According to Airbnb, around two million people stay in its listed properties around the world on any given night. It’s no wonder the service is so popular. Homeowners can make good money on the side by renting a room or an entire house. And those numbers can really add up during special events (e.g., festivals, sporting events). But as a responsible homeowner, it’s important to ask that vital, central question: Is this covered by my homeowners insurance?
Services like Airbnb make it extremely easy for you to rent a portion or all of your house. But you need to look before you leap, doing your research first. To start, here are the essentials.
What Coverage Does Airbnb Offer?
First, let’s talk about the coverage offered by Airbnb itself. In some countries (including the United States), Airbnb offers Host Protection Insurance. This is basically accident liability insurance.
As the company explains, Host Protection Insurance is “primary liability coverage for up to $1,000,000 per occurrence in the event of a third-party claim of bodily injury or property damage related to an Airbnb stay.” Essentially, it covers accidents. So if someone slips on a rug, or an exercise bike in your house breaks and a guest files an injury claim, Airbnb covers it through this program. Naturally, there are limits to this coverage.
What Other Types of Coverage Could I Need?
Next, let’s sort out one of the most important things to consider when it comes to insurance and renting your space. Is this going to be a regular thing, or just an occasional event? Frequency matters.
If you have a room set aside for rental purposes and you’re frequently renting it out on Airbnb, many insurers consider that a business. If that’s the case, you’ll need to purchase business insurance.
If you’re renting out space for an extended period, you may also need what’s called landlord insurance. This type of insurance covers your home as well as any external buildings, like a guest house, shed, or detached garage.
Home-sharing rules are still a bit of a grey area for some insurers, and rules vary. A number of forward-looking insurance carriers have started offering coverage extensions, or riders, that allow homeowners to enjoy the benefits (you know — the money!) without requiring them to set up a new business and incur the requisite costs. In particular, home-sharing policy riders protect owners from vandalism or theft. They may also cover personal injury or accidental damages.
Before you start renting your place on Airbnb, it’s best to ask your insurer if they offer anything like this. That way, you make sure you’re protected.
Who and What Are Covered?
As we noted earlier, Airbnb offers some liability protection to hosts. But that coverage extends only to accidents. And the truth is, your home or personal property could be damaged by Airbnb guests in ways that don’t fall under the heading of accidents.
What to do? Some insurance companies offer additional protection for guests and hosts in case of accidental injury. You can also add policies that protect your property both from accidental damage — like a guest accidentally starting a fire in the kitchen — as well as intentional damage. Like that guest intentionally starting a fire in your kitchen!
The main thing to note is that your average homeowners insurance policy very likely doesn’t cover these things by default. If your insurer looks into a claim and finds you’ve been renting out a room every weekend for months, they may see that as a business. That’s likely to be problematic when it comes to getting your claim paid. It gets even more complicated if you don’t reside at the residence, and more complicated yet if you’re renting the rental property from someone else.
Again, the best policy is to talk to your insurer before you begin renting on Airbnb. Explain the situation completely and accurately. After all, while home sharing can be a great way to earn some extra money, is it really worth losing your homeowners insurance? If your homeowners insurance policy is cancelled, you could end up with a lapse in coverage. And that’s highly likely to make it harder to get homeowners insurance in the future.
What Else Do I Need to Worry About?
Check with your municipality to make sure what you’re doing with your Airbnb rental is in line with local laws. In many cases, cities have worked towards compromise. But rules vary around the country. For example, you may not be able to rent an unoccupied home, or you may only be able to rent it for a certain number of days each year.
So What Do I Really Need to Remember?
Here are the bottom-line basics you should remember:
- Check with your insurer before leaping into rentals on Airbnb. Renting even once could threaten your homeowners insurance coverage, especially if any worst-case scenarios come to pass.
- Renting on a regular basis means what you’re doing is more akin to a business. That likely means you need a different type of insurance policy.
- Your agent can help you make the best decisions, enabling you to make plans that won’t threaten your coverage.
Home sharing can be fun and financially rewarding — as long as you do it right. So look before you leap. Do a little research first, and make sure you’re covered!
Already an Airbnb host, or thinking about becoming one? One of our expert insurance advisors can do a free policy review to help you determine where you may have gaps in coverage. Just give us a call at (303) 302-9927 or send us a message.