Laura May is Digital Editor at Just Another Magazine. We write about beauty, fashion, lifestyle, relationships, travel and trends.
The COVID-19 pandemic has raised a number of questions and challenges for both renters and landlords in equal measure.
How will I continue to pay my rent despite a lack of income? How do I continue to preserve my property investment if I can’t visit it?
While many would say these concerns don’t hold equal weight, we are no doubt seeing an accelerated rate of concern surrounding the rental economy.
One question that has piqued our interest, in particular, is that of rental insurance, and how relevant it is in a COVID world. We’ll analyze whether or not COVID-19 has made rental insurance ‘pointless’ from both the perspective of homeowners and the people currently living in these properties.
What is rental insurance?
Flexible rental insurance, particularly those offered by companies such as Duuo (who focus on short-term insurance offers), gives homeowners the opportunity to offer their homes for short-term rents such as through vacation rental sites and have a little extra confidence in their services. By opting into a more flexible rental program, homeowners with vacation rental properties can choose to drop in and out of the service to suit their own schedule and the economic climate without affecting their own finances.
Rental insurance is popular because it’s usually cheap, protects valuables in the event of theft, infestation or accident and is usually quite flexible.
While rental insurance is not always mandatory, both residential and vacation property landlords will often opt to use it to improve their services and offer an additional layer of protection to their enterprise.
Yes, it is pointless
Now we have some background, let’s delve into why rental insurance may have been rendered pointless by the COVID-19 pandemic.
A change in the travel industry
In the last few years, a new kind of property owner and landlord has emerged, completely shaking up perceptions of the property market and how people analyze empty lots: the Airbnb host.
The rise and rise of platforms such as Airbnb and Homestay led to a litany of homeowners both renting out their current home to holiday-makers and buying new properties entirely with that purpose.
The concept has been hugely successful, with Airbnb now boasting 650,000 hosts worldwide and over 10 million people using Airbnb properties in December 2019 alone.
Of course, the first wave of the COVID-19 pandemic sent shockwaves throughout the travel industry, and Airbnb and the vacation rental marketplace was caught up in that perhaps more than any other. Almost overnight, the idea of vacationing became impossible, let alone staying in another person’s house. Airbnb itself almost collapsed.
All of this background is to say that perhaps one of the biggest beneficiaries of rental insurance, vacation rental hosts, may not have use for it anymore. While the travel industry is starting to pick itself up again and recuperate some losses throughout the summer of 2020, it’s difficult to say that rental insurance is enough for businesses that are now on the edge.
Perhaps a new form of insurance that takes into account issues such as COVID-19 will have to be put forward to entice this industry again.
Second-home selling sprees
The pandemic has led to cost-cutting across the board, from multinational corporations to household budgets.
While they have hardly been the most negatively affected of all of COVID-19’s victims, second-home owners have been met with a drastic wake-up call.
Whether it’s to recuperate lost income, cut their losses with a rental business or simply to avoid running costs many homeowners with a second property have been pushing throughout the year to downsize their property portfolio.
As the real impact of the pandemic hits later down the line, many people could be forced to part ways with their second properties. If these are properties they’re renting out, it could suggest a lack of interest in rental insurance. Especially with people owning second homes receiving a frosty welcome across the UK from locals, there may be no point in owning or renting a second property.
No, it’s not
Of course, there are always two sides to every argument. Let’s look into why there is still life for rental insurance.
The eventual recovery
As touched upon, the assumption is eventually we will be living without or controlling COVID-19 sufficiently for things to return to a sense of normality. Businesses will re-open and people will once again have that desire to travel the world. Travel companies such as TUI immediately offered the option of rescheduling holidays in the wake of cancellations.
The housing market, in its perhaps flawed state, shows no sign of monumental change. Despite the pandemic, prices are expected to recover, and people will continue to rent as prices remain too high and wages remain too low for many to secure down payments on a property.
Renting as an idea will not die, whether it’s long term or short term. And with that, rental insurance will continue to thrive. People will now be more eager to secure their assets and move into more well-protected places.
Likewise, potential landlords will look at the way many economies such as the UK and USA have been structured to protect landlords and homeowners throughout the pandemic, leading to many considering an investment in a second property post-pandemic. They may have missed out on a couple of months of rent deep into lockdown, but the idea of picking up another property while prices are at a slight slump will still be very appealing to a landlord, and they’re going to need insurance.
Sitting on the fence
Let’s look at some suggestions that make the future less clear
Changes in renting laws and movement pool
In many parts of the world, the rules around renting have changed in light of COVID-19.
Some countries have introduced eviction bans, others have allowed tenants to backlog rent payments while lockdown measures are in place. This has no doubt led to many landlords questioning the game they’re in.
This rent relief will slow the movement of people between properties and perhaps remove the need to advertise secure rental insurance. However, it might be just what a landlord needs if a second wave approaches and they are able to access the property less frequently for maintenance checks and repairs.
In short, both yes and no. In this particular moment, it is difficult to create a new business with a second property you’re renting out. However, there will always be demand for homes and having insurance on yours can only make it a more appealing proposition. The vacation and rental market will bounce back, and it’s best to be prepared for when it does.