Even though some short-term residential rental websites offer insurance for that type of leasing, the fact that you are renting your apartment to tourists, remains essential information to be communicated to both your home insurer and your syndicate insurer. Remember that the insured must declare to his insurer any circumstance resulting from events within his control, which aggravates the risks stipulated in the insurance policy. This will avoid horror stories on the occasion of a loss.
The holder of a classification certificate is required to hold civil liability insurance for an amount of at least two million dollars. It is also advisable for tenants to also subscribe insurance covering their civil liability. As a short term co-owner lessor, expect this type of activity - which is considered a commercial activity - to result in a substantial increase in your premium. Indeed, the insurers consider that the insurable risk is much higher in this context than in that of a so-called "usual" dwelling. And remember that in the event of a loss caused by short-term tenants in your apartment, the insurer would refuse to indemnify you if it had been advised that you rent it for that purpose. Such a scenario could end up in a disaster, especially if the event of major damage. The Law states that every insured person is bound by an obligation of "utmost good faith" to his insurer, that is to say, he must disclose any fact likely to increase the insurable risk; and short-term leasing is an activity that increases the insurable risk. That being said, several insurers are reluctant toward short term leasing; they turn their backs on co-owners who devote themselves to this practice.
You should also be aware, as the Insurance Bureau of Canada (IBC) reminds the public, that people who exchange or rent their homes in the short term may be denied coverage in the event of a claim occurring during the rental and that such leasing had not been disclosed to the insurer. The same applies to civil liability in the case of bodily injury, for example.
Insurance of the Syndicate
For a syndicate, insurance is compulsory for both the common and private portions. The Law (article 1073 of the Civil Code of Québec) and the majority of declarations of co-ownership require it. The insurance contract specifies the guarantees offered, their limitations and exclusions, including the deductible amounts.
It should be understood that the short-term hotel-type rentals is a commercial activity that carries risks. For example, it can generate an increase in the number of water or fire damage, which could lead to considerable harm to a community of co-owners. Be aware that the syndicate insurer is unlikely to cover the risks associated with short-term leasing. And as soon as he is informed, it does not usually renew its insurance contract with the syndicate concerned. Other insurers agree to assume the possible consequences, provided they have been notified, which allow them to adjust the premium accordingly, which is to say upward.
Often, the declaration of co-ownership provides a clause that allocates the additional premium taking into account the fact that an activity is generated by a co-owner. In such a context, it will be up to the syndicate to decide whether to redistribute this premium increase (surcharge) to the co-owners who are active in short-term hotel-type rentals.
WHAT YOU SHOULD KNOW! The co-owner responsible for an increase in risk should compensate the syndicate for the cost of the additional premium. Such a scenario occurs when it results, without any doubt, from the personal activities of a co-owner or of some of them.
WHAT TO KEEP IN MIND : You should keep in mind that the co-owner's liability insurer may refuse to cover the loss if it occurs in the context of a short-term lease and that such commercial activity has not been denounced.
WARNING! If a short-term rental made in violation of the insurance policy should result in a loss, the syndicate's insurer could not refuse to cover the resulting damages (article 1074 of the Civil Code of Québec), in the event the syndicate had not been informed that this type of leasing was carried out in the building.
CONSULT THE PUBLICATION: Condo Insurance: Everything you should know