Mandatory insurance for short-term rentals in Portugal

Insurance is compulsory for short-term rentals in Portugal. Article 13-A of Decree-Law no. 128/2014, the AL legal regime, requires the operator to take out civil liability insurance (seguro de responsabilidade civil extracontratual) and keep it valid. The article was added by Law no. 62/2018 of 22 August, and the 2019 State Budget Law (Law no. 71/2018, art. 347) defined the type of insurance and the minimum cover.

Under the law, the policy must cover material and non-material damage caused to guests and third parties by the accommodation activity. That includes damage to third parties from a fire or explosion that starts in the unit. The legal minimum cover is €75,000 per claim.

The insurance is also a condition of registration. You must show proof of cover in the prior notification (comunicação prévia) to the RNAL (Registo Nacional de Alojamento Local, the national register of short-term rentals), and having no insurance is grounds for cancelling the registration. Without valid cover, the property is operating irregularly and its registration number can be revoked.

Amounts, deadlines and the exact scope can change through a ministerial order (portaria) or an amendment to the law. Before you sign, check the minimum cover and the required risks with your insurer and against the legal source (Turismo de Portugal and the updated text of DL 128/2014).

People often confuse two different kinds of insurance:

• Civil liability insurance is the one the law requires. It covers damage your business causes to other people: a guest who gets hurt, a third party affected by a fire that started in the unit, or damage to the neighbours. It pays what you may owe to others.
• Multi-risk insurance (buildings and contents) protects your own property, meaning the building, the furniture and the appliances, against fire, flooding, theft and natural events. On its own it is not the compulsory civil liability cover, although many multi-risk policies for AL include it.

In practice, many insurers sell a multi-risk policy designed for short-term rentals that combines both: the compulsory civil liability cover plus protection for the building and its contents. Having "an insurance policy" does not mean you have the legal cover, though. Check that the policy expressly includes civil liability cover on the terms the law requires.

There is one more obligation if your unit is in a building divided into separately owned units (propriedade horizontal), such as a block of flats. On top of civil liability, the operator must hold, or prove there is, insurance covering material damage caused directly by a fire in the unit or starting there.

The exact scope depends on the policy and the insurer, but AL insurance usually has three parts:

• Civil liability: injury and damage suffered by guests and third parties, including damage to third parties from a fire or explosion that starts in the unit. This is the compulsory part.
• Fire and building risks: direct damage to the property itself and, in a building of separately owned units, fire damage that starts in your unit. This is where it overlaps with the extra legal obligation.
• Contents (common, but not always included): furniture, appliances and equipment. Some policies add theft, water damage or loss of rental income.

Cover, exclusions, excesses and per-claim limits vary between insurers. Read the general and specific policy conditions before you sign, and confirm that tourist use, and not only residential use, is expressly covered.

There is no standard price. A real figure only makes sense once you have a quote for your own property. These are the factors that usually affect the premium:

• Capacity: the number of guests, bedrooms and beds.
• The type of AL and of property (house, flat, guesthouse), plus details such as the year of construction and the building materials.
• The cover and the amounts insured: the wider the cover and the higher the limits, the higher the premium.
• The location and the claims history.
• Who the operator is (an individual or a company) and the turnover.

So ask more than one insurer, or a broker, for quotes and compare the cover as well as the price. Any figure you see online is only a rough guide.

Proof of valid insurance is one of the documents in the RNAL prior notification, together with proof of your right to use the property and the declaration of start of activity filed with the tax authority (Finanças).

The insurance must stay valid for as long as the AL is open, and not only on the day you register. If the policy lapses or is cancelled and not renewed, the property no longer meets a legal requirement, and the lack of valid insurance is, by law, grounds for cancelling the RNAL registration.

During an inspection by ASAE (the economic and food safety authority) or the municipal council, you may be asked to show proof of insurance. Keep the policy and the proof of payment to hand, and put the renewal date in your calendar so you are never left uninsured.

The most common and most expensive mistake is assuming your "normal" home insurance covers the short-term rental. Many home policies are designed for your own use or for long-term letting and exclude tourist use. If a guest is involved in a claim, the insurer may refuse to pay because that use is not covered. If you run an AL, tell your insurer and take out (or adapt) a policy for tourist accommodation.

Other common mistakes:

• Mixing up multi-risk and civil liability, and ending up without the cover the law requires.
• Forgetting the extra fire obligation when the unit is in a building of separately owned units.
• Choosing too low a limit, or accepting high excesses that make the policy almost useless for small claims.
• Letting the policy lapse and, without realising it, breaking the registration rules.

This guide is for information only and is not legal or insurance advice. Always confirm the exact cover, exclusions and obligations with your insurer and the legal source (the updated DL 128/2014 and Turismo de Portugal).