What's the best way to handle Airbnb insurance?
Home-sharing has changed the way that people travel while allowing property owners to earn extra income. However, many prospective hosts aren’t aware of how home-sharing can impact their homeowners insurance.
For homeowners considering renting their property via Airbnb, it’s crucial that you know whether or not your homeowners insurance provides the proper coverage, as short-term rentals most often require additional endorsements or a new type of coverage altogether. Below, you’ll find out how a typical homeowners policy handles home sharing, as well as some short-term rental insurance options that can help ensure that you are properly covered.
Homeowners insurance coverage was developed to offer protection in the event of perils (causes of loss) such as fire, lightning, and wind. Things quickly get murky when you operate a business from your home — and insurers typically consider home-sharing a business activity.
Most homeowners insurance policies offer protection for the occasional rental, as long as you inform the company beforehand. If you rent out your property on a regular basis, a standard homeowners policy isn’t likely to provide adequate coverage. Home insurance policies often exclude liability coverage — including bodily injury and property damage — for any business activity run from the home. If you are relying solely on your homeowners policy for protection, you may be at risk of being underinsured.
Opening your home to strangers comes with some risks. Vandalism, theft, and accidental property damage are serious concerns of which any host should be aware of. Should a guest incur bodily injury while staying on your property, you could be exposed to risk if you don't carry the correct insurance.
Landlords may be liable for the actions of tenants renting out their apartments. If a guest is injured, the landlord — as the owner of the property — could be held liable. This is one reason that many leasing agreements explicitly prohibit home-sharing.
A standard home insurance policy provides liability coverage and property damage, typically extending to the property's guests and their belongings. This coverage may be nullified if you operate a business on your property. Regular home-sharing is considered to be a business activity.
In some cases, insurance companies offer protection for Airbnb hosts with tenants who stay only occasionally. Bear in mind, however, the major differences between a one-off rental situation and the operation of a dedicated Airbnb business. To carry coverage in the latter case, you will need a home-sharing endorsement or a separate commercial insurance policy.
An Airbnb insurance endorsement may be available through your current insurance company. These cover theft and property damage. Certain endorsements may cover liability, theft, vandalism, as well as damage to guests' property.
However, if property rentals comprise a significant portion of your income, you may need to purchase a separate insurance policy. In many cases, a landlord policy may suffice. Landlord insurance covers the primary dwelling, other structures on the property, personal property inside the dwelling, lost rental income, and any liability claims filed against you.
Companies like Slice and Proper Insurance sell insurance products specifically tailored to Airbnb and the home-sharing industry. This is often known as short-term rental insurance. These policies cover issues such as accidental damage to property, infestations, and mold. They also increase your personal liability coverage substantially, even covering legal fees in the event claims are made against you.
Some home-sharing companies offer a form of coverage for hosts. For instance, Airbnb’s Host Protection Insurance provides up to $1 million USD for liability. The coverage extends to Airbnb hosts — as well as landlords — that face third-party claims against them resulting from an Airbnb stay. Airbnb also offers a Host Guarantee. This product is not technically insurance, but it does help to cover the costs of damage caused by guests.
It’s important to be aware of the gaps in Airbnb's insurance coverage. Airbnb Host Protection Insurance does not cover loss of income, intentional acts, or mold. It is not intended as a replacement for homeowners insurance, and should instead be treated as supplementary protection to your primary coverage. Also, be aware that the claims process can be tedious, as claims go through Airbnb directly and are not handled by your own insurance company.
Sites like VRBO, Homeaway, FlipKey, and onefinestay offer guidance on recommended insurance coverage for hosts. VRBO suggests using a vacation rental policy. The company worked to help design the coverage to suit the needs of its users. It is designed to cover homes that rotate between being rented out, being owner-occupied, and sitting empty for long periods. VRBO insurance is offered via Proper Insurance.
HomeAway offers $1 million in liability coverage for its users, while onefinestay has a policy underwritten by a syndicate of Lloyd’s of London, though the details on the coverage are vague. FlipKey suggests finding an insurance company that offers home-sharing coverage.
Research exactly what is covered by your home-sharing network and how it works with your current homeowners insurance. This can help you avoid gaps in coverage.
If you rent your home, it may still be possible to advertise it on a home-sharing site as a rental. The first thing you’ll need to do, however, is to check with your landlord to verify that this is allowed. Many leases explicitly prohibit such activity, so it always pays to check. Some renters forgo getting permission from their landlord, which can lead to trouble if an insurance claim is necessary, potentially resulting in eviction.
After receiving your landlord's consent, the next step is to consult your renters insurance policy to check for any restrictions. Some insurers may not allow you to rent out your apartment for longer than a certain duration, while others might restrict how much money you're allowed to make via home rentals each year. Some renters insurance companies may not allow Airbnb coverage at all.
As with homeowners insurance, it’s always wise to check with your renters insurance company to explore your options.
Not every insurance company looks kindly on home-sharing. The sharing economy has forced insurance companies to change how they provide coverage. As with ride-sharing, some insurers have responded with special short-term rental insurance options for home-sharing. Along with the limited liability insurance policy offered by most home-sharing companies, other insurance carriers offer options, including:
In most cases, your homeowners or renters insurance policy will provide you a fair amount of protection while you're traveling. Your personal belongings are covered against most losses, including theft or fire. Your personal property coverage outside your residence is 10% of coverage C (your total personal property amount) or up to $1,000, whichever is greater. This is subject to a deductible. This may be limited to theft alone on certain policies, so you'll need to check with your insurance company. Travel insurance is also a great option to consider while staying in an Airbnb or similar short-term rental.
Short-term rentals have had a major impact on the cities in which they are popular. Some cities have adopted relatively lax approaches to home-sharing regulation, while others — like New York City — require rental hosts to follow the letter of the law to a T.
Below are examples of Airbnb regulations in some major cities. This list is by no means exhaustive but provides a general idea of the differences short-term rental hosts may face from city to city.
The city requires short-term rentals to be registered with the city, and only operate for up to 120 days a year. Rent your unit for longer than that, and you’ll need to apply for an extended-stay registration.
New York was one of the first cities to restrict Airbnb and other short-term rental companies. New York City's individual laws and zoning restrictions are too numerous to list, but more information can be found on the city’s website. Airbnb also has a helpful guide to New York City regulations.
San Francisco Airbnb hosts must register rental properties with the city and obtain a certificate from the Office of Short-term Rentals. To remain eligible, you must live at the property in question for at least 275 days per year.
The city of Denver requires hosts to obtain one of two different licenses in order to legally rent out their property. For stays in your primary residence shorter than 30 days, you’ll need a Short-Term Rental Business license. For larger spaces dedicated to rentals, you’ll likely need a Lodging Facility business license.
The rise of home-sharing services threw the insurance industry a curveball. Insurers are still adapting, meaning that short-term rental insurance is continually evolving. For this reason, one of the most important things you can do before becoming a host is to inform your insurance company. The company can then help you determine what’s covered by your current homeowners policy, as well as whether or not you’ll need an Airbnb endorsement or altogether different coverage.