The sharing economy is currently worth about $26 billion and grows bigger each day. Even with regulations meant to curb short-term home rentals (like New York City’s latest regulations), homestay companies like Airbnb and Home Away continue to grow.
If you rent part of all of your home or property on a sharing site like Airbnb, we really can’t stress the importance of proper insurance protection (and it’s not just because insurance is in our blood). If you own your own home and rent out the whole thing (or even just a room) and a guest becomes seriously injured, you could lose your home and any other savings or assets if you don’t have proper insurance coverage. If you don’t have either commercial homeowners insurance or extra insurance like the products Airbnb and HomeAway offer, you are taking financial responsibility for any damage your guest causes and any damage or injury that happens to them while you’re hosting them.
When it comes to your home, you really can’t be too careful, and unfortunately misconceptions and confusion abound in the world of insuring short-term home rentals. We’ll break it down.
1. When are short-term rentals covered by your personal homeowners insurance policy?
If you own a home or rent, homeowners or renters insurance is important to cover both your personal property and belongings (both when you’re at home and when you’re traveling) and to protect you from the consequences of litigation in the event that someone is seriously injured or dies on your property.
But just because you have a homeowners or renters insurance policy does not mean your property or your homestay guests would be covered if something happened while you were hosting (whether you’re physically at home or not). Everyone considering (or engaged in) home sharing must tell their current homeowner/renter insurer or risk having their policies canceled or claims denied if something bad happens.
The general policies for homeshare hosts hoping their homeowners or renters policy is enough liability protection are as follows, according to the Insurance Information Institute (III):
- Liability for guests in one-time home (or apartment) rentals is usually covered, but you must notify your insurer ahead of time and guests are usually only covered the first time you rent out your place (like if, say, the Olympics come to your city and you want to rent out your home).
- Renting out all or part of your home or property more than once to guests (whether you’re living there full time or not) is often considered business use by insurers, which means you’ll need a business (or commercial) policy on top of your homeowners policy. Specifically, you’ll need either a hotel, vacation rental, or a bed and breakfast policy even if you only rent your place on a homestay site once or twice a year. Some insurance companies offer month-to-month homesharing liability policies (but make sure to check exclusions or limitations).
2. Do you need business insurance to rent your home?
Business or commercial policies are often quite a bit more expensive than homeowners policies. However, if you don’t disclose your home sharing activities to your insurer you could be subject to policy cancellation (even retroactively if you don’t get caught until you need to make a claim), which could end up costing you more.
The following will most likely not be covered by your homeowners insurance, according to Allstate:
- Your personal property stolen or damaged by a guest
- Stolen or damaged personal property of a paying guest
- Injury or property damage to someone else (say, a neighbor) caused by a paying guest
- Damage to the building (if you rent out an apartment or condo) by a paying guest
You, the host, could be held liable for all of the above (and more) in court. Even if you do add a business insurance policy to your homeowners policy, the above aren’t guaranteed to be covered, so always make sure you check each exclusion in your policy.
An important note: if you rent property you own full time to one person (or group of people) for an extended period of time, then your insurance needs are different than people engaged in homestay hosting and you will likely need a landlord or rental dwelling insurance policy. More information can be found here.
3. What insurance options do Airbnb and Homeaway offer?
Airbnb and HomeAway are now offering their own insurance policies for hosts, but the details differ fairly substantially. Though HomeAway was the first to offer primary liability coverage policies to hosts, Airbnb now does, too. The details of each policy, and limitations to be aware of:
Airbnb Host Protection Insurance
- Insured by Lloyds of London
- Available to Airbnb hosts and landlords
- Primary liability coverage for eligible claims filed as a result of Airbnb stays
- Currently offered in 15 countries (of the 191 Airbnb operates in)
- Liability coverage limit up to $1 million (USD) for injuries sustained at Airbnb listings and properties for guests during a stay
- Liability coverage limit up to $1 million (USD) for third party claims of property damage or bodily injury caused by a guest during an Airbnb stay. (What this means, according to Airbnb’s Help Center: If a guest were to injure or cause property damage to a third party; say your guest drops his suitcase on a third party’s foot in the lobby of your apartment building and that third party then sues you and your landlord, you’d be covered if you have Airbnb’s HPI)
- Property damage claims may be covered, but are not guaranteed
- Liability claims not covered (excluded) by HPI: Intentional Acts, Loss of Earnings, Personal and Advertising Injury, Fungi or Bacteria, Chinese Drywall, Communicable Diseases, Acts of Terrorism, Product Liability, Pollution and Asbestos, Lead or Silica, Liquor Liability, Assault and Battery, Electronic Data, and certain (unspecified) personal property may not be covered.
Potential pitfalls of Airbnb’s HPI:
- The coverage is only good for the actual booked stay, so if your guests cause damage or get injured during a time when they’ve arrived early or overstayed and you’re sued, you’re not covered.
- HPI also doesn’t cover damage to your own personal property. That, they say, can be covered by the Host Guarantee (more on that below).
- HPI “may” cover building damage caused by guests if a landlord files a claim against a host, but coverage is by no means guaranteed.
- If, say, your guest burns down your entire condo building, you’re only covered up to $1 million. Any damage beyond that is on you, unless you have a commercial umbrella policy (more on that below).
In addition to their Host Protection Insurance policy (which members pay for, just like you would a regular homeowners policy), Airbnb provides a $1 million Host Protection guarantee to every host. The Host Protection guarantee isn’t an insurance product, and hosts don’t pay extra for it – every booking on Airbnb is covered. The terms and conditions are subject to change, so be sure you’re always consulting the most up-to-date version of the Guarantee, but Airbnb says what’s covered is “up to $1 million in damages around the world.” The Host Guarantee can’t replace either your homeowners policy, your business policy, or your combined homeowners and business policy. There are also a number of exclusions in the Host Guarantee. The limitations (from Property Casualty 360):
- Prior to contacting Airbnb for reimbursement, the homeowner must attempt to resolve the property damage issue with the guest.
- The damage must have occurred during the booking period. Damage occurring before or after the booking period is not covered.
- The host must be in compliance with all requirements of the Airbnb contract prior to the loss.
- The damage must be reported within 14 days.
- Payout may be actual cash value on some items, rather than replacement cost.
- Not covered: cash, securities, pets, personal liability and common areas.
The bottom line with Airbnb’s insurance coverage and guarantee: it’s all better than it used to be, and hosts can get a measure of protection from both, but it’s still on each host to understand what their insurance policies cover, and what they won’t, and to add more coverage when needed.
- Insured by CBIZ Insurance
- Designed to replace a homeowners insurance policy (so you wouldn’t carry both)
- Replacement cost coverage for your building(s) and for your contents
- Coverage for damage to your building and contents caused by a guest
- Loss of income coverage
- Liability coverage in the event of a guest’s injury or death
- Liability coverage extended to your amenities, including: Swimming pools, Hot tubs, Watercraft, Docks & piers, Beach area, Fishing, Picnic area, Bicycles
HomeAway’s insurance appears to be more complete than Airbnb’s, but be sure to look closely at each policy’s limitations, and always ask about exclusions.
4. Umbrella Insurance: Do You Need It?
Umbrella Insurance policies can offer added protection above and beyond auto and homeowners insurance for people with substantial assets. Just as with homeowners insurance, there are personal and commercial versions of umbrella policies. Personal umbrella insurance policies won’t cover short-term homestay rentals, but commercial umbrella policies can.
5. And if you’re the one staying in an Airbnb? You should be covered.
…If you already have renters or homeowners insurance, that is. As a guest in a homestay short-term rental, your personal homeowners or renters insurance policy will most likely cover your possessions in the event of theft or in the event you accidentally injure someone else and are held liable. More info here.
The Bottom Line
Before entering into a home-sharing situation (or ASAP if you already have) carefully consider what you need covered and ensure, line by line, that your homeowners policy, supplemental homestay insurance (like Airbnb’s), or your commercial umbrella policy covers each situation, event, or type of property or injury. Be sure to specifically ask about what exclusions apply to any policy or add-on you carry.
More advice for smart hosting (from Allstate): “Do a thorough interview of anyone before you give them access to your home. Most home sharing sites offer a screening service that gives you an overview of a candidate’s background, but you likely want to go further, asking for identification, doing reference checks, asking for deposits (much like you would do when taking on a rental tenant as a landlord). You might also require any paying guests to have their own homeowners or renters insurance policy; check to see what their policy covers (liability, for instance) and consider whether their insurance is extensive enough to help you avoid any undue risk.”
And though we know you know, we’ll say it anyway: never misrepresent yourself to your insurer. Don’t omit the fact that you’re participating in a home-share program. You might save yourself short-term insurance premium dollars, but if anything ever happens, your homeowners policy could be subject to cancellation, leaving you completely unprotected and responsible for the activities of strangers.