Mike Bayer
You're listening to the SSTIR Crazy Month limited series as part of the Vacation Rental Success Podcast. This first annual month-long event through the month of February focuses on the key short-term rental business pillars of Safety, Sustainability, Trust, Insurance, and Regulations. This event could not happen without the support of our sponsors, and we need to give a special thank you to Proper Insurance for putting their full support behind this online event. Proper Insurance know that short-term vacation rentals don't fit into one insurance category. So Proper developed a speciality insurance policy that covers both commercial and personal use for your vacation rental. The question is, are you covered? Contact Proper Insurance today to get your questions answered. Click the link in the description of this episode to connect with the team at Proper for a no obligation chat.

Mike Bayer
Let's get to the good stuff. Here is the ring master behind Steer Crazy Month and your host, Heather Bayer.

Heather Bayer
If you've ever had the experience of opening your front door to a Process Server and accepting that brown envelope, you'll understand the importance of having the best liability insurance. This is just one of the topics we're covering in this episode with Nick Massey of Proper Insurance. Listening to this could save you months of stress and thousands, maybe hundreds of thousands of dollars.

Heather Bayer
This is the Vacation Rental Success Podcast, keeping you up-to-date with news, views, information, and resources on this rapidly changing short-term rental business. I'm your host, Heather Bayer, and with 25 of experience in this industry, I'm making sure you know what's hot, what's not, what's new, and what will help make your business a success.

Heather Bayer
Well, hello and welcome to another episode of the Vacation Rental Success podcast. This is your host, Heather Bayer. And as ever, I'm super delighted to be back with you once again from not-so-sunny Gulf Shores. I'm sure the sun will come out. It has at least warmed up and it's not freezing anymore, and we don't have to use a heated water line to bring water into the RV, which is a thing. A lot of people around here are having to unhook their water lines because it's freezing at night, and you have to either fill the water tank, which we tend not to do, or have big jugs of water sitting around for use during the night, if you know what I mean.

Heather Bayer
But anyway, it is now warming up. It's still overcast. It's raining. But heck, I look at my driveway at home and that is pretty disgusting. It's got way, way too much snow in it. We have a great plowman who comes by after every round of snow to clear the driveway, the reason being is that I still have people going into the house. Mike goes up with the family and my cleaner goes in while I'm away for the winter, and she does a spring clean, but she does it in the winter. So I want to make sure that it is safe for her to do so. It is safe for her to take her car down my driveway to park it, and it is safe for her to walk from her car into my house. I don't want to be sued. I don't want any liability claims made because she gets out of the car and slips, falls, hurts herself or whatever, and has me to blame. I don't think she would ever do that. But you know, you've got to stay on the right side of everybody, and you must not be negligent.

Heather Bayer
And this is what we're talking about today. We're talking about insurance. We're talking about liability. We're talking about negligence. And I just want to tell you a bit of a story before we get started. So it was a sunny afternoon in the late spring, a few years ago, and we just spent a really busy day on reservations and meetings to discuss the upcoming season. And we were about to relax on the deck with a cold drink, and life was good. But little did we know that a single knock on the door could change everything. That could have been the scenario that ensued when that Process Server handed me the document that laid out the claim from a guest who'd stayed in one of our properties nearly two years previously. I remembered the event. We'd had a five-star review from the guests saying that they'd had a really wonderful time at the place, although her mom had fallen and hurt her knee, and she'd been treated for it when they got home. The reason I remember it was because usually when somebody's doing a review, if something happens like that and there's something happens that spoils their vacation, they're not going to give you the five-star review.

Heather Bayer
But anyway, we got the five-star review. I hadn't really thought about it at the time. We just thanked them for the review and extended some sympathy to her mom, because we got no explanation of how her mom had injured herself and we just didn't ask. So getting the outline of the claim that cited the owner, the property manager, which was us of course, and the maintenance company, stating it was negligence on our part and making a claim for a million dollars was a huge shock. And that was the start of two years of document submissions, depositions, and then finally, a settlement of the claim, which we never found out what it was because it had been taken out of our hands. Because that knock on the door did change the good day we were having. But from there on, we were in the hands of our insurance company and their lawyers. But it could have been so much worse. It didn't cost us anything. Except for some time. It felt a little stressful, as it would be for anyone who's sued. But if it ever became worrisome, our contact at the insurance company was always there for reassurance.

Heather Bayer
Of course, it did help that the claimants weren't able to prove that any of us had been negligent, as we were strong on safety procedures, and certainly for onboarding a new property and the maintenance of it, we were right on point. But it would have been a nightmare if we hadn't had really good liability insurance. So here to talk about this, and so much more, is Nick Massey of Proper Insurance, and you need to listen to this. So without further ado, let's go on over to the interview.

Heather Bayer
Okay, well, I'm really pleased to have with me today, Nick Massey from Proper Insurance. He's the Director of Sales, and we're going to talk about everything insurance on this episode. So I'm super happy to have you here, Nick. I did say it when we were talking before we started recording, I get really excited about insurance. I think people must think I'm nuts. But I've told my story in the introduction, so it's not just being excited about it, it's motivated to do something about it. So I'm glad to have you here to talk about all these things.

Nick Massey
It's a pleasure for me to be on. I know it's been a long time since Proper has been on the podcast, so we're excited to be back to shed some light. Things have changed a lot over the last decade when it comes to insurance, and if I were to do my own intro into what I want this to translate into, we're going to have a great conversation.

Nick Massey
But there's so much going on out there with insurance for vacation rentals, from the property manager, What do I need to do? What do my homeowners need to do? There's the OTA coverages, there's supplemental insurance and liability, there's travel insurance. What does this all mean? It's like a big tornado of insurance jargon just spinning around all of us nonstop.

Nick Massey
Let's break this down. Let's put it into categories. After you get done listening to this show, when something happens, I want you to think about what category does this fall under? Because none of these things that are going to really overlap too much with each other. Some of them will, some of them won't. They work together in certain ways. But literally, there's four categories of insurance, and I like to call it the four pillars. And that's where we need to start categorizing where these things go to structure our risk management plan around our short-term rental operations.

Heather Bayer
Okay, before we kick off, I want to clear up the terms, because I know that within our conversation, we're going to be talking about different types of insurance. And there's all sorts of different terms that are used, and I want to make sure everybody understands what these terms are before we start. I'm thinking about things...., like the things that come to my mind, like what's a claims adjuster? What does liability mean? What is self-insurance liability waiver? What are the most important things that people need to know before we head off into this conversation?

Nick Massey
Yeah. So let's build a little glossary. And too, because of certain ways I'm going to present some information here, I'm going to categorize some things in a general category. So first thing in the conversation here is retail market. So when I'm talking retail market insurance, I am talking about your State Farms, your All States, your Nationwides, all of those big companies that advertise in every major sporting event. They spend hundreds of millions of dollars in advertising, and they don't really do a whole lot in the vacation rental space. So that's retail market.

Nick Massey
The other terms we're going to talk about, in general, are going to be property coverage. Property coverage will break down essentially into three categories for us. Your protection for the building - the physical asset, the contents or furnishings contained inside that asset, and the revenue generated by that property. Those are your three general categories of property coverage, and then liability. So property coverage is physical damage to the structure, and then liability coverage is going to be our 'somebody slipped and fell, got hurt, sued me' type protections.

Nick Massey
Now, liability breaks into three different categories as well. We have what's called, at least in the US markets, we have personal liability, you have premises liability, and you have commercial general liability. These are for the general home terms.

Nick Massey
We also want to break down our glossary from basic, broad, and special. So insurance does break down into easy categories that are digestible. Basic form coverage is the cheapest you can buy. It has the fewest amount of protections in terms of perils, which is what's actually causing damage to the structure. Then you have broad form coverage, which is middle of the road, which also categorizes a number of perils that are damage, that will be responded to. Then you have what's called special form all risk, which is a policy that just tells you what's excluded. And if it's not listed as an exclusion, then you have protection for it. That is the best coverage. And for most of this conversation, I'm going to be speaking to special form all risk coverages, because that is the standard that we, for the most part, all have on our homes. We are going to talk.... Go for it, Heather.

Heather Bayer
I was going to say, anything else? If not, we're going to head off into the four pillars.

Nick Massey
Yeah, those are the basic terms, right? And we'll get into some other stuff around property managers. But for the general consumer, those are things you want to know and understand what they are, especially after this conversation when you're looking at your own stuff.

Heather Bayer
Okay, so you mentioned four pillars. What are they and how do they apply to us?

Nick Massey
Yeah, so the four pillars for vacation rental owners anywhere, or managers, it starts with the manager's insurance package. If you are a professional property manager managing other people's property, you need to have your own insurance, and that comes with a lot of different things. It could be starting with professional liability, also known as E&O insurance or errors and omissions, commercial, auto, cyber security, employee benefits, yada, yada. Pillar number 2 is the homeowner's insurance. The homeowner's insurance is one of the most important parts of this puzzle, because every one of these properties that is on the market for short-term rental is owned by somebody, and every single individual address needs to have its own insurance. It's inherently important for Pillar 2 that all of our listeners and managers are knowing and understanding that everybody's responsible for their own coverage for the property they own. Number 3 is damage waiver products or supplemental insurance, which are becoming increasingly common. They're really meant for the smaller damages. You can think of AirCover as a supplemental coverage. You can think of the likes of companies like Safely, Superhog, Waivo as those are supplemental damage companies.

Nick Massey
And then the last pillar is travel insurance. Paid for by the guests; last minute cancelations. It's an insurable product, so you're not refunding their trip money. They're insuring against last minute cancelations. So you're not dishing out revenue against your cancelation policy.

Heather Bayer
That's great. And I want to... I mean, something that's always come to mind, you mentioned the platform coverage. I think we should talk about that, first of all, because there are those out there who are saying, Well, I've got the Airbnb Host Guarantee, and I've always countered with, But you have to have your own insurance. That was when I was working as a property manager, and it was always a conversation that I found a little difficult, because I'm not involved in the world of insurance. So I think it's important to get that out of the way that the Host Guarantee is not the be-all and end-all. It's not the one thing that you have in place of all others.

Nick Massey
It's definitely not. Many OTAs out there are going to have something similar to the AirCover product, if you will. But on Airbnb's website, it comes out and says it's not insurance, and you're still responsible for your own policy. That's why, when we're talking about these pillars, AirCover and OTA insurance does not fall into pillar number 2 for my home insurance. So they're not the same thing. We need to categorize these into separate realms. It falls under supplemental; it is a backup plan. It is not the fall on/lean on crutch 'everything that happens at my vacation rental, they'll take care of me'. That is not right. Like I said, these pillars do not overlap with each other. You still need home insurance, and if you rely on AirCover, great. If you fall into the realm of not trusting AirCover, then look at a damage waiver product that you can implement into your booking process. That's also going to assist with those smaller damage or supplemental liability, perhaps, if that product comes with it, to fill potentially a gap between your home coverage and what needs to happen over here in pillar number three.

Heather Bayer
Okay, so let's start with one of these pillars, and I want to start with homeowners, actually. I know when I was running a property management company, we had an obligation, for our own liability really, to ensure that our homeowners carried sufficient cover on their policies for their rental activities, because many of them would say, yes, of course, I've got my homeowner's insurance and it covers me for rental. I know my lay version of the answer to this, but I'm going to pass it over to you.

Nick Massey
Yeah. So disclaimer first on this part of my conversation, no offense to other folks in my profession, but there is a line drawn in the sand between rental, mid-term rental, and short-term rental. And unfortunately, in the world of insurance, most agents and brokers are not correctly relaying what type of rental it is to an insurance carrier. Unfortunately, many insurance carriers out there, especially in the United States, want nothing to do with short-term rentals. You're now relying on an agent whom you've, in one way or another, told them it's a rental, and they present that information to a carrier, and a carrier sends back a quote. But unfortunately, the underwriting side, they don't really understand what you're doing. We need to be very clear in what the rental situation is when we're obtaining quotes and going through our insurance package. Now, in the general terms of insurance, rental is going to be a 12-month lease, standard long-term rental. There's what's called dwelling landlord policies all over, everybody sells them, they're easily attainable, relatively the same. They're meant for that long-term rental exposure. But when you fall into the short-term and mid-term rental category, that is publicly advertised online, 365 days a year, whether your occupancy is 10% or 90%, that falls into a totally separate category of rental.

Nick Massey
It's actually defined in the US insurance market as a business. And so your standard rental insurance policies are going to have business activity exclusions because long-term rental doesn't fall into that category. And that is where you can run into some potential claim denials as a property owner, for not having the right insurance package. Even though you told them you're renting, maybe we weren't very clear on, No, this is on Airbnb, this is on Vrbo, I'm using XYZ Property Manager and it's advertised on their website, for them to obtain and get you the right insurance package.

Heather Bayer
Yeah, that is interesting. We simply told our owners, that they should go to their brokers and tell them exactly what they were doing, that it was short-term, they were using a property manager, provide them with all our details. Then if we were in any doubt, when we saw.... We always wanted to see not just their certificate of insurance, but the part that showed that they had sufficient coverage for the short-term rental business activity. We wanted to see that. We filed that every year internally, we had all those documents filed, so we knew that our owners had sufficient coverage for that specific area of short-term rental. And of course, coming with that, when they got that coverage, they would have business interruption in there. So that if something catastrophic happened that stopped their business running, they would be able to make a claim for that loss of business. So that's what we were looking for as managers from our homeowners.

Nick Massey
And that brings another point of confusion with a lot of homeowners out there and agents alike, loss of rents versus loss of income. So when we're looking at short-term and mid-term markets, from an insurance standpoint, it's not rental income, it's business income now. And so when you look at these landlord insurance policies that a majority of the US market is carrying, they only have what's called loss of rent coverage, which is a limited scope. It pays a fair market value for rentals in that zip code, which is not the same as your business income that you're generating on the property. For example, Heather, you and I could have townhouses in Vail, Colorado, right next to each other. You happen to stay at that townhouse a lot more, and so you're not generating as much income as I am who's renting it out much more frequently. Now, if there was a fire to the building association and both of our townhomes are gone, I don't want to get paid the fair rental value, which is the average between you and I. I want to get paid what I'm out and what I'm insuring for.

Nick Massey
So that's the other kind of line we need to make sure we're talking to agents about is when they go, Well, this is your rent. You go, No, it's not rent, it's income, this is income. I need to be insured for my income, not fair market value rental.

Heather Bayer
That's interesting. And again, we would look for business interruption, having that word business in there. So what else would you like to cover when you're talking about that homeowner pillar?

Nick Massey
Yeah. So on the homeowner pillar, you obviously want to make sure that there's first and foremost, it's either enhanced to or specifically designed for short-term rentals. And so short-term rentals is really going to mean six months or less. You're not doing the traditional leasing, and you're the one furnishing the property. It's not the tenant's belongings that they're moving in. You want to make sure that it's adequately enhanced for that. Then you also want to make sure that not only business income, but that you're getting your property coverage limits at replacement cost, not actual cash value. And that's for your personal belongings inside, or business personal property is another term, that if there's roof damage, you're getting a new roof, it's not actual cash value. These are all things that you can enhance your policies for. And it does increase your premium in any insurance market, or any provider to do that. What we're doing is, we're strengthening our risk management here. We're transferring more risk onto the carrier that we're electing to do business with, so that we're out of pocket less money if something happens. Everybody's different. Some people have deep pockets and they're fine with the lesser coverage. That's great. But the general populace, let's increase our risk management a little bit, pay a little bit more money to better protect ourselves.

Nick Massey
From a liability standpoint, which we can discuss the different liability types and what they mean, but from a liability standpoint, no less than a million dollars on the base insurance. So that's not your base insurance plus an umbrella. That is the base product stand-alone by itself at a million dollars to begin with. That is the new norm. That is, and is with your experience on your claim, people sue for a million bucks. So you want to have a million dollars in coverage in case something goes the wrong way and you're found liable, and now it's a million dollar settlement. Those are the key starting components of what to look for in pillar number two on your home coverage.

Heather Bayer
Okay, you mentioned umbrella. Can you just explain what umbrella means?

Nick Massey
So umbrellas are commonly sold in the personal lines realm. So you have personal landlord commercial, personal and landlord size area, if you will, you get umbrellas. And the reason for that is those base insurance policies have low limits of insurance. And then you have car insurance, and you have X, and Y, and Z that you need to put in or, quote, unquote, bundle into your insurance package. And those also come with low liability limits. So you get an umbrella to kick you up to or above that million dollar limit, and those are very inexpensive. One common confusion with umbrellas is, umbrellas follow whatever the base coverage says. So if my base policy has an exclusion for say, dogs or animal bites not owned by me, the insured. Then that base insurance excludes the claim for a dog bite at my property. Your umbrella does not also respond because it follows the terms of that base insured. Now, in the commercial side of things, it's generally referred to as excess. It's a little bit different, but for points of this conversation, it's relatively the same. If I carry a commercial style policy on my short-term rental, I cannot additionally protect it with a personal umbrella because they're different insurance forms and they don't work together.

Nick Massey
Same goes, I cannot put a commercial umbrella over the top of my personal automobile. They're not the same thing. It's always personal to personal and commercial to commercial. For the most part, if you have the right liability coverage on the base and you have a policy that's custom-tailored for short-term exposure, the true need for an umbrella or excess policy is more or less nil at that point. Go buy as much liability insurance as you can afford, but it doesn't mean that everybody out there needs to carry a $10 million umbrella while participating in this market.

Heather Bayer
Okay. We've been talking about liability for the homeowners. What about if they're offering the additional things like watercraft, bicycles, if they've got a hot tub, or a pool of course. How does that all fit in?

Nick Massey
Back to - we're having this conversation with our insurance agent, and we're trying to make sure we're getting quotes that are adequate for our property, that we need to be upfront with this in these conversations. I am offering a kayak, or two, or three, because I'm waterfront, or lakefront, or beachfront, whatever it might be. I have a hot tub, I have a sauna, I have gym equipment, I'm pet friendly, I have bicycles, all of these things. You want to be very upfront with what you're doing. The reason why is a lot of the personal realm insurances, the homeowners and the landlord policies, are not going to cover these types of amenities. So now you put yourself into, Okay, I need to go get commercial-style insurance, because it's much more comprehensive and robust. But then we need to be very careful about what they may or may not be excluding. Are they going to cover these amenity types? And unfortunately, in a lot of cases, when we're reviewing other insurance policies through our consultation process with a new client, we see things like recreational activity exclusions. We see small watercraft exclusions. We see heavy limitations around what you're required to have for a swimming pool or a spa, and that can leave you heavily exposed if you don't fully understand what those limitations are or what needs to be in place.

Nick Massey
If you have a recreational activity exclusion and you're offering kayaks, you could very well be on the hook to pay for defense yourself on that if somebody has a claim. So, when we talk risk management about amenities, I always lean on the safety side. Specific to our product, we underwrite very heavily, which can be a frustration point to some clients. I'll side with you all on that. But at the end of the day, it's providing defensibility. So there's a reason why these companies have these exclusions, or may or may not allow these types of amenities. It's simply put, they don't want to spend the money for attorneys to defend you. So if you have those limitations, remove the unnecessary risk, and you can't offer those amenities. Or you find a company that is going to allow you to provide those amenities with some certain stipulations that increase the factor of defensibility to help prove you not negligence should an injury arise.

Heather Bayer
Yeah, that's really interesting, because I don't think the majority of owners, when they go into this business, they really think about that. They think, particularly in this world of 'unreasonable hospitality' [See Show Notes] and offering absolutely everything, that they just add in what is to them the bells and whistles, the extra things that their neighbors don't have, without really thinking of the ramifications of doing that and maybe not sharing that with their insurance agent?

Nick Massey
Yeah. It was told to us by an attorney client of ours that everybody thinks, Oh, I have an LLC and I have waivers of liability, and I have this big, robust rental contract, and this will never happen to me. But they said it extremely well. They said, At the end of the day, you can have the biggest, most robust rental agreement in the world. But if a personal injury attorney can find a way to prove you negligent, that doesn't matter. It doesn't matter how many layers of protection that you have, it's ultimately going to fall on the insurance policy, should there be coverage, or your own bank account. That's where things like very simple precautions come in. You have functioning smoke detectors. You need to have carbon monoxide [detectors]. If you're offering kayaks, you have life jackets. If you have bicycles, you should offer/have helmets. You are presenting a way that you are responsible. Should that person decide not to wear a helmet when they ride your offer bike and they get injured, you have a level of defensibility that you are not negligent towards their injury. Again, you can't waive negligence.

Nick Massey
The other side of this is these might be familiar residential homes to you the owner, or you the manager, because you spend so much time at these properties. They're not to Joe and Jane Doe and their family who are coming on vacation for the first time to wherever they're traveling. They have no idea about the property, and it's your responsibility to make it safe and inviting, right? But also point out potential risks around the property. Just next time you stay at a hotel, just look around. I know we're not trying to be the hotel, that's what's great about short-term rentals is that every property is inherently unique of one another. But there's a reason hotels put up a slippery, when wet sign. There's a reason they have exit signs. There's a reason why there's fire extinguishers on every floor. It's to defend themselves against potential negligence.

Heather Bayer
We used to tell... Because all our properties had docks, and those docks went out into the water, we suggested, and not all our owners would take us up on this, but we suggested stenciling to the end of the dock, 'NO DIVING OR JUMPING', putting on a post, putting in their guest guide, however deep the water was, because you never knew what was under the water.

Nick Massey
Absolutely. It's one thing, specific to our program, we require. It doesn't matter if you have a babbling brook that's only a couple of feet deep during runoff, or if you are lakefront and off your dock is 20 feet deep, maybe, we require that you put in a 'swim at your own risk' sign and your property maintains rescue equipment like a nautical throw buoy or a river throw rope, because that is going to help, one, self-rescue if something happens and hopefully prevent some serious injury, like a drowning happening. But also, again, it provides a level of defensibility back to the carrier as allowing you to offer these amenities. But should something happen, we have some ammo in the defense to hopefully limit or completely absolve you of any case.

Heather Bayer
Yeah, that is great. I hope that people with waterfront properties really listen to this. That just having that buoy on a tree by the dock and throw ropes is so necessary. However, I want to move over to property managers now. That's where we were. I want you to explain errors and omissions because people used to say to me, Have you got E&O? And it's like, I think so, but I have no clue what this actually means.

Nick Massey
Yeah. So your standard business type policies, property management is a little bit of a different animal. Property management for short-term rentals is a little bit of a different animal as well when you get into the complexities of it. At the end of the day, for one, shameless plug, we do have a company that does this in our network that's specific to property managers and can really help break this down for you. But basically, you get general liability. You may or may not have an office, or you may or may not go and do onsite visits. You should have general liability, because if you're with a customer and there's an injury involved, you could be sued, and so you need that general liability. There's a lot of other stuff in the package as well that you might want to get. But errors and omissions, otherwise known as professional liability, is to protect you against how you conduct and do business. Basically, it's going to protect the manager specifically. If you're an individual property owner, you're hosting your own home, you do not need anything categorized in this pillar number one. You can ignore pillar number one, but what this is really going to do is, it's going to protect the property manager against actual or alleged mistakes causing financial harm to your client.

Nick Massey
And so it's really important that, as a property manager, you go ahead and get that as part of your package. It could be the way you promised some type of level of maintenance that didn't happen, that resulted in lawsuits to the property owner. You could get a counter too from your property owner on that. It could come in a wide variety of other ways as well. I think most commonly, what folks think of when they think E&O insurance is like a doctor or a surgeon or a legal practitioner at errors and omissions because doctor left a medical implement in somebody's body. I think we've all seen that stuff before on the news or TV shows and stuff, and then they get sued and there's an omission insurance, but it does relate directly to management as well. If you are alleged to have done something wrong within your practice of managing that property or advising your client that results in financial harm, you could be held liable, and you need to make sure you have coverage for it through professional liability E&O insurance.

Heather Bayer
It always strikes me when I see baby-friendly or child-friendly in listings and thinking, oh, they really are opening themselves up for trouble. Am I right?

Nick Massey
You are. So it actually has become a pretty big point of contention through our underwriting with clients. And so this question comes at a great time, Heather. I'm actually glad you asked it because I wrote it down to bring it up. So baby equipment. Did you know?... I'm going to ask you this question. It's anecdotal, but did you know that baby equipment is the number one recalled thing in the world?

Heather Bayer
I did, because I speak to Justin Ford. Because of Justin, I subscribe to the recall websites. And when we were in business, we would look at the Canadian recall website really regularly to see if there was something. I remember once, that's off the topic of baby equipment, but it was a particular type of dock steps that were being sold by Amazon. I knew we had properties that had these dock steps, and I was able to go to these owners and say, There's a recall on these. But yes. So in answer to your question, I actually did.

Nick Massey
Yeah. So it is, and it's nerve-wracking. And so the way we specifically look at it from an insurance firm, because, again, there's some level of defensibility or level of indefensibility, if you will. If you are charging extra for the use of baby equipment at your property, you can get yourself in a whole heap of potential legal trouble, because of that. Because one, you are not a licensed or insured baby equipment rental facility, and you are not keeping track of these recalls that come out literally on a daily basis for baby equipment.

Nick Massey
Now, with us, specifically, we know that there are kid-friendly properties and that you're going to have potentially a highchair, a pack-n-play, and maybe some different types of baby equipment, especially if you're using the property yourself and you have little ones. So as long as you're not charging for it, there is a particular level of potential defensibility of, well we're not charging for it, it's just they're the ones who opted to use it.

Nick Massey
The best advice, and this is my underwriting hat, being a very lame risk manager, if you will, don't offer baby equipment. Most people are going to travel with their preferred baby equipment, or partner with a company like BabyQuip, who delivers, allows people to rent this stuff. They have their own insurance and liability coverage that if a product is in service that was recalled, it falls on them, not on you. The guests are the ones renting this from them and getting it delivered to your location. That is the ultimate way to resolve potential liability around baby equipment. If you are going to offer baby equipment, do not, under any circumstance, charge additional rate for the use of baby equipment. Just don't do it.

Heather Bayer
That is tremendous advice. You see that when people are talking about upselling, you often see that baby equipment is included in those upselling ideas.

Nick Massey
Yeah, you are not a bike rental shop. You are not a kayak rental shop. You are not a baby rental shop. You're not a gym equipment rental shop. I truly believe in maximizing revenue at your property as much as you possibly can, but you need to consider these certain things. Simply increase your nightly rate because you have multiple amenity offerings. Do not charge separately for it.

Heather Bayer
Yeah, great point. I wanted to talk about record keeping, because when we went through our claim, we had pretty meticulous records. We kept maintenance records and we encouraged our owners.... We were not in a typical situation, because we weren't in control of our properties, because they were so widely dispersed. We would recommend that if our owners had a hot tub, that they would have a maintenance log. That maintenance log said what chemicals were introduced to that hot tub, on what particular date, when was the water changed, and all this information that was checked and signed. We had the record of when these things were done. It's a bit like you've got your fire extinguisher and you keep a record of when it was last replaced. I mean, that's usually written onto the side of the fire extinguisher. People forget. They put their fire extinguisher in and that's it. It's there for the next 20 years. How important is that type of maintenance log and record keeping?

Nick Massey
It's important, but not as important as a lot of people make it out to seem. You don't need to go through and take individual pictures of every last piece of silverware in your property and every single plate and wine glass. That's overkill. A general count of perhaps how many place settings you have is always good, especially if you have substantial damage. Worst case scenario, say, total fire loss of your property. My claims team would like to know how many place settings and what type they are. Do you have the IKEA plates or do you have Fiesta-ware? Do you have some higher-end thing that we need to know about through the adjustment process?

Nick Massey
In terms of maintenance records, that is where I would advise that you keep a well-recorded list of what you are doing. That can be anything from the changing of batteries or replacement of smoke alarms and carbon monoxide detectors, your regular maintenance schedule on pool cleanings, on hot tub servicing, Just your general cleaning schedule as well. There's tons of apps and services out there that you can sign up for. I know a lot of us who are in the industry are probably familiar with the Breezeways and the Turnos of the world, and those help you document and record those types of things that are going on.

Nick Massey
When you replace the filters and your ventilation for your HVAC system, that's stuff that you should record. If you had your gutters cleaned, if you had windows replaced, all of that type of stuff. Then in those maintenance records, I would highly encourage everybody to potentially have an Excel spreadsheet of who the company was who did the service as well. Because if there is a substantial claim, or potential loss of life due to improper cleaning of a hot tub. Unfortunately, hot tubs are known for hot tub folliculitis, which is a blood infection, which could result in, unfortunately, the death of somebody. The insurance company is going to want to know who cleaned that hot tub and who is in charge of the regular maintenance. That should be done by a hot tub professional, not your regular cleaning person. You should have that done at least monthly if you're a property with a hot tub to help protect yourself if something comes up.

Nick Massey
So maintenance records, way more important than taking pictures of every single little thing inside your house to track. Although if you want to do that, do it. It'll help us out in the claims process in the long run, but it's not as necessary as the maintenance record keeping.

Heather Bayer
Okay, that's excellent. And I think people should pay attention to that, particularly the things like pool maintenance, hot tub maintenance. Maintenance on anything, really, that your guest is going to use or partake of.

Nick Massey
Canoes and life jackets, too. I mean, life jackets have a life. They need to be replaced. Helmets have a life. I'm an avid backcountry snowmobiler, and snowmobile helmets have an expectancy of five years. After five years, you need to hang that helmet up and go buy a new one. And so those are things you need to be tracking as well is when you've replaced those and put the new ones in, right?

Heather Bayer
Yeah. Is there anything else we haven't covered so far on what property managers need to be aware of? Is there anything that you find that they miss in terms of how they cover themselves?

Nick Massey
There's a misconception out there that property manager insurance is going to cover you for everything and all the properties that you manage. Unfortunately, most manager insurance around the general liability side of the product does not extend liability to the properties under management. That is why it is super, super important that you are collecting certificates of insurance from your homeowners, showing you, your entity, as additional insured.

Nick Massey
I tell every property manager that we work with and every new property manager that wants to know about how we can help them through this, it's number one, make sure you require a million dollars in liability to your homeowners, that you are named as additional insured, and do not put that property online until you have a copy of that certificate. Because your property manager insurance, more than likely, will not respond to generic accidents that might happen at the property, because a lot of that does fall on the responsibility of the property owner.

Nick Massey
Now, you will be named in a lawsuit. You had that happen. Everybody was named in the lawsuit. In some cases, depending on where you're at around the world and how the insurance rules work and how those contracts are written, you may or may not be covered on your manager contract. But if you take anything away from this conversation as a property manager, a million dollars in liability, additional insured, file that certificate away before that property goes online.

Heather Bayer
Yeah, great advice. Let's talk about damage waiver products. What exactly are they and who should be using them?

Nick Massey
So damage waiver products are for everybody. We are moving away from a world of security deposits. My generation specifically, I feel strongly in the sense that I'm not real fond of some entity that I don't really know holding $1,500 or $2,000 on my credit card and potentially pointing the finger at me for some minor things that I more than likely did not cause at the property. So damage waivers continue to become very popular. They're very super inexpensive to me, the traveler, depending on what you want to charge for them, depending on what product you're using, they could cost as little as $30 or $40 to me as a non-refundable fee. And then I don't really have to worry about my kids wrecking something and then you coming after me. The best way to think about damage waivers is a deductible saver.

Nick Massey
In Pillar 2, your home insurance, you always have a deductible. Most commonly with my clients, we see that deductible floating around $2,500. First out of pocket is $2,500. So me as a property owner, if my linens are damaged, they broke a lamp, they broke a TV, they put charcoal in my gas grill and wrecked it, they caused some level of damage to my property in that sense. They've smoked in my house and put cigarette holes in my couch, whatever. That first $2,500 has to come from somewhere, and it's going to be my pocket as a property owner. So you can look at those damage waiver products as saving you out-of-pocket deductible.

Nick Massey
Now, some of these damage waiver products do come with liability extensions as well. They use a commercial liability, and they cover up to a million dollars. But because they're inherently inexpensive, there is a lot of exclusions. So it could be exclusions around dog bites. It could be the recreational activities like we talked about. It's maybe not covering communicable diseases through spa equipment, things like that. So you've got to keep that in mind. Now, they work very well with your home product. So let's use Proper Insurance and our damage waiver company, Waivo, as an example here. So you come to Proper and you get a $2,500 deductible, and somebody happens to throw a party, and now that damage to your house, including lost business income, is say $50,000. Now Proper, with our product specifically, we're going to respond to that, but it's going to be $50,000 less 2,500. But if you have a damage waiver product, and that is damage caused a guest, then you also can apply against a claim for that damage waiver product to be the first responder as well.

Nick Massey
And that's usually paid for entirely by the guest. You don't have to pay that yourself. And so they're great products that work well in that. And keep in mind, a damage waiver product does not cover anything outside of the rental period, and generally, things not caused directly by a guest. So right now in the US, it's been very cold. We had negative 68F last week here in Bozeman, Montana, where I'm at; we're built for it. Texas got down into the single digits. A lot of the Midwest and the South got down into single digits, and we have a lot of frozen water pipe claims going on right now. Damage waiver is not going to respond to that. So you've got to keep that in mind, too. They're only for during the booking period and really only for damage caused by a guest.

Nick Massey
But they work extremely well because we've all dealt with the damaged linens, we've all dealt with the broken TV, the broken lamp, the cracked chair, that type of stuff. And that's really what they're meant for and very similar to AirCover. That's what AirCover is meant for. It's not to cover, 'I had this big event and a tree fell in my house, and now I'm shut down for eight months'. That is not what damage waiver product is going to do.

Heather Bayer
Yes. I know for the years that we had a damage waiver and we stopped taking... We used to collect the checks. I mean, this is going back 15-20 years ago. We used to collect the security deposit checks and then send them back after the rental. And then it went to, we'll collect your credit card number. And there's some real issues around holding credit card numbers as well that most companies, I don't think, understand. But yes, moving onto damage waiver was just a huge lifting of stresses for us.

Nick Massey
Well, from a property management standpoint, all of these damage waiver companies can integrate directly into your website, and it's very much ease of use. You also eliminate potential risk from cybersecurity stuff by holding those credit cards or potential financial fraud, which is great. You also eliminate a huge risk that's actually coming down the pipeline in the United States. We're starting to see it in states like Washington. Airbnb is familiar. You could look up the lawsuit with the insurance commissioner there around AirCover with marketing as an insurance product that's not an insurance product in paying taxes. It's going to make ripples across the US. But a lot of property managers are self-funding damage waivers now. They are simply throwing a fee up of, call it 50 bucks and pocketing the fee, and it's not a regulated insurance product yet. I would strongly encourage, if you're doing that to get away. Partner with a damage waiver company. There's a handful of them out there, and find a partner that you like and trust. Or go making $50 a booking, and now it's $30 a booking. But when the legalities start coming down the pipeline, you are not dealing with that potential insurance fraud conversation. I know that's a scary term, but that's what it can end up being.

Nick Massey
So it's time to move to damage waivers as a property manager. As an individual host, you can also move to damage waivers. A lot of these damage waiver companies are going to allow you to sign up to them as a single property owner. You don't have to be an enterprise client with multiple properties and forego that security deposit stuff, forego the bad review, forego the guest communication for these smaller damages and really streamline your business around that.

Heather Bayer
Yeah, I like the idea. We did it all ourselves for many years. And yes, it built up quite a nice little pot of money. I mean, this was before there were damage waiver products out there on the market. And yes, I think going back, I would probably look at those instead of managing it yourself, because there's some inherent issues in there that I don't think we ever considered.

Heather Bayer
Hey, Nick, we are getting really close to our time and we haven't even touched on travel insurance yet. So maybe that could... There's just so much here and so interesting. And I hope everybody has stayed to this point.

Nick Massey
Yeah, travel insurance in 30 seconds, I guess. So travel insurance, we all have cancelation periods, right? And so most of the OTAs, they're already partnered with a travel insurance provider. But if you're doing direct bookings, there's so many out there. There's a Generali Global Assistance. There's Faye Travel. You have UIG Travel, or.... excuse me, AIG Travel. Red Sky Travel is a great product as well. There's so many out there that you can implement into your own website. And it's not something that you can force your guests to pay for. But if you have a 30-day cancelation rule in your contract, and I come in to, I'm 15 days from travel, and my spouse has just come down terribly ill with something, and I can't make my trip from Montana down to The Keys in Florida. I should buy travel insurance because that is going to help refund me what I paid to you for my stay. Let's say it was a $3,000 booking. It's going to pay, and a lot of times, additional experiences that I may have paid for that have cancelation periods, and it's going to prevent you from having to send back that money to me and try and fill a booking very quickly.

Nick Massey
Additionally, because it does that, we get phone calls at Proper all the time where it's like, Well, this person canceled because it's smoky in California from forest fires. How do I claim loss of revenue? Well, there was no claimable event. There was no damage to your property that resulted in loss of revenue. So there is no payout from Tier 2, Pillar 2 on the home insurance. So that's why it's important to look at implementing a travel insurance strategy into your risk management around your property.

Heather Bayer
Yeah, that was great. Thank you for that, to do that so quickly. I know from being a property manager, one of the most difficult things you have to deal with is when somebody calls four days before their vacation to say that somebody has fallen ill in their group, they can't come. Please, please, please, please, can we have our money back? If you have a product that you sell at the point of booking and make it very, very clear what will happen if you don't buy that product, then it doesn't make the conversation it any easier if they didn't. But at least you've got it to go back to and say, Look, we did show you this product and you chose not to take advantage of it.

Nick Massey
Yeah. So it's important to have in there.... you never know what's going to happen. And it can ease the conversation a little bit, because it does put the onus on the guests for that. And they're inexpensive. They could be $40, $50, $60 per booking for the guests to purchase. And it's just a good thing to have in your strategy.

Heather Bayer
Nick, thank you so much for your time with me today. All the information on Proper Insurance is going to be on the Show Notes. Proper is sponsoring the SSTIR Crazy Month, and you will see a lot more about Proper on our Virtual Vendor Showcase as well. Anything else you'd like to add before we part company, Nick?

Nick Massey
Yeah. I would add that when we're operating in the short-term rental space, regardless if you're a manager or an individual homeowner, you need to take a stronger focus on your risk management. You need to partner with a company that is not just get a quote, pay a premium and move on, with no additional interaction. You want to research and work with companies who are intimately familiar with what you're doing and are more in here as a partnership from a risk management standpoint, not just selling you an insurance product with a premium. And that's something that we pride ourselves on. We are going to guide you through not just setting up insurance, but also ways to better protect yourself from a high level safety view at your property. When and where to put in handrails, your smoke detectors, rental agreements, waivers, things like that, to be your partner in risk management on this business. Regardless of who you move forward with or who you use currently, have deeper conversations and be unapologetically open with your insurance agent and/or carrier about what you are doing at your property to make sure you are, in fact, protected.

Heather Bayer
That's perfect. Thank you so much, Nick. I'm sure we'll be talking again at some point in the future, because I'm sure I will have many more questions. But for the moment, thank you so much.

Nick Massey
Absolutely. Thanks for having me.

Heather Bayer
Thank you, Nick Massey from Proper Insurance. My goodness, that was information-packed, and I hope you got a lot out of it.

Heather Bayer
There is a lot of information now on our website about SSTIR Crazy Month and about all the topics we're going to be covering. So go to the Virtual Vendor Showcase and check out the Proper Insurance feature. As we go through this SSTIR Crazy Month and talk about all these elements, these pillars of our business, I'm ever more mindful of how important they are. We've had the week on safety, we've had a week on trust, and now we've been focusing on insurance so much this week that I've been talking to people who have been saying, I hadn't really given as much attention to all this as I should. And I'm loving that. I'm loving that we are hearing from people who are taking all of this on board and using all the information to make changes to their business practices. I mean, that's what it is all about.

Heather Bayer
And thank you to all the people in our industry who are contributing to this month. We've had some amazing support, and I want to thank everybody.

Heather Bayer
So next week, we are moving on to regulations. This is a topic dear to my heart, because we are experiencing a lot of restriction and regulations and upcoming legislation in Canada. One of the reasons that Catherine Ratcliffe is organizing the CanStays Rental Alliance Conference. There will be details of that on the Show Notes. I really encourage you, even if you're not in Canada to go and take a look and see what's going on in this conference, because it's going to be an event like there has never been in this industry. It's an event that brings together legislators and decision makers with the people that they're legislating, the property managers and the property owners who are bearing the impact of the legislation that is currently coming down. So I would love it if you would go to the CanStays Rental Alliance website, take a look and see what they're doing. As I say, even if you're not in Canada, if you're not part of this, it would be a worthwhile event to attend, because many of the presentations and learning components are just as useful to anybody else in this industry as they are to Canadian operators.

Heather Bayer
Okay, that's it for week three of SSTIR Crazy Month. And just two more to go; that's regulations and sustainability. So you can go to the Vacation Rental Formula Business School website and register for the upcoming panels. And also, when you register, it means that you will get the information that we are compiling at the end of every week. So you get everything if you are registered for one of the panels. So it's not just registering for a panel, it's registering for the entire month's worth of information that we can send you if you've missed anything.

Heather Bayer
Thank you once again for listening in. I hope you found this really useful. I look forward to bringing you more super information and conversation next time.

Mike Bayer
That was some amazing information, and we hope you'll take the chance to implement some of these ideas in your short-term rental business in 2024. Don't forget to connect and give our thanks to our platinum sponsor for SSTIR Crazy Month, Proper Insurance. Click the link in the description of this episode to connect with the team at Proper for a no obligation chat.

Heather Bayer
It's been a pleasure as ever being with you. If there's anything you'd like to comment on, then join the conversation on the show for the episode at vacationrentalformula.com. We'd love to hear from you, and I look forward to being with you again next week.
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