Are you offering your home on a home-sharing service? Most home-sharing and host services make renting out your house easy. Airbnb specifically, offers $1 million in insurance coverage as part of their service.
Like most people, you might ask yourself why you’d need more than $1 million in insurance.
It’s not the coverage amount as much as what that $1 million truly covers.
What is Airbnb Insurance?
Airbnb provides Host Liability Insurance, which is designed to protect hosts against liability claims that arise from guest accidents and property damage. This coverage is automatic and free for all hosts who use Airbnb to rent out their property.
Host Liability Insurance provides up to $1 million in liability coverage per listing, per occurrence. It covers a range of incidents, including injuries to guests or their property, as well as damage to common areas of the building or property. However, it is important to note that Host Protection Insurance does not cover damage to the host's own property.
Hosts can also opt for Airbnb’s Host damage protection program, which is not an insurance policy, but is designed to protect against damage to their property caused by guests. Host damage protection program provides up to $1 million in coverage for damage caused by guests, such as theft or vandalism.
However, it is important to note that the Host damage protection program has limitations and exclusions. For example, it does not cover cash, securities, pets, or personal liability. Hosts should carefully review the terms and conditions of host damage protection program to ensure that it meets their needs.
What could go wrong?
While making some extra cash sounds exciting, the liability that goes with it could cost you more than it’s worth. Most home-sharing and host apps allow you to control the pricing, hours and rules of engagement. But for everything you can control, there’s a lot you can’t.
The home-sharing guests who became unwanted tenants
Imagine you’ve signed a deal for a four-week family vacation. The credit check comes back clean, the prepayment clears and the texts you’ve exchanged are nothing short of a pleasure. They’re looking for privacy and quiet. And you’re savoring the profit margins that offset your annual mortgage by 40%.
But your dream guests refuse to leave and won’t pay. After week four, the family vacation turns into an overstay-cation.
Your perfect guests become a long-term nightmare
You seek assistance from the home-sharing service, but the most they can do is allow you to charge extra for the unauthorized days. You go to the police. Because your guests have resided in your home for over 30 days, the police tell you they may have tenant rights and can’t remove them from the premises. You’ll have to go to court to evict them.
Evictions and other profit-depleting liabilities
After you evict the guests and regain access to your property, you discover damage to the walls. Since the stay wasn't fully authorized, your $1 million in coverage might not respond to the damage they caused. The exclusions on your $1 million host policy and homeowners insurance mean you're unlikely to win a lawsuit. In the interim, you have to pay out of pocket.
You turn to your homeowners insurance, but they deny the claim because home-sharing is a business operation.
While extreme, this example is based on a true story.
If an Airbnb host operates their rental as a business, they may need to consider commercial insurance. Commercial insurance policies are designed to protect businesses from a range of risks, including liability, property damage, and loss of income.
Commercial insurance policies can be customized to meet the needs of individual businesses. For example, a host who runs a bed and breakfast may need additional coverage for food service, while a host who rents out a vacation home may need coverage for outdoor equipment.
Insurance options for home-sharing liabilities
|Insurance policy||What it covers|
|Home-sharing insurance||Covers theft and damage of your personal property (Check the limits on each rental period.)|
|Property owner insurance||Covers theft of and damage to your personal property|
|Special event insurance||Covers single events like weddings|
|Host liquor liability insurance||Covers you If you’re sued for overserving someone at a party you host (Verify guest coverage options, if any.)|
|Auto liability insurance||Covers damage and injury due to use of a vehicle on your premises (Even if it’s not part of the rental, you may need added liability coverage.)|
|Watercraft liability insurance||Covers damage and injury due to use of a watercraft on your premises (Even if it’s not part of the rental, you may need liability coverage.)|
|Building ordinance or law insurance||Covers the costs if you have to rebuild your home in accordance with current building codes after a covered catastrophe|
|Personal umbrella insurance||Extends liability coverage over both your home and auto insurance at the same time|
|Business owners insurance||Combines property and liability insurance into one policy and sometimes includes business interruption and advertising injury (You might consider this type of policy if you’re renting a second home on a full-time basis.)|
|Data breach or cyber liability insurance||Covers hacks, data theft, ransomware and other cyberattacks|
|Sewer backup insurance||Covers sewage and water backups into your home through pipes or drains|
|Flood insurance||Covers damage from floodwaters or mudslides that flow into your home (usually due to flash melts or rains)|
Ask your insurance agent to review what’s covered under your homeowners policy before you open the door to a home-sharing guest.
Know your insurance exclusions
Some home-sharing services advertise a no-worries approach to homeowners, but you should worry.
Using one home-sharing service's insurance policy as an example, here are some things that may not be covered:
- Animals, livestock and pets
- Standing timber and crops
- Watercraft, drones, aircraft and satellites
- Property owned by someone other than you
- Security cameras and other recording devices
- Losses that happen after the original booking period ends
- Losses or damages that exceed the policy’s limit
- Loss of or damage to fine arts (You may only get actual cash value, not agreed value.)
- Extreme weather events and acts of nature
- Excessive use of utilities
- Interruption to your business (even if it was due to guest damages)
- Deterioration due to delays
- Compliance with local ordinance or law repairs
- Identity theft and identity fraud
- Acts of war, terrorism, insurrection and rebellion
- Actual or threatened malicious use of poisonous biological or chemical materials
- Nuclear reactions, radiation and radioactive contamination
- Seizures and destruction under quarantine
- Contraband and illegal trade
- Damage caused by insects, animals and vermin
- Losses directly or indirectly arising out of or relating to mold, mildew, funguses, spores, viruses, bacteria and other microorganisms
Denied coverage twice? It’s possible
If the home-sharing company denies your claim, you could be unprotected. Your homeowners policy might also deny your otherwise legitimate claim because you didn’t tell them about your home-sharing gig.
Don’t leave your home protection to chance.
- Contact your agent about your home-sharing plans.
- Confirm your homeowners coverage.
- Purchase home-sharing or property owners' insurance.
- Purchase Commercial Insurance
- Investigate tenants’ rights laws in your town.
- Invest in a home monitoring system (but be clear on laws about consent and filming guests).
- Consult a personal injury and liability lawyer so you know your options if a lawsuit arises.
- Verify that home-sharing is legal in your municipality (because Illegal home-sharing could void your homeowners policy).
Protect your home and assets
Before you take a trip down liability lane all alone, make sure you enlist the help of your insurance agent. They can advise you on how to proceed. So when it’s time to stake your claim in the home-sharing marketplace, think of the thousands you could make in profit and savor the millions you’ll save in liability.