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Do You Need Airbnb Insurance?
Everything that you need to know about Airbnb Insurance
Airbnb has revolutionized the way people vacation. Owning an Airbnb property can be a great way to make extra money and help others enjoy your hometown or favorite getaway spot.
However, it's important to understand your insurance liability. While the casual, sharing economy model might not make your Airbnb listing feel like a business, your homeowner’s insurance sure thinks it is. That can jeopardize your coverage under some circumstances — and that means you need to make sure you know what you’re getting into before you rent out your home.
Here's what you need to know about Airbnb's Host Protection Insurance, and how it could intersect with your homeowners' insurance policy.
Why You Need Airbnb Liability Insurance
Your homeowner’s insurance covers guests under normal, non-commercial circumstances, as well as certain commercial uses. In most cases, if you want to rent your home out to a tenant, you can do that while still maintaining coverage under your homeowner’s insurance policy. So why would you need Airbnb liability insurance for your short-term tenants?
Because they’re not actually tenants — at least according to your homeowners’ insurance company.
Homeowners’ insurance is designed to protect a residence — i.e. the primary place you or your tenants live. When you rent your property out as a vacation getaway, it’s not being used as a residence, and therefore, not covered.
This is why homeowner’s policies specifically exclude rental for “business purposes.” For example, as part of State Farm’s insurance, the “insured location” is defined to include, “any part of a premises occasionally rented to an insured for other than business purposes.”
More explicitly, they exclude certain types of coverage when the property is used as a business. For example, the policy states that coverage does not apply to “bodily injury or property damage arising out of business pursuits of any insured or the rental or holding for rental of any part of any premises by any insured,” unless it’s “on an occasional basis for the exclusive use as a residence.”
In other words, drawing up a contract to rent your house to tenants every year or so is fine. Renting it out for a few nights (or a few weeks) to visitors who are just passing through town isn’t. Without extra Airbnb insurance, you’re exposed to serious liability.
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What Does Airbnb Host Insurance Cover?
Airbnb Host Protection Insurance provides good coverage against injuries and incidents that happen to guests in Canada, the United States and many other countries around the world. If an Airbnb guest is injured in an accident or accidentally injures someone else on your property, Airbnb will cover the liability up to $1 million. This coverage also applies to situations where guests damage their own property.
However, Airbnb host insurance doesn’t cover everything. If your house has serious safety or health issues like mold or asbestos, the insurance won’t help you. Host Protection Insurance also only applies to accidents, and doesn’t address intentional acts.
What is the Airbnb Host Guarantee?
Airbnb Host Insurance can be really useful if something happens to a guest, but it doesn’t do anything for you if a guest damages your residence beyond their deposit. Fortunately, the Airbnb Host Guarantee offers additional protection for your home and property — under certain conditions.
The Host Guarantee isn’t Airbnb renters insurance according to the company, but it does offer some of the same benefits as insurance. The program covers your building and property up to $1 million, along with property in your possession that you are responsible for.
However, the terms and conditions of the Host Guarantee have a lot of exceptions. Pets, cash and securities aren’t covered, and it also has complex conditions around fine art, vehicles and certain other types of property that may limit coverage.
It also excludes weather-related damage, damage from “indirect or remote causes” and a variety of other circumstances. Equally importantly, if a guest sticks around for longer than they’re supposed to, you may be out of luck; the Host Guarantee specifically excludes “any losses caused by a Guest or Invitee after the expiration of the booking period shown in the applicable Listing.”
Airbnb Insurance Claim Processing May be Slow or Unreliable
Airbnb poses rigid deadlines and complex requirements, which can pose challenges for hosts. For the Host Guarantee, for example, hosts have to submit any claim within “14 days from the guest’s check out, or before the next guest checks in, whichever is earlier.” If your next guest is arriving quickly, you could fail to notice missing items or hidden damage in time, jeopardizing coverage.
Airbnb also requires substantial documentation to prove ownership and value of the missing property and can take a long time to get back to you. Some Airbnb hosts have been less than happy with the results.
Emily Jenks, owner and writer at the family travel site, Henry and Andrew’s Guide, wants to warn hosts and renters of the perils of the Airbnb Host Guarantee. When a renter robbed her house of more than $13,000 worth of property, Airbnb was very slow to respond, says Emily.
Instead of responding promptly when they reported the theft, Airbnb sent them “a standard email to rate your renter!”
“Things picked up after our story was featured on the local news. They immediately contacted us stating that we are protected under their $1 million insurance. We have been going back and forth with Airbnb, and they did send an adjuster and received our list of items stolen. We have not received the money yet for everything that was stolen, but it seems to us that they are at least willing to help.”
And this happened despite the fact that Emily is an Airbnb Superhost — someone the company gives special certification to highlight her high standards of hospitality.
“If we were not featured in a news report though, I am not sure if we ever would have heard from them to make it better,” said Emily.
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Other Limits of Airbnb Liability Coverage
Even discounting potential problems with response, Airbnb coverage is pretty limited according to Evan Roberts, a property manager and Airbnb host with Dependable Homebuyers, a company of real estate experts specializing in purchasing homes in the Baltimore area.
“The key thing to know about Host Protection Insurance is that it is only valid during times that the home is booked with renters. If these renters cancel or do not show up at the property then no coverage will be provided.
The policy does not cover damage where responsibility is assumed by the renter in the contract. Host Protection Insurance only covers a small portion of potential situations and we always recommend that our homeowners invest in a supplemental umbrella policy to cover these other potential occurrences.
We've found that claims to the Host Protection Insurance policy is a process that requires time. Airbnb owners should have a reserve of funds for unexpected events to resolve these issues and get back to renting while the claim is being evaluated.”
The last point is crucial — particularly for Airbnb hosts who haven’t experienced any major incidents of property damage or loss. If your house is robbed or damaged, you’re going to need to perform repairs and replace essential items before you can start renting again. Airbnb will not compensate you for lost rent, so you’ll be losing revenue, and waiting to process the claim can greatly increase your losses.
What Airbnb Insurance Do I Need?
Your property is your financial future. If you’re not fully covered, one bad guest or freak accident can derail that future. Airbnb hosts should be covered against virtually anything that can go wrong, including:
Fire and hazard insurance is a must. Depending on where your property is, you may need insurance against floods, earthquakes and other natural disasters as well. And don’t forget to consider sewage backups and other municipal service failures.
Although Host Insurance provides some coverage in this area, there are exceptions where negligence or poor home condition is a factor. Even if your property is well-maintained, additional Airbnb liability insurance is a good idea.
You need to make sure you’re covered if a worker is injured while maintaining your property. If you have a caretaker or bring in cleaners between guests, consider investing in workers compensation insurance. You may also need to take out builder’s risk insurance to protect you from accidents during renovation.
Keep in mind, the need for this type of insurance depends on your service provider. Hiring a licensed and bonded construction crew, or contracting with a cleaning service that insures their workers may lower your risk and obviate the need for insurance.
Loss of rent
If your Airbnb represents a major portion of your income, you may wish to insure against loss of rent. However, if you are only renting occasionally, this may not be a necessary investment.
Theft, damage and injury outside of Airbnb operation
As we mentioned before, Airbnb coverage only applies during a guest’s scheduled visit. It’s crucial to be completely covered between visits.
Umbrella Airbnb Insurance
An umbrella insurance policy is often the best way to make sure that you’re covered, no matter what happens. Additionally, if you do need to collect on insurance it can make the process simpler and faster, by establishing a single, responsible insurance provider. A reputable broker can help you evaluate the unique needs of your property portfolio and build the best insurance plan to protect your investment and Airbnb income.
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