Property Casualty 360, an insurance trade publication, reported upon a number of experiences faced by Airbnb hosts that certainly won’t earn the guests top reviews on the website. These issues included property damage, outright theft, evidence of wild parties, and even illegal activities. Beyond suffering the disappointment of having losses to their property that far exceeded the rental payment, many home-sharing hosts also found they did not have the insurance coverage they needed to get compensated for these problems.
Insurance Problems Home-Sharing Owners May Face
Airbnb, Homestay, and a number of other companies facilitate short-term rentals between guests and hosts. It’s easy to understand why you might want to earn income by renting out rooms that you aren’t using. As just one example, Airbnb books over 100 million stays each year, so you would join a growing trend.
However, you should understand that your typical homeowner’s policy probably won’t completely cover you if one of these paid guests causes damages or files a liability claim. To understand this problem, learn more about typical homeowners insurance and the insurance provided by home-sharing companies.
Issues With Home-Sharing Rentals and Typical Homeowners Policies
First, most homeowners insurance policies either limit or exclude damage caused during business use of a property. A claims department will certainly consider renting a room in exchange for payment as business use. Home insurance that does cover some business use typically limits payments to no more than $2,000. Before you decide to offer your own property to home-sharing guests, you should review your current insurance coverage.
Your homeowner’s insurance company may advise you to upgrade your policy to commercial coverage. Naturally, you will face higher premiums because the insurer has to accept more risk. Now they don’t just have to protect you and your family; they also have to cover risks from a series of strangers.
Issues With Coverage From the Home-Sharing Platform
Airbnb and some other home-sharing providers may offer their own coverage at no extra cost to the owner. Before you rely upon this kind of coverage, consider some of the limitations:
- In some cases, the insurer will base claim payments on actual value and not the true replacement cost.
- The coverage asks owners to attempt to resolve disputes with their renters before filing a claim.
- Right on the website, Airbnb states that this coverage will not include common areas, pets, cash, security deposits, and personal liability.
You cannot assume that the insurance that comes from the home-sharing company will offer you complete protection against damages that your guests may cause.
What Actions to Take Before You Open Your Home to Home-Sharing Guests
Some Airbnb hosts posted on their forum about having their homeowner’s insurance company send them a cancellation notice when they found out their customers were participating in this business without telling them. You definitely do not want to start renting out your garage apartment, finished basement, or extra bedroom before you contact your insurer.
In any case, you should speak with an experienced homeowners insurance agent at Giuffre Insurance to learn more about your options. Then you can factor in the additional costs of coverage against any profits you might earn as a home-sharing host.