Owning luxury investment property comes with many benefits, but there are also risks. Like any property, you’re responsible for injuries sustained by your tenants, their guests, service professionals, and even trespassers in some states. Since personal injury lawsuits can lead to substantial compensation for victims, the risk of injury is a serious (and expensive) liability.
Understanding the risks unique to your property is a good place to start, and with those risks in mind, you also need to implement preventive measures to protect yourself.
Here are some key considerations:
Know the enhanced liability of your amenities
Luxury properties typically have amenities that present unique liability. For example, there’s usually a swimming pool and possibly a hot tub, expansive landscapes, guesthouses, pool houses, and other structures that increase the potential for accidents. As a property owner, it’s your duty to maintain the entire property to prevent injuries and lawsuits.
Get generous insurance coverage
Your standard homeowners’ insurance might not provide enough protection on a higher-valued home. It’s possible that you’ll need a special kind of homeowners’ insurance specifically created with higher liability limits and tailored to address the risks associated with luxury properties.
For example, according to Progressive, some insurance companies offer separate policies for homes that would cost $750,000 or more to rebuild. These policies require an in-person inspection to qualify.
Insure your personal property
Insuring your personal property is a good idea, whether you rent out your property or not. However, if you’re renting a furnished luxury home to short-term guests through Airbnb, the risks are greater and it’s vital for you to get insurance on your personal property.
Technically speaking, Airbnb is legally responsible for certain damages caused by guests, but unfortunately, many guests have been disappointed by the company’s refusal to pay for damages. Don’t think this can’t happen to you just because you have a luxury home. It’s not uncommon for guests – even celebrities – to trash expensive homes.
Another reason to insure your personal property is not knowing if you can trust the people who spend time in your home. This can be employees, contractors, or guests. Insuring your high-value belongings is especially important if you host parties and gatherings where you don’t really know everyone in attendance. If you have anything of real value in your home, it’s worth insuring, just in case.
Make sure household staff are covered
If you hire people to cook, clean, do yard work on a regular basis, or anything that can create an employer-employee relationship, make sure you have the right insurance coverage. This might require getting workers’ compensation if they are employees.
If the people you hire are genuinely contractors, you still need an insurance policy that will cover injuries on the property. Employees and contractors are treated differently, but you’re still responsible for their injuries.
Warn people about known hazards
One way to prevent foreseeable injuries is to go around the property and point out potential hazards to anyone who will be frequenting the space. For example, if you hire a gardener, take them on a tour and let them know about hazards, like outdoor electrical cords, sprinklers, tree stumps, and random holes. This is one of the best ways to protect yourself if you end up named in an injury lawsuit.
Make the effort to fix hazards
As a homeowner, it’s your legal responsibility to maintain a safe environment for renters and visitors. Failure to address hazardous conditions can result in having a premises liability lawsuit filed against you. If you lose your case, you can expect to pay significant damages, which could even ruin your reputation.
Fix any known, visible hazards as soon as possible. Accidents can happen at any time.
Conduct routine property inspections
Routine inspections can help you identify and mitigate new hazards as well as hazards you may have forgotten to fix. Proactive maintenance increases safety and can work in your favor during a lawsuit.
Be proactive about managing hazards
You are legally and financially responsible for injuries sustained on your property, and it’s crucial to stay aware of the heightened risks that come with owning luxury property. You don’t want to get dragged into a lawsuit for a preventable injury. With comprehensive insurance coverage and a solid maintenance and mitigation plan, you can create a safer environment for all who live in and visit your property.
