A Guide to Massachusetts Short-Term Rental Insurance Law Changes

If you rent out a Massachusetts property on a short-term rental basis, things are about to change. Effective July 1st, 2019 new insurance laws will apply to Massachusetts homeowners that rent out their home on a temporary basis and those laws may force you to change your homeowners insurance. Read on for what's changing, how it affects you and your Massachusetts property, and what you can do about it.

What's Changing

On December 28th, 2018, Governor Charlie Baker signed into law Chapter 337 (2018), regulating temporary rental and short-term rental properties in the Commonwealth of Massachusetts. Let's start with a quick overview of the law and then go into depth about the insurance impacts and what you need to do.

The Definition of Short-Term Rental

Basically, you're a short-term rental and subject to the new law if you rent your house (or a portion of your house) for just 1 day or more in a 5 month period. However, you're excluded if you're renting the room out intentionally for more than 31 consecutive days to the same occupant (which covers most residential full-time rent/lease situations).

If that's you or someone you know, read on!

What the Law Does

In short, the law does this:

  1. Creates a database of properties being used for Short-Term Rental
  2. Requires you to register with the state if you intend to use your home for Short-Term Rental
  3. Requires you to collect excise tax from your renters
  4. Allows for the state to require hosting platforms (Airbnb, VRBO, etc.) to provide reporting to the state on rental activity
  5. Allows local municipalities to generally regulate and tax Short-Term Rentals
  6. Allows local municipalities to require inspections and apply code and zoning enforcement
  7. Requires you to post certain safety data (emergency exits, location of fire extinguishers, etc.)
  8. Applies new insurance requirements for any property being used for Short-Term Rental

Wait.

New insurance requirements for my Short-Term Rental?

Yup! But don’t worry, I'll make it easy to understand.

Changes in Law Regarding Insurance for Short-Term Rentals

The insurance portion of the law takes effect July 1st 2019 (Section 16) and requires you do a few things as the owner:

  1. You must carry a minimum of $1,000,000 in liability coverage (yes that's $1 million) that will defend you and any tenants or owners from bodily injury or property damage arising from the short-term rental. Or in more general terms, you must carry $1mil in liability insurance to protect you if your renter sues you for injury or damage. The exception is if the hosting platform (Airbnb, VRBO, etc.) maintains equal or greater coverage already.
  2. You must provide notice to your homeowners or renters insurance company of your intent to use the property for short-term rental. More on that below and yes this may cause problems with your insurance coverage.
  3. The law specifically allows your homeowners insurance company to exclude coverage for short-term rentals. This isn't a change per se but it is worth noting that they actually took the time to write it into the law.

A Personal Invitation

Before I get into some FAQ's for homeowners that rent out their place, I want to extend an offer . . . I would love to chat with you about your properties and answer any insurance related questions you might have. No fees, no strings attached. It's amazing how much peace of mind can come from a short phone call! Feel free to call or drop a contact request note to me by clicking here.

Homeowner FAQ's About Short-Term Rental Insurance

Will my home insurance cover my short-term rental?

Maybe but likely not. How home insurance companies handle short-term rental insurance varies widely. Some companies specifically exclude coverage for short-term rentals, others offer limited coverage or limit the number of days you can rent the property each year. Many standard insurance companies simply won't insure a short-term rental property.

What are my short-term rental insurance options?

It really depends on how much you'll be renting your home out. If it's for a few days a year, there's a good chance your agent can find a standard insurance company that will write your home and short-term rental insurance on a homeowners policy. If you're talking about a couple of weeks a year, that's starting to stretch but your agent may have standard home insurance companies available. More than a month a year and you're probably going to have to look at an insurance company that fully accepts short-term rental use. These policies tend to be more expensive but have little or no restrictions on rental activity. Work with your agent to find the right coverage package and value for your unique situation.

My short-term rental is on the Cape. Does that change anything?

Coastal properties have more limited options than those inland. But home insurance is still available, even for properties that are being rented frequently. Again, work with your agent to find the right fit for your unique needs.

My house is with the FAIR Plan so I'm good right?

Maybe. However, the last time I contacted the FAIR Plan underwriting department I was told that they would accept a property that is rented no more than 30 days a year, and that they won't write an insurance policy on a property being rented more frequently than that.

I'm not using Airbnb or VRBO to arrange my rental, do I still need to deal with this law?

Absolutely. Regardless of how you arrange your rentals . . . Airbnb, VRBO, Craigslist, to a friend, directly to family, or via singing telegrams . . . If your rental meets the definition of 'short-term rental' then you're subject to the law.

Do I really have to tell anyone I'm renting my house out for a few days here-and-there?

Yes. Yes you do. The law is clear that you must notify your homeowners insurance company of your intent to rent the property out on a temporary basis (as defined in the law). It's important to note that it's required for mere intent, meaning you must tell your insurance company what you're planning BEFORE you actually rent out the property.

If I tell my agent I'm going to rent my home, do they need to tell the insurance company?

Yes they do. An insurance agent is contractually obligated to notify the company of any material change in the risk (e.g. your new rental plans).

As the owner of a short-term rental, what are my next steps for insurance with this new law?

The first step is to call your agent and explain how you're using or renting your property. Your agent will work with you and their insurance carriers (companies) to find the right fit for you. And of course Safford Insurance is always happy to help as well. If you'd like to chat please give us a call or use the contact form below and we'll happily get in touch with you.

Wrapping Up

I hope you found this information useful, please comment below with general questions and feel free to share this article with anyone you think might benefit!

Lastly, as a reminder, I'm not an attorney and nothing I've written should be construed as legal advice. The law has a lot of details so please read the full law (link below) and/or get an attorney to help you with how it applies to your individual situation. Full text of the new law can be found here: https://malegislature.gov/Laws/SessionLaws/Acts/2018/Chapter337

Want to learn more? Give us a call at 774-847-1106 or click below to schedule an appointment.

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Lastly, an important disclaimer: This information is general in nature and intended to be educational. Nothing in this should be considered an offer or provision of coverage. Every insurance company, situation, person, and animal is unique and pricing and coverage will vary. Depending on the situation, in some cases coverage may simply not be available. At the time of this posting, Safford Insurance, LLC services the states of MA, RI, and TN.