosts benefit 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, going over to our Facebook group, the host nation.