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435. Short-Term Rental Insurance 101 with Proper Insurance
Welcome and Listener Feature
[00:00:00]
Sarah Karakaian: Hello, welcome back for another great [00:01:00] episode. My name is Sarah Karakaian.
Annette Grant: I’m Annette Grant, and together we are Thanks for Visiting!
Sarah Karakaian: Let’s kick off this episode like we do each and every week, and that’s featuring one of you, our incredible listeners who’s going to strshare.com, sharing everything you can about your short-term rental, so we can share you here on the podcast, on our Instagram on Sundays. Annette, who are we sharing this week?
Annette Grant: This week we are sharing DeLonga Estate. And wow, it is a showstopper property. They are on 13 acres. Private acres. Love it. One thing that really sticks out, and I want to share this with everybody, Sarah and I both, Like, saw this and said it at the same time.
They have six bedrooms and five and a half bathrooms. Love that ratio. And we just want to share that if you are building out a home, please make sure your bedroom bathroom count makes sense. We see so many five bedrooms, 1. 5 baths. And that math ain’t mathin for me. That toilet time math is not [00:02:00] mathin Shower time.
It’s just a, it’s not working. So I want to say they’ve done an excellent job. The other thing I saw that they recently, um, They, they have a pretty extensive, like, amazing, uh, basement that they put a lot of hard work in, like, after they built it. And it is a showstopper, um, and it is, Just a wow factor.
That’s where they kind of put their gaming room. They put some rooms, um, some extra bedrooms down there, but do not discount, you know, a walkout basement and how much that can bring to your site, um, to, to your property. I think they’d probably be a, ripe for a parent child listing. If you don’t do a parent child listing, everybody, what are you even doing?
But well done. Check out their, um, check out their use of video throughout their Instagram too. They use a lot of just video so you really get a feel because the home is amazing. Well done. Thanks for going to STR Share. [00:03:00] Sarah.
Introducing Proper Insurance
Annette Grant: Okay. Today. Oh, listen. Let’s get, let’s get to today’s episode.
Sarah Karakaian: It’s, it’s, it’s a, first of all, it’s, it’s on the longer side listeners.
Annette Grant: It’s important.
Sarah Karakaian: But it’s important and it’s with proper insurance. We are a customer of proper insurance and have been for years and years. And they continue to be one of the most transparent partners that we’ve had as operators and they don’t sugarcoat things.
They don’t lie that they are one of the more expensive options out there for short term rental coverage, but they know their stuff. They see a lot of stuff. And today we have on the show, Nick Massey, who’s the chief sales officer at Proper Insurance and is considered an insurance expert with over eight years in the industry.
And Nick does not shy away from educating you, whether you ever become a client of proper insurance or not. Obviously, I don’t say it doesn’t matter to him. It does matter to him, but what he wants, what he cares more about is educating hosts, whether you’re an [00:04:00] owner, a co host, an arbitrager, does not discriminate.
And there’s things that you’re going to learn in today’s episode that are going to make you a more thoughtful, risk manager of your short term rental business, whatever that might be. And wait till you hear just some of the stories that Nick has working at Proper over the years of people that are underinsured, of people that just count on air cover, and what happens when air cover denies you because they don’t have to protect you.
It’s eye opening. It’s educational. Let’s get to it.
Nick, welcome to the show. We are so excited to have you on. And you know what? I will say every time we talk to Proper, you guys make insurance educational.
Fun, slightly terrifying, but in a healthy dose sort of way. So I’m excited for this conversation.
Nick Massey: Same. Thanks for having me. Yeah, the, at least the last decade of my career here has been, let’s try to make things [00:05:00] digestible.
Sarah Karakaian: Yes. Yeah.
Nick Massey: Um, there needs to be a little. You know, fear and risk management. I mean, we all know Justin Ford and maybe I’d just let him stay with the scary stories for the most part, but uh, insurance is also inherently confusing.
So whatever we can do to, to kind of get it down to ground level and, and not all jargon and, and demystify is the word, uh, it’s, it’s everything that we look to, to try and accomplish.
Annette Grant: I’m just, I’m going to, I’m going to go, I’m going to go in for the killer right now. This is what she does, Nick, so get ready.
Nick, why do we even need insurance?
Understanding AirCover vs. Proper Insurance
Annette Grant: Because we have AirCover.
Nick Massey: Well, uh, AirCover is an insurance. It’s not a policy with your name on it. So you technically don’t have policy rights. Um, it’s
Annette Grant: Oh, I want to slow down because this is my quote. This is the thing I quote the most. Go to AirCover. I want to see your name.
I think you’re the one that taught me this. Like, show me where your name is on a policy through Airbnb. Like, I can actually go into my files, my digital files, [00:06:00] and see my name and address on Airbnb. Properties that we have, proper insurers. So I want you to slow down and, and, and say that again because that was the one that really like, was the gut punch for me to understand.
Mm-hmm . Wait, air cover is not insurance, so we are not named as an insurer on, on that coverage. Whatever the air cover is.
Nick Massey: Correct. Correct. And by no means am I, am I batching Airbnb and everything that they’ve done for this industry and the growth and the financial opportunities that they’ve given everyone, including, including myself here.
Um, we wouldn’t have a business without them technically. So, uh, the OTA, Airbnb and, and Burbo does it as well. Uh, they market to get inventory by saying, Hey, we have insurance. So you can book with us and put your property with us and we have some, some level of protection where the marketing becomes confusing to somebody who’s just getting into this industry is they see the word insurance as a marketing [00:07:00] term and I use air quotes because that’s how they do it and they go, Oh, great.
I don’t have to do anything with my home policy. They’re going to take care of anything that happens. But when you start really digging into it, that’s when you start to see, like you pointed out, I don’t have an insurance policy that’s sent to me by somebody at Airbnb that says, Sarah and Annette, here’s your insurance policy for this address that you host on, on Airbnb.
So that’s the big problem. If you don’t have a policy with your name on it, you don’t have policy rights. And what that really means is if they tell you no on a potential claim that they’re not going to cover it, then you don’t really have any recourse against them. Right? Because you, again, you don’t have policy rights.
So you don’t have arbitration. You don’t have public adjusters that can come in and do these things and kind of fight on your behalf. That’s the, that’s the job of us. an agency, uh, to work on your behalf, especially during the [00:08:00] claim. The other part is that they have, they’re only covering you during a booking period.
So anything that happens outside of the booking period falls on your regular home insurer. And I’m sure we’ll get into the details of the jargon we want to be on the lookout for in those policies. It’s also very difficult to go through their marketing and through their website and see what is actually covered now We’ve spent the hours and the time to dig it up and like one big thing that you see that’s not covered on there It’s gonna be stuff from like natural disaster.
Even if your property is booked. They’re not covering it because that’s not their Their duty as a supplemental coverage. They are just there to supplement potential gaps in your underlying insurance policy the other thing is they have These exclusions and it could be things for like communicable disease if you have a hot tub or a pool Uh, the cdc just posted a thing last month Specifically calling out vacation rental property owners and managers about [00:09:00] the rise of legionnaires disease with hot tubs Uh in which over half the people who reported having legionnaires in 2024 stated that it came from a stay at a short term rental property.
One out of 10 people who contract Legionnaires die from it.
Annette Grant: So you
Nick Massey: don’t have coverage for that in, in a lot of, in a lot of cases. Um, and you can get that from decorative fountains. You can get it just from hot water coming out of the faucet. Uh, if you have. If you haven’t replaced your hot water heater in 25 years, it’s full of gunk and grime and this bacterial infection can grow and that stuff.
So, you know, those are parts and pieces that people miss because it’s not presented to the general public on what those limitations are. Um, again, it is a supplemental coverage and there’s supplemental policies out there that you can go and pay for yourself. Or have your guests pay for it on the booking And then you do have a policy with your name on it And you know exactly what is covered and for how much and when and where that policy supplemental policy responds [00:10:00] to or in my sense in Uh, the name of, of, uh, name dropping just by the right insurance to start with.
And the OTA is there. They may cover some things they may not. And if they cover it, fantastic. They cover it. And you’re not, uh, having to file a claim on your regular policy. That’s awesome. Or sometimes they cover part of it and you need your insurance to come in, uh, like proper and, and pick up the rest of the bill.
Um, so yeah, there’s a lot of issues with it. Uh, and it’s not going away, so it’s always there, but you can’t think of that as your risk management Bible. Just because you book on Airbnb, you have this protection and it’s going to cover everything.
Real-Life Insurance Scenarios
Sarah Karakaian: Do you have any specific examples, Nick, that you’ve heard of in the agent at Proper of a client who tried air cover first, got denied, and then had to come to the, and then what, and what does that cost that they were denied and they were kind of shocked by?
Nick Massey: Yeah. So I always go back to a [00:11:00] personal client of mine. Uh, I want to say it was back in 17 or 2018 when it happened. But so they had accepted a booking and a group of college age individuals stayed. I want to say it was a Thursday night and the neighbor had called my client and said they were having a party.
So he reached out to Airbnb, had them cancel the booking, and then they broke in the next night. and through an even bigger party and ended up causing about 102, 000 in damage to their home. Now, initially, Airbnb denied air cover. At that time, it was called the host guarantee. Uh, they denied the claim because there wasn’t technically an active booking.
Now, through the investigation with the sheriff, uh, they had found a wallet. The id in the wallet happened to be the individual who did book the property And so airbnb provided some response if I recall correctly, it was [00:12:00] around 17, 000 which was just the cost to clean up the home not to repair the damage that was done broken windows pulled cabinets off the off the wall burnt furniture in their backyard like Total retaliation for their booking getting canceled at this property so They did the right thing in that in where they more or less declined Airbnb’s offer of 17, 000 because it clearly wasn’t enough.
Uh, and then we ended up responding to the property damage and the lost business revenue on that to the tune of about 102, 000.
Annette Grant: Wow.
Nick Massey: Um, we’ve had plenty of situations though on the flip side where We, a client calls into us to file a claim. We have an in house claims team, which is very unique in the insurance market.
A lot of times claims are, are, um, you know, kind of pushed off to a third party organization as a contractor to handle everything we, we handle it all in house because we know our contract in and out, so we should be [00:13:00] adjusting our own claims, uh, and that’s. That’s a very, very special designation to have in the, in the world of insurance.
So when we have a client come in and say we have guest cause damage specifically that term guest cause damage Uh from an airbnb booking my claims team They’re going to initially push off and say let’s get a claim filed with airbnb and see what they’re going to do about this Okay, because Yeah, we’re here to protect you, but if you got 20, 30, 40, 000 in damage from a guest and Airbnb is going to respond to the whole thing, you don’t want that impact potentially on your regular insurance.
Right. So, we do that and then we wait for what Airbnb is going to do. The problem with that is that it is a drag of the feet. It can take weeks and weeks and weeks, which all that does is stack up lost revenue on the backside for them to respond and say what they’re going to do. Sometimes they’re very quick, but our experience is that it’s kind of slow.
So maybe in that [00:14:00] situation, you have 20, 30, 000 in damage from a guest and air covers says we cover 12, 000 of it. Okay, cool. We’re going to come in and take care of the rest of that from that 12, 000 up because Airbnb is responding and of course if they just flat out say no and it’s a covered cause of loss on say our policy, then we’re responding to that thing entirely less your deductible.
Sarah Karakaian: Are there any other OTAs that offer? Uh, like a damaged waiver type thing that, that air cover does, or is, are they, is Airbnb really the only one that offers that?
Nick Massey: Airbnb is the only one that offers it to the scale they do. And really because the insurance market, we’re, we’re in what’s called a hard market right now.
Um, and what that means to the listener is if you look back, you know, really from 2017 was when this really started, but there’s been so many large natural disasters and problems in the insurance. Industry as a whole, especially in the United States, that it’s really hard to get [00:15:00] program business through and what program business is a custom built policy for a particular market type.
So we were able to do what we did in in 2014 if we were trying to do what we do today. In today’s market, it would never happen. We would never be able to get our program through because nobody would want to touch it. It’s too risky. So we’re in a hard market and Airbnb was fortunate enough to get their program going prior to this real restrictive market that we’re in now, Verbo offers a liability policy.
They started doing that in 2016, 2017. And then they tack in other supplemental damage waivers through some travel insurance providers, uh, generally specifically, uh, that covers a little bit of stuff. Uh, we see the likes of companies like evolve, for example, um, you know, they’re not a full service management company.
They’re kind of a mix kind of OTA. You do a lot of your own boots on the ground, but they help with some client communication and collecting the rent and stuff. They have a program. [00:16:00] is well, but it’s no different than a damage waiver supplement that our sister company would sell you as an individual on a by booking basis.
It cost the guest a few bucks, usually 40 50 60 per booking, and then you get 5 in supplemental damage protection. So we’re seeing a larger growth of that. type of program through the online travel agencies versus this kind of full blown, full scale thing that Airbnb did. I think if Airbnb ever kind of lost that policy or it got really restrictive with the insurance companies, they’d never be able to get it back.
Sarah Karakaian: That’s, and that’s, yeah, I just, and I like that you actually do promote, let’s go see what AirCover will cover first and then And then we can see how we need to move forward. So it proper recognizes that air cover could be a solution, but you just can’t count on it because if they say no, you have no recourse.
And now you gotta, you better hope that your, your current policy knows that you’re doing [00:17:00] short term rentals or furnished rentals and they’re, they’re able to cover whatever happened at the property.
Nick Massey: Exactly. Because again, if a tree falls on your house, even if a guest is there, it’s not, doesn’t fall under any supplemental provider.
Annette Grant: Mm hmm.
Nick Massey: That, that always falls under your regular home insurance and whoever that might be, then it’s on the basis of what’s in that contract. Um, which unfortunately, a vast majority of this industry is still running with a standard homeowner’s or landlord style policy, has very explicit business activity exclusions, so that claim can be denied.
Um, there’s actual case law on it in the state of California from back in 2016. A tree fell on a detached structure that was rented sometimes and they denied the claim. And it was about 100, 000. Emily Richer is, is the gal’s name. And the only reason we know about that, and she brought it to us, um, became a client of Propper’s.
For a little bit while she’s on that property, um, but had sent us all the [00:18:00] docu everything and said this is what I have going on. And they 100 percent denied my claim because of this business activity exclusion of which she fought and fought and fought in court, uh, which costs even more money. Right? So, uh, those are, those are things that I think a lot of folks are, I don’t know if they all go into it kind of flying under the radar, or if it’s a, if it’s a lack of, of insurance policy knowledge on The retail insurance agent, you know, the Main Street agent that you called up in your town and they just heard the word rental and they wrote a rental policy, but that’s on the basis of long term rentals, which doesn’t fall under business and insurance and, uh, and then you don’t really find out until you have to file a claim.
So, we like to go through all of that on the front end and be like, send me your current policy. And I will point out on what page and where it says this so you can actually see in the policy language where these limitations fall and what that could mean to you in the event of a claim.
Common Insurance Claims and Coverage
Annette Grant: What are the top three?
So you said loss of income [00:19:00] is, is one that I’m sure. People before they get into short term renting, they’re not anticipating that. What are two others that you see people just overlooking time and time again, just because, sheer, like, not, not having the knowledge? So it’s loss of income. What, what, I want to say, like, bedbugs is something that I think a lot of people, renters, but what, what do you see as like two other big ones that people just really kind of have the blinders on about?
Nick Massey: Yeah, so the three things that, When somebody calls in to us and we’re first talking to them and we ask them, what’s your biggest concern? The top three that we get are gas caused damage. Liability, I’m getting sued, and my loss of revenue, in the event I can’t carry the cost of my property due to a claim.
Um, but, those are not the top claims or things that are going to happen to your property. So, the number one claim in insurance, through and through, whether you’re short term renting, you run a, uh, you own commercial real estate, uh, or your primary home is going to be water damage. Is the number one claim.
Number [00:20:00] two is going to be wind related losses. So that could be hail, it could be hurricane, could be trees falling. Uh, with us specifically, number three then becomes the guest cause damage. Okay, uh, the reason that’s number three for us, because we don’t exclude it. So if you were to look at the standard average losses, this data comes out every year through the Insurance Information Institute.
You’re not going to see guest cause damage because nobody covers it. Um, but we do. So it’s on our, what’s called a border row for loss stuff. And we can see how many claims we filed, how much money we’ve paid, you know, how much premium was collected on those policies, where that was paid out and things like that.
Um, now a lot of people look at wind and they go, well, it’s fine because my regular home policy covers wind. And, and yes, 100%, they, they do. But the problem is, is does that policy have that business activity exclusion or not?
Annette Grant: Uh,
Nick Massey: uh, when an adjuster hears that. It’s like, oh my gosh, I had guests here, and then the tree fell on the house, and, you [00:21:00] know, I’m going through this whole thing, and it’s just a scary situation, you know, wait a sec, what do you mean you’re a short term rental?
That’s not the policy that you have, and then they report that back to the underwriter behind the policy, and the underwriter can deny the claim on the basis of said business activity exclusion. So, um, that’s, a lot of the phone calls we do get is folks going, I had a claim. It wasn’t covered. Fortunately, it wasn’t very big, but now I’m on the hunt to make sure I have the right insurance policy in place.
Bed bugs is in the top five. Uh, bed bug remediation. That’s why we brought that out in 2018. We started to see an increase in bed bug infestation. Our clients were asking about it a lot because it was in the social media, it was hitting the news, um, and we’re able to move very quickly. So we, we jump on it and go, we’re going to do bed bugs.
We’re going to charge a very minimal amount for that coverage and give you 20, 000 in protection for the remediation and seven days of lost business revenue on that. Uh, [00:22:00] and then in 2020, it was squatters. We have longer term stays due to the COVID pandemic and people are staying 30, 45, 60 days at these properties to get out of the city for, for a time being.
And now people are worried about squatters. So May of 2020, our squatters protection comes out, uh, which are just things that we’re on the forefront of hearing these problems or hearing these concerns firsthand. And as soon as we see viability in the need for that protection, we’re able to take it to our carrier, come with a tentative rate.
on what we think to charge for that, what we think our basis of how many claims are going to pay, potentially are going to be, and then we roll that coverage out within months of, of engaging with the carrier on it. So, uh, that’s where working with a specialty firm like Proper becomes inherently beneficial, uh, because we can add and, and change these coverages big.
Um, I had mentioned water damage, number one claim, and because this is the number one claim, and we’re in this very hard market, We’re seeing a lot of [00:23:00] water damage limitations being put into these contracts. So, uh, you may have, say, a million dollars in building coverage on your home to replace your structure if it burnt down to the ground, but you only have twenty five, fifty thousand dollars in water damage protection for things like frozen water pipes and, and stuff like that, which is not a lot of coverage in the grand scheme of what water damage can do to a million dollar home.
Sarah Karakaian: Which is so scary, especially, I mean, right now in As we’re recording this in Columbus, Ohio, we did experience a deep freeze, which I think a lot of the country actually did, and we were all hands on deck as a property management company, doing everything we can to, to mitigate frozen pipes and things of that nature, because it’s just next level devastation when that, when that happens, I wanted to say before we get to the end of the episode, Nick, and correct me if I’m wrong, but you mentioned this, and I want to highlight it, because I think it’s a really nice offer from Proper, but you will, someone could, who’s listening to this episode, could Schedule a call with a proper insurance agent, [00:24:00] share with them their current policy, and then PROPER will take a look at it.
And if they, if you, if PROPER feels like, hey, this is actually quite good, we couldn’t do better, like you would tell them, or you could expose gaps in their coverage, they can at least make the best educated decision they can for their short term rental, right?
Nick Massey: 100%. So, you know, full disclosure, we keep the lights on in the office by selling insurance policies.
Right, right. But we know not everybody, um, based on how they’re trying to do their risk management, which insurance is a major component of that, uh, that, They may not need all of the, the bells and whistles and, and call it, you know, the Cadillac trim package, if you will, that, that our package offers, but we’re still going to take a look and say, okay, this is the limitations in the policy.
And from my standpoint, you know, you’re a lakefront property, so you really. Um, need to be mindful that there’s limitations in this coverage for the amenities that you offer, um, or this policy has, um, you know, [00:25:00] requirements around your swimming pool. If you don’t have X, Y, and Z at your swimming pool, they’re not going to pay a claim.
Like we see a lot of coverages require self locking gates, which may or may not be the current code. Uh, in your area, but if you don’t have a self locking gate that’s operational, they can deny a liability claim. So we, we want to see your policy so we can help point those out because two things are going to happen.
One, you’re absolutely guaranteed to get a much higher level education around insurance and how this works in your property with us. And two, you’re going to leave that conversation with the option of taking policy A. or the proper insurance policy on the basis of what you’re looking to accomplish. And we totally get, and our numbers are just this, 7 people are going to go with that other policy, but we know 10 people got done chatting with us and very much should have a better understanding of things they may need to self insure for, or maybe take next steps to better manage their risk to try to avoid one of those [00:26:00] excluded losses from happening at their property.
Sarah Karakaian: I love that transparency. Let’s you mentioned amenities. Can we talk about that? What should hosts look for?
Amenities and Risk Management
Sarah Karakaian: We get calls in all the time in our hosting hotline, Nick, or in our, in our private group of, you know, what appendices gonna make them money. And a lot of the times, and then I try to do a good job of saying, just make sure that your insurance company knows That you want to bring this amenity into your property.
So talk to us about what you see when it comes to these money making amenities that might also not be covered or expose them to risks that they’re not quite aware of.
Nick Massey: Yeah, so rule number one, if it’s not a searchable amenity on the OTA, do not provide it. Um, What does that mean? That’s, like I can search swimming pools on Airbnb and VRBO, but I can’t search diving board.
So you probably should remove your diving board if you have one. I can’t search slide. I can’t search trampoline. I can’t search inflatable flamingo. Like [00:27:00] just don’t have those at your property if you can’t search for it on Airbnb. If it’s not a filtered amenity, get rid of it. And I think That is
Sarah Karakaian: some pro tip right there.
Is this because they OTAs are like, we’re not going to promote these things because they’re high risk.
Nick Massey: And it’s partly because they probably want to cover it on their free liability insurance, as they call it. Um, but that’s what we looked at when we developed our program was like, what are these commonplace amenities?
Canoes, kayaks, swimming pools, hot tubs. Uh, saunas aren’t technically a, um, searchable amenity, but it is something like that we cover. Um, so. You know, take that a little bit with a grain of salt, but what are things that we’re not going to cover? We’re not going to cover zip lines. We’re not going to cover the trampolines.
We’re not going to cover the rope swings hanging in a tree. We’re not going to cover this and that, uh, because it’s just not a commonplace amenity. Okay. So that’s kind of my, that’s definitely a pro tip. And that’s what I tell every client. They’re like, well, I want to do this. I want to do that. It’s like, well, if you can’t check the [00:28:00] box on the OTA.
Don’t offer it. Plain and simple.
Annette Grant: Let’s pause, yeah, let’s pause on, you said kayak, canoes, bicycles. We hear so many hosts, like, that cribs and high chairs, they think they’re just, like, the more they throw in there, the more bookings they’re gonna get. Via Justin Ford, I’ve heard that, you know, from the high chairs to kayaks, all of that should have a waiver attached to it.
Is that correct?
Nick Massey: 100 percent Absolutely. So one of our fundamental requirements when somebody setting up with this and we’re helping them kind of walk through this managing of the risk. Yes, we’re going to cover it. But part of the give and take relationship when you work with an insurance provider like proper is okay.
We’re going to give you a million dollars in liability coverage. Yes, but you need to do X, Y and Z for us so we can defend you in the event somebody sues you over that, right? So if you’re offering a bicycle, we ask that you you need to have helmets. Yes. Okay. You need to do post day inspections on the bicycle to make sure that it’s not um, you know, the [00:29:00] handlebars aren’t loose, it’s not missing spokes on the tire, the seat isn’t ripped, the chain isn’t broken, you know, and it’s safe for somebody to use.
And then you need to have a general waiver of liability or use it your own risk language in the rental agreement or house rules via the OTA. Uh, because what that does is it gives our liability adjuster a platform of defensibility to stand on. If we don’t have a platform of defensibility, We either don’t want to take on the risk, or it’s just going to be a million dollar lawsuit every time, and then we really should be charging quadruple what we’re providing if we, um, if we weren’t asking for these things to be put in place.
Uh, swimming pools, it’s depth markers, it’s swim at your own risk signs, it’s non inflatable pool equipment. Right? So, you should have life jackets, Coast Guard certified thing, same with canoes and kayaks, non inflatable. Um, there’s this rule in, in liability in, in the legal side called inherent risk. Is something an inherent risk or not?
Well, a hard sided canoe or [00:30:00] kayak or a bicycle falls under the kind of guise of inherent risk. The general public knows how to use and operate those. The general public doesn’t know how to use and operate a 2, 500 inflatable triple chambered canoe. Because what happens if one of those chambers has a leak?
Now, here in Montana, everybody has inflatable rafts for the most part. We all know how to use them. But not everybody knows or understand like Saranet, I don’t think you would come and pick up the raft out of my garage and say, I know how to operate this thing. Uh, so, you know, that’s another kind of pro tip is, is inherent risk.
What is an inherent risk? What is not? Is a zip line an inherent risk? Does everybody have a zip line at their property? No. They don’t. Uh, so again, that’s another thing to kind of think about, uh, about getting rid of anything that’s semi out of the norm. That would be an acceptable amenity. Not everybody has a sauna or knows how to understand those should have the placard that comes from consumer product safety for those suppliers of the [00:31:00] saunas.
It needs to be posted on how to operate it. All right, so we we do ask and require those same thing with bunk beds again. Bunk beds is not something that everybody has. Mhm. But consumer product safety requires manufacturers to put a placard on. If you’re custom building a house and you have a contractor custom build bunk beds, they need to be built to the consumer product safety specifications.
They need to have an affixed handrail, a ladder, excuse me. They need to have a minimum four to five inches between mattress to top of the top bunk railing. Right, uh, and then you should just look up the consumer product safety requirements and write up a little placard or order one on Amazon and put it on there.
That’s going to help the defensibility in the event of a lawsuit.
Annette Grant: I like that, that, a term that I’ve learned today is a platform for defensibility. So it’s like help, help who’s ever going to be helping you in a claim or lawsuit. You’ve got to give them. [00:32:00] Something that the platform of defensible. It’s like thinking ahead of time of what could potentially happen.
And where in my listing am I protecting myself ahead ahead of time? How? How can proper help with that, though? Like, I know you’re looking at it. Maybe you don’t. But I know you’re looking at policies and doing policy comparison. But as host, when we go to list on the O. T. A. S. How are, I don’t know if you can even help with this, but how can we protect ourselves just via the way that we are presenting ourselves on the OTAs?
What do you see a lot of hosts miss in the way that they’re presenting, um, and marketing their properties online?
Nick Massey: So where we see folks miss is, is nondisclosure of possible risk at the property. And then that has two problems. One has a problem for us who’s underwriting the property and our job when you become a client.
You’ve not just bought an insurance policy, you’ve [00:33:00] hired us as your risk manager. So, we’re gonna look through, we look at your listing through and through. All of your reviews, we look at all of your photos, we look at how you advertise everything. What the geographic, like around the area geographically, what does it look like so that we can help present you with things that you may need to do, again, to give us that platform of defensibility in the event of a liability claim.
So, uh, we just had a situation where a gentleman has a very unique property. Um, it is constructed and engineered well. However, upon reading the reviews, um, There was a a portion of the property and just in the event that uh, that client’s a listener I don’t want to get too into the details, but there was something that we saw that we just didn’t Like, that it would become very difficult for us to, uh, protect that client in a lawsuit.
And so came back and, you know, had to dive a little bit deeper into that particular, it’s not really an amenity, it’s kind of an access point to the property. [00:34:00] Um, and how it’s constructed, how it was engineered, so that we have that stuff on file in the event somebody says it wasn’t constructed correctly.
Uh, if there was, there was an incident. We also see people, unfortunately, try to hide some things. Uh, there was a situation a number of years ago for us. I shouldn’t say a number. It was like two years ago. We didn’t know that this property, um, had access. Basically, the property line butted up to a cliff, a 40 foot drop into a lake.
Um, if we would have known that, we would have required a fence and signage and illumination of the trail that this gentleman walked off the edge of at. night, intoxicated, followed the, the, the gravel path and it just, the gravel path literally stopped at the end of the cliff and they fell off, a multi million dollar lawsuit against the property owner.
And so that should have been something that was advised and disclosed in, in the, um, [00:35:00] listing. Uh, another kind of pro tip, a great, a great attorney client of ours who told us. I cannot defend negligence. You can’t waive negligence. You can’t protect yourself against negligence. And something like that, unfortunately, is negligence on the property owner.
It’s indefensible. There is literally nothing anybody can do to get you out of that. Um, so, those are things you need to really think about and consider.
The Importance of Test Stays
Nick Massey: I strongly feel that one of the biggest misses with new property owners is not doing a test stay. And so, you need to have family, friends, somebody like that, like, let them stay there for three or four days at no cost and be like, you need to give me the checklist on like, something that you feel might be out of the ordinary that I need to address.
There’s a, there’s a small step between the living room and to the kitchen, and you missed it and you tripped on it. Um, somebody else is going to trip and fall on that and, and, and maybe come after me. So [00:36:00] maybe that’s something you need to address with signage or, you know, some, a little bit of tape or something like that, that really makes it pop out to everybody so that they know they got to go up that, that little rise.
Right. So, uh, I think that’s one of the biggest misses that, that I’ve heard of and at conferences and talking with people is like, nobody really does the test stay anymore, like get excited about your property and have people go in there and check it out. And then.
Addressing Potential Liabilities
Nick Massey: Take the feedback that they’re giving you on things you might need to make changes or adjustments to.
Sarah Karakaian: I was going to say, yeah, you’re not kidding, Nick, with, so Annette and I have a townhome that we have insured with Proper, and They were on our listing looking at the photos and we have a handrail and they wanted to make sure the handrail was continuous and to code. And I was talking to the agent and I was like, How many more angles of this photo do you want?
But she was like, she was doing her job. And I was like, fine. So I got her a video, like the whole nine yards.
Understanding Insurance Requirements
Sarah Karakaian: But it also, it’s, it’s not Proper’s job to, to be at the property, so if, I would just say [00:37:00] as a host, especially if you’re a new host of your property, if you have any concerns of something being a liability, to just Don’t hide it, right?
Like, bring it up. You’re not doing yourself any favors by not asking your insurer, the insurer whether or not this is a concern, right? Because, at the end of the day, you want to be covered should something happen.
Nick Massey: Yeah, that’s the big thing. Like if they don’t underwrite for it, they’re probably not going to cover it.
So asking, presenting what is going on at your property so that the insurance under, not the agent, the agent doesn’t pay claims. I don’t physically write a check to you as your agent. That’s Lloyd to London. They’re the ones writing the check. So if we don’t correctly present the exposure, then there could be gaps in coverage, or there could be something missed where, you know, we say.
Well, we didn’t know about that, so we couldn’t tell you it wasn’t covered. Right. Right? Or we couldn’t tell you to remove it, or, or this or that or the other thing. So, I think people get really nervous about being open and [00:38:00] honest about their exposure, because they’re afraid that, Oh, boom, right out of the bat, I’m just going to get cancelled tomorrow.
Navigating Policy Coverage
Nick Massey: Uh, to kind of let everybody know, State specific rules with the Department of Insurance require a 30 day and in some states a 45 day notice of cancellation due to underwriting. So if you bring to the table and they go, we don’t like that or we’re not going to insure it, they provide, they have to give you a formal notice via certified mail that it’s 30 days, in some states it’s 45 days, of cancellation or non renewal due to underwriting.
So that gives you time to go and find another carrier. Right? Now, I will say when you’re having these conversations, be very, I’m thinking of, I would like to, using terms like that, so that they don’t just jump in and do this. So, like, if you’re already short term renting, you already have an online listing, and you’re like, mmm, I don’t know if they’re gonna cover me or not, but I want to ask a question, then be like, [00:39:00] I’m thinking about doing Airbnb with my property.
Is that something you guys cover? Do I need to get a new policy? Do I need to go shop around? Um, and see now if they come back and say, Oh yeah, we cover short term rentals and we’re going to add this endorsement. Now you open up the door to being like, okay, I have a hot tub. I have a pool. I offer bicycles.
I’m pet friendly, how am I covered in all of this stuff? Right. I’m lakefront with a dock and you know, like if this happens, if that happens, how am I covered? That’s when you start asking those questions and always ask for an answer from the underwriter, not the agent. Um, that way, you know, from the carrier that you’re paying the premium to, if, or if not, they’re actually going to pay for that claim because an agent can tell you on the phone, whatever they want to tell you.
Uh, so always make sure it’s in writing via email from the underwriter. Uh, if you really want to nail down and ensure how you’re protected.
Pet-Friendly Considerations
Annette Grant: You just mentioned pet friendly. So is that something that all hosts need to, if let’s say they weren’t pet friendly and then they switch to pet friendly, they need to [00:40:00] disclose that to their insurance company?
Nick Massey: Um, yes and no. Uh, the, the problem And we can get into some more kind of details on what to look for in your policy to know if you’re protected or not. So, dog bites make up a little north of one billion dollars a year in liability claims paid out in the United States. So, it’s not that you’re pet friendly, it’s that your neighbors also have dogs.
And if your guest goes for a walk and that dog bites your neighbor, what’s gonna happen? Our experience, they just sue everybody. Are you liable?
Annette Grant: Yeah.
Nick Massey: No, no, you shouldn’t. I don’t think you’re liable. Why are they suing you? Okay, well, they named you in the lawsuit. Now what happens? Do you have coverage or do you not have coverage?
Well, if you don’t have coverage, you get to pay for your lawyer out of your own pocket, and hopefully they get you out of the lawsuit. If they don’t get you out of the lawsuit, now you go to, uh, you know, the mediations and everything that happened to come up with a settlement and you get to pay for that out of your own pocket.
If you do have coverage in your policy, uh, [00:41:00] for dog bites, then you more than likely have defense costs provided by the carrier. But that leads us to another thing.
Types of Liability Coverage
Nick Massey: What type of liability form do you have on your policy? There’s three of them. There’s homeowners or personal, there’s landlord or premises, and then there’s commercial, which is the broadest of the three, because it covers off property claims, homeowners insurance always excludes business activity.
So if the property is not your primary residence, you need a new policy today and get rid of that. Uh, it says HO3 on it. It’s no good. Uh, even if you have an endorsement, it defines that it’s short term rentals in your residence premises. So if it’s not your primary home, again, you have no coverage, that 250, you might as well flush it down the drain.
A landlord policy can be enhanced and endorsed for short term rentals, and they’re, they’re okay. They’re getting better. They’re starting to increase their liability limits and things. But the biggest limitation in this [00:42:00] specific topic about dog bites is premises only liability. That coverage for your liability protection does not extend beyond your property line or the language of that contract.
That is how premises liability is written. It’s built and designed for a landlord. Who’s going to have tenants living in their property full time, and if that tenant has an injury on your property amongst something you’re responsible for, you have coverage. If that guest has a dog, and takes that dog for a walk, or goes to a park, and that dog bites somebody, you will be named in the lawsuit, and you do not have coverage under that type of form.
Okay? So, same thing if you’re waterfront. If you’re a lakefront property, riverfront property, you do not own that lake. If that guest goes out and you’re provided canoe or kayak and becomes injured and you have premises liability, you have no coverage. And so those are, if you’re offering that type of amenity, especially pet friendly or you have amenities that take the guest off premises, you really just need to be looking at a policy [00:43:00] that offers commercial liability.
Because it extends beyond your property line.
Sarah Karakaian: That’s huge, yeah. So what you’re saying is we have responsibilities as short term rental hosts that we need to Okay, actually, speaking of short term rental hosts They’re becoming we come in all shapes and sizes and business forms, Nick.
Arbitrage and Insurance
Sarah Karakaian: So talk to me about Annette and I have never done arbitrage.
We don’t particularly like it as a form of of hosting properties, but we want to support our arbitrage is out there because if they’re gonna do it, they’re gonna do it anyway. There’s a landlord. There’s someone who owns the property and they are hopefully agreeing with the arbitrage or for them to have this business.
Property. Does proper work with arbitrage hosts to offer them some sort of commercial protection, or does the landlord have to get it? Do you even touch this? Talk to us about arbitrage.
Nick Massey: Yeah, so we, we invented the arbitrage policy. Uh, so, so we know, we know this through and through, and so [00:44:00] we can operate in, um, we can do it a couple of different ways.
So, uh. In, in the sense that you’re renting an apartment in Boston or Seattle or Dallas or whatever and you’re, you know, Graystar, for example, they’re a massive apartment developer across the United States and, um, we have, I use that name cause they’re additional insured on a lot of our arbitrage policies, so, uh, so you go into that apartment building, they have a massive insurance policy that covers the structure.
You need to get what’s called basically renter’s insurance. And so, if you called up, say, State Farm or Allstate, you can get a renter’s insurance policy, also called an HO4, uh, for 20 bucks a month. Super cheap. But, because it’s an HO form, or homeowner’s form, it’s on the basis of your resident’s premises.
So again, now you have business activity exclusions and you got, you’re not going to have any coverage. So what we did, was we essentially Just took our commercial property [00:45:00] coverage and liability coverage that’s enhanced and custom built for short term rentals And we sell you a commercial renter’s insurance So instead of 20 bucks a month now It’s it was like 88 bucks a month is what it comes out to on our on our minimum premiums and it covers contents In that contents limit that you select and purchase from us, you’re also going to get coverage for the structure in relation to guest caused damage, accidental or malicious.
So if you’ve got a 30, 000 content limit, which is technically for your furniture, but that guest gets drunk and punches holes in the wall or wrecks countertops, you can extend that limit to cover that. within whatever the, as long as you don’t exceed the limit, business income, and then a million dollars in commercial liability, and then we name your landlord as additional insured, uh, on that.
If you’re renting a, a single family home, for example, it works the same way, and the landlord, so, I’m arbitraging from Sarah Nanette, you own a, [00:46:00] you mentioned a townhouse, so you own that townhouse, I can go and get, Contents coverage, income coverage, liability, name you to as additional insured for around 1, 200 a year from proper insurance.
And then I’m good to go, and I can operate. Now, We had made some adjustments because then, as the insurance market in the retail space starts to mature to this exposure, we start seeing that Sarah Nanette’s landlord insurance provider is coming in and saying, If you’re doing this, we’re not going to cover anything.
Electrical fire, storms, nothing. So, we’re able to also insure the landlord. On a more or less commercial landlord insurance policy, so we’d cover your, the structure. We would cover nothing in contents, because it’s not your furniture that’s in there. And we’d cover 12 months of loss of rent, so if it’s 3, 000 a month you’re collecting from the arbitrageor, then you get 36, 000 in income, plus we give you a million in liability as well.
So we can [00:47:00] just insure the, the sub letter. We can also insure the landlord and the sub letter. Um, we have a couple of accounts where the, the sub letter is not using proper, they’re using a different commercial policy. And so one of our underwriting requirements to that landlord is you need to have XYZ company provide you proof of a million dollars in commercial liability with your name as additional insured on it.
And then, then I don’t have to insure the, the sub letter.
Annette Grant: What if you, okay, we have a lot of these listeners. Either they are co host and co hosting the property and or folks that hire property managers to manage their property.
Co-Hosting and Insurance Needs
Annette Grant: What, so let’s start with the co host. What do they need as far as coverage in addition to the homeowner?
Nick Massey: Yeah, so co host specifically, not talking about, not talking about like a larger, you know, XYZ [00:48:00] management LLC, right?
Annette Grant: Mm hmm.
Nick Massey: Um, Depending on, on your size, uh, really depends on what you need to do with insurance. Okay. Rule number one, the homeowner that you are co hosting for needs to name you as additional insured on the liability.
And listening to this, I would hope that you are telling them because of this new exposure you’re taking on, you really need to be looking at a specialized policy with commercial liability. Um, and hopefully proper lands on that list. There’s a couple of us out there that, that do a commercial level coverage for short term rentals now.
Now, As you start to get bigger as a co host, you start to, I’m going to have an LLC cause I need to run the funds through the LLC. I want to be protected. That’s where you kind of graduate into buying more or less a, a management style insurance policy. Right? And so we do do that through our other company, Wistr.
Um, W I S T E R. They have a management policy. [00:49:00] Whether you manage five properties, or you manage 5, 000 properties, they’re going to be able to take care of you. The thing with co hosts where I think things are commonly missed is co hosting is a great way to get your feet wet in the management realm without having to go through all the licensing and all of that stuff.
But you still have exposure as a real estate manager, um, by default, and you can still be named, uh, in a lawsuit because you’re tied to that listing. Uh, maybe you’re doing the communication and stuff like that. So number one, make sure you’re listed on every property’s insurance as an additional insured.
Number two, it is worth investigating. If you’re at the point or the size, um, I would say probably five. Is a when you start need to start thinking about getting your own general liability policy If you have an LLC set up and you have a vehicle commercial auto, um, if you have private contractors making sure you have protections there and [00:50:00] then when you what we see a lot of co hosts do is then they go and get their real estate license and then become a More formal property manager that can collect commissions, uh, then you 100 percent need a management policy, uh, that’s specific to what you’re doing.
Annette Grant: We want to pause right there because we know that the co hosting just, um, is on the rise and a lot of people And I’m going to do air quotes here. I’m just a co host, I’m just the co host. But I love that you’re saying, like, 100%, you have got to be covered. Like, you need to talk to your homeowner today about you being an additional insured.
That’s an easy thing to get taken care of. And I know, Sarah and I, we coach a lot of people on this and they get nervous to, like, bring insurance topic up to their owners because they’re like, Oh, it’s a new client. I don’t want to ruffle the feathers. But it should be baseline for anybody that’s looking at any, managing anyone’s [00:51:00] asset like a home.
Like, Nick, a homeowner should not give them any pushback at all, correct? If they’re asking them to be an additional insured. And if they do, that’s not the client for them, right?
Nick Massey: Yeah, correct. Red flag for sure. Um, And if, if the client comes back and says, well, my insurance won’t do it. Well, then you go, well, you have the wrong insurance.
Like we can’t, I can’t list your property until this is done because we just have too much exposure. It’s not an if, it’s definitely a when in this industry. And you could, you could have somebody sit down in a chair the first night they’re at your property and it breaks and now they’re suing you. And who has coverage?
Where is the coverage? Yeah. Now you’re definitely not going to get your co hosting brand off the ground because it’s, it’ll crush you. It’s so important. Um, I, I mean, I work in an industry where I’m inherently the bad guy. Um, people think we’re a scam. People don’t trust insurance. And I promise you that’s not who we are.
That’s might [00:52:00] be who other folks are out there, but not this company. We’re here to help educate and walk you through that. And I would absolutely say if somebody is unwilling or unable to get you that, it’ll just, you hit the nail on the head. They’re not the client for you. Um, Don’t jump into this space and just wing it and hope things go well for the first six months, then address this on the back end.
It’s harder to address this once you’re up and rolling and cruising than dealing with it right now. Um, so don’t be afraid to talk to people about insurance. It’s your livelihood. And at the end of the day, I don’t, it doesn’t matter how many trusts or LLCs or S corps or whatever you have trying to layer structurally, uh, as you operate and grow in this business, 99 percent of the time, it’s the insurance policy that’s going to take care of it, not.
Stacks and stacks of different paperwork and legal structurings.
The Cost of Proper Insurance
Annette Grant: I, I’m just, I’m going to be very, um, vulnerable and open right now that we here, and, and listeners, we have to tell you, like, people are [00:53:00] out there. You’re going to go and you’re going to shop insurance and you’re going to look at prices because commercial insurance is going to be a different price than your homeowner’s insurance.
Yes, it’s expensive and it’s kind of, it’s like, we want our, so many hosts want their cake and eat it too. They want to be making all this profit on their home. But when it comes to getting the right policy, they want to nickel and dime and have the same, the same, um, policy that they have, you know, the same rates as their homeowners.
And so I think everyone needs to have this mindset shift that you are, you’re helping us have here, Nick. I’m like, we are now a commercial business. And so therefore, The insurance has to mirror that, and guess what? The, um, the investment that you’re going to make in insurance is going to be more than your normal homeowners.
And I just think, I hear it so often, but everybody, again, they want their cake and eat it, too. They want to have this house that’s making all this money, and they’re cutting down on their taxes, and it’s paying for [00:54:00] itself. But when it comes to the things that matter, i. e. safety and insurance, They want to figure out how they can save the most and do they really need it.
And so I just want to offer to everybody, you have to sit down and slow down and really think about that. Again, you’ve said it multiple times that this is a commercial policy that you are getting. So obviously it’s going to be a different investment than your normal homeowners insurance or renters insurance.
Again, if you’re arbitrary, you know, like, or if you’re co hosting, like, you have to have that insurance in place.
Nick Massey: I mean, ultimately, again, speaking to us at Proper, our average premium breaks down to two and a half to three nights of booking a month to cover the total insurance expense. Right. And you need to, everybody needs to keep in mind, like with Proper specifically and the other two or three commercial competitors that I have, we completely replace your insurance [00:55:00] package.
So if you’re paying 2, 000 a year right now, and I’m 4, 000, I’m already, I’m covering everything that’s in the 2, 000 package also. So your expenses didn’t go up 4, 000 a year. They went up 2, 000 a year. So when you do your math and you break down your numbers, especially if you’re looking at buying an asset.
And you’re trying to see if it’s going to cashflow, like what we got to, obviously you got to buy furniture and you got to do all these things. You got to set it up and you’re going to spend time and get photographers and all these startup costs. I get it, but let’s look at it two years down the road.
Okay. If you plan, let’s say you’re going to make 80, 000 a year gross, and you’re going to do 30, 000 net because you have a lot of expenses, a very nice home. Interest rates are up. Property taxes are up. You have more expenses. So you’re going to make 30 K. And you plan that 30, 000 off a 2, 000 a year insurance policy that’s not the right coverage versus, say, my 4, 000 a year.
Guess what? You’re still going to cash flow. You’re going to make 28, 000. [00:56:00] Increase your nightly rate by 15 a night. You’ll make that up pretty quickly. All right? Also need to look at this in a way of how fast is that 30, 000 in cash going to disappear when you don’t have the right coverage? The average water damage claim in the U.
S. is about 18, 000. So that’s half of it. And then you also aren’t making that revenue, plus you have to pay your ongoing expenses and carry costs while that restoration is happening. One average claim can wipe out your entire cash flow for the year by trying to save a couple of bucks a month. Um, and I know that’s like a very honest and maybe like a very like, kind of like dad thing for me to come in and be like, no, you got to do it this way.
Uh, but it’s, it’s the truth. It’s the truth of it. Um, You, you, you just need to spend more time on investigating this and thinking about it and, and not just eliminate the mindset of I want to keep my low expenses, but eliminate the mindset of it’s never going to happen to me.
Annette Grant: Right.
Nick Massey: Because the [00:57:00] average claimable event in the US for residential property is once every 10 years.
Our data. Shows that it’s about once every five years for a vacation rental. So you’re almost twice as likely to experience a loss at your property when you operate as a vacation rental than if you just Operate it as a primary home or a long term rental.
Sarah Karakaian: We don’t have to fear it as long as we have no but We know the stats and yeah proper coverage and being as open and honest and transparent as you can with your team and your insurance Provider is part of your team
Nick Massey: Yeah, exactly.
And that’s, that’s the other thing you think about Hilton and Marriott. How much money do they spend on engineers and professionals that come in and inspect their properties every year for insurance? Because, again, they need this platform of defensibility. If somebody gets hurt at a Hilton, Hilton has way bigger pockets than we do, so they get sued for a lot more.
So they want to make sure that they got everything buttoned up and tight. Um, so they have these professional risk managers that are typically [00:58:00] engineers. highly educated individuals who come out and inspect the property on an annual basis. They also pay them a ton of money. So one thing that I like to kind of tell our clients is like, look, you’re not just buying an insurance policy.
You’re, you’re buying a risk manager. You’re hiring a risk manager into your business. And the hope is is that we just get to communicate once a year and we review your property and your listing every year. And maybe some years we have to Do something or make a change or you added something that we see or you updated your photos and we have a new exposure that we weren’t privy to and the setup of the initial policy.
And so, um, you know, you had mentioned it earlier, the kind of annoyance of needing the photos of the handrail underwriters are annoying, but at the end of the day, it’s for a good reason, right? And we want to work. I can’t go out to your property and every one of our clients and take these photos myself.
So you can have your cleaning You know, team do it. If you’re a remote, um, owner, if the house is just down the street, just walk over, snap a couple of photos, text them to [00:59:00] us. It’ll be fine.
Annette Grant: Yeah, that was the point of that too, of like proppers paying attention, you know, like it’s not like, Oh, it’s policy renewal.
Just sign again. This is what the new, this is the rate. It’s like, no, we need to see again, like this is your current listing what’s going on there. And, and that’s, that’s to show folks also like if your insurance. Company isn’t doing this then how closely are they even looking at your property? You know if you haven’t had to supply them with With any documents about about the property they should kind of be fearful of that.
Nick Massey: Yeah Yeah, and and again some of our closer commercial competitors are doing the same thing we are And and I’ve heard from clients too. They’re like, oh my gosh I want to leave this company because the underwriting is so annoying And then we look into it and we’re like, well, we’re going to ask for the same stuff.
Annette Grant: Right.
Nick Massey: So, you know, we’re, it’s just, we’re looking out for you. And again, nothing against them. I’d love to have your business, but I’m going to, I’m going to make you put in a handrail on your stairs as well. Right. It needs to be there. It’s [01:00:00] building code. It’s your commercial asset. Now you have to have a handrail.
Sarah Karakaian: Uh, uh, listeners. Yeah. How does. As we wrap up this episode, because it’s a heavy one, but it’s an important one, so everyone should save this and share it with your business partner, your life partner, whoever’s doing the rentals with you.
Breezeway Partnership and Risk Management
Sarah Karakaian: But I want to talk about, if you’ve been listening to TFU for a while, you know that we love the Breezeway platform.
Pilots need checklists. Doctors need checklists. Surgeons need checklists. Hosts need checklists. How does Breezeway work with Proper to help us? stay compliant to help us avoid liabilities. What sort of partnership do you guys have?
Nick Massey: Yeah, so Justin Ford, um, great, great personal friend. Uh, I met him in 2017, I believe it was, at a VRMA conference.
And, um, so we started getting into this whole, Hey, what does your underwriting look like? What kind of safety things do you guys require? And it really just started [01:01:00] on the basis like, Do you require fire extinguishers and smoke detectors? And it’s like, yeah, that’s kind of fundamental. Number one, um, and as he started to, uh, as Breezeway kind of took over his program and he’s now their head of safety, uh, we worked with Justin very early on to say, this is what our baseline requirements.
And he agreed 100 percent with everything that we require from clients. Um, and then he went above and beyond that. And so my checklist is like 22 things. His checklist is like 50, but it includes those 22.
Annette Grant: Right.
Nick Massey: Um, And so we looked at that and said, look, if, if somebody’s willing to go out and do this checklist, whether they’re a property manager, managing multiple properties, or, or just a, uh, a solo host with one property or two properties, then that just puts them in a better risk category.
So we, we ran data for, for 24 months. So we started it and we ran data and we gave a little bit of a credit, uh, discount on premium because we wanted people to really get immersed in it and start [01:02:00] doing it. Well, then there was enough people doing it that we ran even more data. Holy cow, these property owners and these management companies have way less claims and way less severity of claim.
It doesn’t eliminate you from having a claim, but it makes the claim, uh, smaller, right? Uh, so that’s why our, our partnership with Breezeway has transpired into the largest available discount that we have on our program. If, if you’re going out and doing these safety inspections, again, providing us a better platform of defensibility.
Then we’re going to give you the biggest credit we can offer through our carrier, which is up to 10 percent off your total premiums. There’s no other partner that we have. There’s no other, uh, software that you can implement. There’s no other, anything else that you can do other than in paying a big, big money to install fire suppression system to get that level of discount.
Right? So, um, we love Justin. We love Breezeway. We love everything that they’re doing. Uh, Justin and I work together. We. We sit on [01:03:00] boards of associations together when it comes to education and, and risk management stuff. Uh, we are very in tune with each other. We’re very in line. Uh, and so if you’re utilizing Proper and or utilizing, uh, Breezeway, having the two connected to, to each other is just, I don’t think you can have a stronger plan of risk management than utilizing those two brands together, uh, to operate your business.
Sarah Karakaian: Amazing.
Final Thoughts and Homework
Sarah Karakaian: Nick, anything we didn’t touch on that you want to make sure our listeners know about risk management and proper insurance other than I want to reiterate really take them up on the offer to we have a link at our show notes, have them review your current policy, uh, like Nick said, Of course, they want you to be with proper, but they will, uh, at least expose you to what kind of gaps you may or may not have and be honest and transparent in that.
But Nick, anything else that you can shed light on?
Nick Massey: Yeah, I mean, I could sit here and talk for hours and hours about this. Um, I think a little bit of homework [01:04:00] for everybody is to do a little research on a term called vicarious liability. So, um, Liability is hands down the number one exposure that we have.
A lot of people think it’s gets caused damage or maybe it’s bed bugs. Uh, but really it’s liability. You’re the one that owns a second home. Or is managing a home that is generating revenue, so you’re by default the one with money, so you’re going to get sued. So, you have two different types of liability in the legal, in the legal realm.
You have direct liability, which I’m directly responsible for for my negligence because I created the situation. Or you have vicarious liability, where I may have unintentionally Led or misled somebody into something that created, um, a lawsuit. And so this is where the importance of the commercial product that extends off premises is so important because we are constantly posting photos and advertising attractions around our property and things to go do.
I can now be held vicariously liable for an injury because I am marketing that.
Annette Grant: [01:05:00] Ah, holy smokes. So go and
Nick Massey: do a little, go do a little research on vicarious liability. It is not. It is not, uh, an across the board in every state type of case law precedent where you can be held liable for that. However, most states are.
So do a little research, um, understand that term. Because for me, that’s the scariest thing in the society that we live in is that virtually Anybody can sue you for anything. And so that’s why having a very strong insurance policy, specifically a very strong liability protection is so important because it’s not just, well, I have a handrail, so if they fall down the stairs, I’m okay.
Or I have death markers on my pool. So we have this, it’s like, no, what about all these other crazy unsung things that could possibly happen? So a little homework to kind of lead the listener for doing a little research on, on that fun term.
Sarah Karakaian: Well, I did. Write it down. How nice of you, Nick.
Nick Massey: Sorry. Before.
Sorry. No, it’s okay. I’m usually a lot more happy now. No, [01:06:00] it’s great.
Annette Grant: We need this dose. And I do want to share with all the listeners, please, um, understand before you purchase a property, even your current property that you’re in, it doesn’t mean every insurance company, including Proper, has to cover you.
You might reach out and they might not cover your area because of the risk. They might not cover your home. So just because you reach out to any commercial policy does not mean they have to, um, insure you. But you do have to do your homework. Now, before you purchase. During the purchase any amenity that you bring in so you are the CEO of your business So it’s your responsibility go out.
Make sure you’re covered Nick. This has been such an eye opener And learning for us and we’ll make sure to put all the links in the show notes reach out to proper See if you can do that side by side comparison again co host owners, everyone make, this is a time of year. We’re at the beginning of the year.
This is the time, um, to, to look at your, look at your policy. Make sure you make [01:07:00] sure you’re covered, but Nick, thanks so much.
Nick Massey: It’s tax deductible. So. Make, you know, it’s part of operating expense, so keep that in mind because, yeah, the right insurance is going to be more expensive than what you’re used to, so, um, but yeah, we look forward to chatting with whoever listens to this and comes in and would like a consultation and a deep dive review of your listing, your risk, and your policy.
That’s what we’re here to do.
Sarah Karakaian: Nick, so much for your time today. Listeners with that, I am Sarah Karakaian. I’m Annette Grant, and together we are, Thanks for visiting. Talk to you next time. [01:08:00]
