Airbnb’s Host Guarantee is useful as a property damage protection program. It offers hosts up to $1,000,000 in property damage protection if guests (or their friends) cause damage during an Airbnb stay. However, it is not as comprehensive as you might think. Many Airbnb hosts prefer to get additional coverage through their home insurance. Here’s what you should know about host protection insurance coverage.
If you are new to Airbnb or are seriously considering becoming a host, you probably have questions about insurance.
- Will your current homeowner’s insurance cover damages resulting from short-term rentals through Airbnb?
- Would landlord insurance or vacation rental insurance help? What protections does Airbnb’s Host Guarantee provide?
- What sort of insurance do you need to protect you from third-party claims? Do you need a special home insurance plan specifically tailored to Airbnb?
- If so, how can you find some at a reasonable cost?
This article will answer these and related questions.
Hosting and your homeowner’s policy: what insurance coverage do you need?
If you’re an Airbnb host, make sure you have liability coverage for accidents that might happen while people stay at your property. You could be held liable for the injuries and damages incurred by your guests while staying at your home. Would your home insurance policy cover you if a guest took to your court?
As a host, you want to make sure you’re covered in the event a renter suffers a bodily injury on your property during an Airbnb stay. You also want to be covered if a renter breaks anything you own. While some renters might have their own travel insurance, it pays to be safe and make sure you have the proper insurance to cover you when they don’t.
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 insurance problems and how to find homeowners insurance that covers your Airbnb hosting. You can also find more information in related articles about home sharing as business to make sure you’re making the right decision for your circumstances.
- Airbnb’s Host Guarantee provides useful benefits, but it doesn’t cover everything.
- Short-term rental insurance and landlord insurance are also useful, but they don’t cover everything either.
- If you’re serious about making serious money as an Airbnb host, you need to protect yourself with homeowners insurance tailored to your needs as a host.
- SuperMoney provides free tools to help you research your options, whether it’s home insurance or financing for your nest rental property.
Backstory: homeowners become Airbnb hosts
Airbnb has changed the landscape of travel. Over the last decade, Airbnb has expanded around the world, offering travelers a new and exciting option when booking accommodations and offering property owners a new and exciting way to earn extra income. Founded in 2007, the company is currently valued at around $75 billion U.S. dollars, 31,000 times the 1,000,000 USD figure once though an important marker of wealth. The company’s rapid growth and widespread adoption have greatly affected the accommodation industry, travelers, and hosts.
What is Airbnb insurance?
Because Airbnb took off quickly, proper insurance, specifically Airbnb insurance, became a vital product for homeowners. As homeowners have become hosts who offer lodgings to guests, their new need for liability insurance coverage and property damage protection has motivated insurance companies to offer these homeowners coverage better suited to the new environment. In this article, we’ll take a closer look at the issues that hosts face when protecting their homes and property while renting it out.
Homeowners insurance and short-term rentals: what’s covered?
First, let’s get some clarity on the issue — does home insurance cover Airbnb rentals?
David Cross, Airbnb Superhost and author of the Best Airbnb Hosting Tips blog, 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.” What Cross is saying is that Airbnb insurance is going to take more research than just your standard home insurance policy.
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.” You should ask specifically about Airbnb insurance, highlighting your need for some form of host protection insurance. Things like property damage aren’t always covered, so you’re going to want to get your own form of insurance.
It is common that home insurance policies explicitly exclude activities associated with short-term rentals.
Does your home insurance cover your home sharing business?
If you’ rent out your home (or part of it) on a regular basis for profit, most insurance carriers will view that as a business activity, which is not covered by your homeowner’s policy. In that case, you will need to purchase a business insurance policy.
What is a landlord insurance policy and when do you need one?
Homeowners that plan to rent out their home for extended periods of time should consider purchasing a landlord insurance policy. Landlord insurance protects the home and any structures on the property, such as sheds and garages, for losses such as fire or wind damage. However, they will not reimburse you damage that is caused by the regular wear and tear of your home or for the loss of your guests’ property.
Kyle Wiseman, CEO and Founder of 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 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.” Host protection insurance is something that every host should have, especially if you’re a frequent Airbnb host.
So home insurance can be hit and miss when it comes to Airbnb rental activities. Airbnb host Spike Spencer sums it up by saying, “Short-term rentals give your home insurance company an out for almost anything that goes wrong.” Regardless, there are some host protection insurance policies that are worth considering for things like property damage.
Let’s look at some other options to protect your home-sharing ventures.
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.” What this means is that while Airbnb has some coverage for their users, they don’t have all of the host protection insurance you would want.
Spencer explains, “Airbnb has a liability policy that covers up to $1 million worth of damages, but there are a few caveats.”
For example, Airbnb’s Host Guarantee 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. Things like property damage are things that you’ll want coverage for that aren’t always covered by Airbnb. because of this, you must look for another form of host protection insurance to make sure you’re protected.
Is a landlord insurance policy as good as host protection insurance?
Landlord insurance protects property owners 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.”
Not all landlord policies apply to short-term rentals.
To put it in layman’s terms, this type of insurance can provide a solution to some of your potential problems, but it might not be as good as a host guarantee for any type of property damage you might have.
What risks does a short-term rental 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, this insurance often won’t apply, and you’ll need a different type of host protection insurance.
Does vacation rental insurance cover Airbnb home-sharing?
The short answer is that some policies do. Such property insurance can be a solution for Airbnb owners. This coverage is meant 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, then personal liabilities are included. This can help the policy act as a host guarantee and a form of host protection insurance on your behalf.
However, it does not cover rentals where there is not a complete separation between the hosts and guests. Such home-sharing insurance, as a result, can involve risk if hosts and guests may both be present on the property at the same time. The Airbnb company has noted that it’s working on a solution for this situation.
This type of insurance could be a good fit for Airbnb hosts who rent out their entire home while staying elsewhere. Additionally, this type of insurance may also fit the needs of those who have separate dwelling units with separate entrances and facilities. In such cases, it can act as a host guarantee.
Most noteworthy, property insurance 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 to find homeowners insurance that covers Airbnb?
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 Airbnb’s 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, an 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.”
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.”
Some insurance companies accommodate an Airbnb host by offering coverage specifically for their situation. As for others, they are left with hosts guessing if their claims will be approved or not. The best advice is what Gryglik says: ask your insurer, or potential insurers, specifically about renting your place out on Airbnb and what is covered.
How much insurance do you really need as an Airbnb host?
As Airbnb’s host, you need to figure out how to protect yourself with some form of Airbnb insurance. You can utilize different tools at your disposal, such as Airbnb’s community host support page and our own reviews of home and renters insurance options, to answer any questions you might have before getting started. You can also look into other support that Airbnb offers to their hosts. While home sharing can be a great way to make extra cash, you will need to cover yourself in case of property damage. Be sure to read your insurance terms, conditions, and exclusions prior to signing up for any type of Airbnb coverage. If you’re an Airbnb host and a guest or third party using your home gets hurt and ends up filing a lawsuit, you’ll be glad you made sure you had the right insurance and are fully covered.
Like other content on our site, this article has tried to cover the situations you as a prospective home-sharing host are likely to encounter. Still, your individual situation may require a more customized solution, perhaps starting with a different insurance company than you now use.
For instance, you may need to find an insurance company that specializes in home-sharing, one that offers Airbnb insurance with all the liability insurance and property damage protection you need. A little research on our site can help ensure your first hosting experience is a good one.
Once you’ve found the right insurance, maybe you’ll decide you want to expand your hosting business by adding another property. Or maybe you still need to purchase your first property to rent out? If so, learn more about how to finance your rental property here.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.