Over the last decade, Airbnb has expanded around the world, offering travelers a new and exciting option when booking accommodations.
Further, property owners have gained the opportunity to become Airbnb hosts, enabling them to benefit from the wide adoption of the website.
However, hosting a short-term vacation rental presents some challenges when it comes to insuring the property and your belongings. Here, we’ll take a look at the common Airbnb insurance problems and how to find home insurance that covers Airbnb.
Where did Airbnb come from?
For those living under a rock, just kidding…for those that don’t know, Airbnb is a website that enables “hosts” to rent out their properties to guests.
It started back in 2007 when two guys, Joe Gebbia and Brian Chesky, turned the living room floor of their San Francisco apartment into an “Airbed and breakfast” by providing guests with three air mattresses and homemade breakfast in the morning. The target audience was people who couldn’t find other accommodations in the city.
By 2008, Nathan Blecharczyk joined the team, and the website was launched. Shortly after, Airbedandbreakfast.com became Airbnb.com. By 2011, the company began expanding overseas. And by 2017, the company was valued at 31 billion U.S. dollars.
It now has over 4 billion listings worldwide in 191+ countries. On any given night, 2 million people are staying in someone’s home on Airbnb (source). Quite amazing that it all started with three air mattresses in someone’s living room.
This massive adoption has had many impacts on the accommodation industry, travelers, and hosts.
Now, let’s take a closer look at the issues that hosts face with protecting their home and property while renting it out.
Does home insurance cover Airbnb rentals?
First, let’s try and get some clarity on the issue – does home insurance cover Airbnb rentals?
David Cross, Airbnb Superhost and author of the blog, Best Airbnb Hosting Tips, says, “Many home insurance policies do not cover the liabilities that come with short-term rental businesses such as Airbnb.
It is critical to read and understand your current homeowner insurance policy to see if you would be covered in the event you have damages associated with Airbnb.”
Cross adds, “It is common that home insurance policies explicitly exclude activities associated with short-term rentals. If you are unclear about your home insurance policy, call and ask about what is and isn’t covered.”
Kyle Wiseman, CEO, and Founder at Wiseman Financial Solutions, explains, “If you rent frequently, it’s likely your company will decline your claim if it’s more of a rental dwelling than a home for you. However, the claim type is very important.
If it’s a property claim due to weather, Airbnb should have little impact. But if it’s a liability claim due to someone being injured while renting your home, there’s a greater chance of the claim being denied and a risk of the company dropping you.”
He adds, “Every state and company has different rules. Some preferred companies such as State Farm attempt to find a way to cover a claim, while other companies may do the opposite. States often have different rules regarding what a policy type will or will not cover.”
So home insurance can be hit and miss when it comes to Airbnb rental activities. Airbnb host Spike Spencer sums it up saying, “Short-term rentals give your home insurance company an out for almost anything that goes wrong.”
Let’s look at some other options.
What about Airbnb’s Host Guarantee – will that cover me?
Cross explains, “Airbnb has the Host Guarantee which will assist if guests cause damages in your home that amount up to $1 million. Many hosts think this is an insurance policy, but Airbnb has clearly stated that the Host Guarantee is not insurance.”
Spencer explains, “Airbnb has a liability policy that covers up to $1 million worth of damages, but there are a few caveats.
For example, it doesn’t cover:
- Cash and securities, collectibles, rare artwork, jewelry, pets.
- Personal liability.
- Loss or damage to property due to wear and tear.
Further, there is a lot of fine print that most hosts are unaware of until they file a claim and get denied. All things considered, this Airbnb guarantee leaves hosts vulnerable to many liabilities.
Is landlord insurance the answer?
Landlord insurance covers a property owner from financial losses connected with their rental properties.
However, Brad Goldsberry – agency producer at The Nate Bingel Agency – explains, “Not all landlord policies apply to short-term rentals. Though the coverages might be the same, a normal landlord policy has not priced in the increased risk you have with a short-term rental.
Due to this risk, these types of policies are usually more expensive than a landlord policy.”
What risks do short-term rentals pose?
“When you have a long-term rental, your tenants go through a much more rigorous screening process than people do with Airbnb,” says Goldsberry.
He adds, “The revolving door of guests increases your liability risk as you do not know what is going on there, not to mention people are usually on vacation using an Airbnb and have little to no consequences for what happens at the place they are renting.”
For these reasons, landlord insurance often won’t apply.
Does vacation rental insurance exist?
Yes. Proper Insurance is one of the most talked about solutions for Airbnb owners as it is designed for short-term vacation rental properties and replaces homeowners insurance.
It covers buildings, contents, business income, and commercial liability. If the property doubles as your primary residence, personal liability is included.
However, it does not cover rentals where there is not a complete separation between the hosts and guests (also known as home sharing insurance). The risk is deemed too high, although the company says it is working on a solution.
This type of insurance could be a good fit for Airbnb hosts who rent out their entire home while staying elsewhere, or for those who have separate dwelling units with separate entrances and facilities.
It is more expensive than homeowner’s insurance but offers more comprehensive coverage and more confidence that your claim will be approved.
What’s the best approach and why?
So what should you do to protect yourself, your home, and your property?
“Having insurance coverage for short-term rental activities such as Airbnb is certainly the safest approach when it comes to running your Airbnb hosting business.
Since the Airbnb Host Guarantee is not an insurance policy and does not cover the full range of potential damages, ensure you have short-term rental liability coverage either through your established home insurance or another short-term rental insurance policy,” advises Cross.
Kristen Gryglik, insurance agent with Liberty Mutual in Boston, MA, says, “Liberty Mutual offers an endorsement that you can purchase to provide coverage if you will be using your home as an Airbnb. My best advice is to shop around and make sure you ask how the policy would respond if you were using your house, condo, or apartment as an Airbnb.”
To gain extra peace of mind, Wiseman recommends, “The best way to cover any liabilities that may not be covered is under an Umbrella Policy. This is an overlapping policy that helps cover unexpected claims that aren’t normally covered.”
While some insurance companies accommodate Airbnb hosts by offering coverage specifically for their situation, others are leaving hosts guessing if their claims will be approved or not. The best advice is what Gryglik said: ask your insurer, or potential insurers, specifically about renting your place out on Airbnb and what is covered.
If your home insurance policy won’t cover it, you can find another home insurance company that will or can opt for a policy that specializes in short-term vacation rentals.