The Risks of Airbnb and Home Sharing in a nutshell.
The Risks of Airbnb and Home Sharing
Just a few years ago, taking a trip involved
contacting travel agencies, booking hotel
rooms and making plans far in advance.
Today, however, smartphones and the
internet have helped create new sharing
services that allow homeowners to
connect with travelers and rent out their
homes, spare bedrooms or other
accommodations for a fee.
Airbnb, the most popular of these sharing
services, offers a convenient platform that
can provide homeowners with an extra
source of income. However, renting
through Airbnb can also expose you to
substantial risks and leave you with costly
property damage and liability claims.
Potential Insurance Gaps
Relying strictly on your regular
homeowners or renters insurance policy
while hosting guests through Airbnb can
lead to significant gaps in coverage.
These policies are designed to protect you
and your family from everyday risks, and
not from commercial renting.
If a renter uses your home for even a
small amount of time, you and your family
will be exposed to significantly different
risks that weren’t considered when your
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policy was drafted. As a result, most
homeowners and renters policies won’t
cover property damage that’s caused by
Airbnb guests.
If you’re considering renting through
Airbnb, your first step should be to contact
your insurance broker to review your
current homeowners or
renters insurance policy. While your
homeowners or renters policy
may allow you to rent your
property to a guest, it’s important to keep
in mind that each insurer has its own
restrictions and requirements. Some
insurers may require advanced notice of
any short-term rental, whereas others
might insist that you purchase an
endorsement to expand your coverage.
If you plan to rent out your residence on a
regular basis, many insurance companies
will consider this commercial use. In many
cases, regular Airbnb hosts will need to
obtain a commercial insurance policy in
order to be properly insured. However, a
growing number of insurance companies
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now offer home-sharing liability insurance
policies that can be purchased on a
month-to-month basis.
Issues with Airbnb’s Provided
Protection
Airbnb does offer its hosts two forms of
protection through its host guarantee
program and host protection insurance.
While hosts may be inclined to rely on
exclusively on these programs to manage
their risks, there are significant gaps
related to these offerings.
Host Guarantee
Airbnb backs every one of its bookings
with its host guarantee program at no cost,
which will reimburse eligible hosts for
damages up to $1 million. However,
Airbnb readily admits that its host
guarantee is not insurance and should not
be considered a replacement or stand-in
for homeowners or renters policies.
Moreover, payments through the host
guarantee are subject to a lengthy list of
terms, conditions and exclusions.
Therefore, hosts should be aware of the
following issues related to Airbnb’s host
guarantee:
– Hosts must attempt to resolve any
issues with the guests involved
prior to receiving any
compensation. This also means
that a host would have to make a
claim on his or her own insurance
policy before the host guarantee
would apply.
– Any sum collected from a
standard policy or a security
deposit would be deducted from
the host guarantee.
– The guarantee will only repair or
replace covered property that is
damaged during the time frame of
an online booking.
– This guarantee does not cover
certain items including, but not
limited to, cash, collectibles,
jewelry, pets, watercrafts or any
damage to property that is not
considered a covered
accommodation.
For more information on specific elements
of Airbnb’s host guarantee program, hosts
can review its terms and conditions in full
on the company’s website.
Host Protection Insurance
In addition to its host guarantee program,
Airbnb offers coverage to its patrons
through its host protection insurance.
Airbnb indicates that the program provides
primary liability coverage for up to $1
million per occurrence in the event of thirdparty
claims of bodily injury or property
damage. Despite these claims, hosts
should be wary of relying solely on this
insurance program for a number of
reasons:
– Intentional acts that aren’t the
result of an accident are not
covered under this policy. In
addition, Airbnb’s home protection
insurance does not cover what it
refers to as property issues, which
can include things like mold,
asbestos and bedbugs.
– Neither Airbnb’s home protection
insurance nor its fine print is
readily available for review. The
policy is also subject to limitations,
conditions and exclusions.
Together, this means that the
specifics of these coverages are
vague, and Airbnb hosts may not
know exactly what’s protected.
The personal property of any
guest is generally not covered.
Additionally, any theft or damage
caused by a guest may not be
covered either.
With Airbnb’s host protection insurance,
it’s best to assume that you aren’t
equipped with the proper coverage. For
full protection, it is likely that you will need
to speak with an insurance professional to
better understand the policy adjustments
you will need in order to be fully covered.
Considerations for Condo Owners and
Renters
While Airbnb opens its services to condo
owners and renters, multi-unit buildings
often have restrictive bylaws, homeowner
association rules or lease terms that could
impact the ability to host guests through
Airbnb.
In many instances, commercial activities
like renting out accommodations—even
for short periods of time—are forbidden by
lease or condo board policies. In some
cases, hosts will need to contact their
landlord or condo board before subletting
or renting out any accommodations.
Failure to do this can result in eviction or
other forms of legal action.
Even if you’re allowed to rent out your
condo or apartment through Airbnb, doing
so can cause tension with neighbors.
There’s always the potential that your
guests may not be respectful to property in
common areas, act inappropriately or
noisily, or make other tenants feel
uncomfortable.
Local Laws and Considerations are Included in the Risks of Airbnb and Home Sharing
In response to the rising popularity of
Airbnb, many states, cities and towns are
moving to regulate short-term property
rentals through their municipal codes or
zoning regulations. In some cases, home
rental services like Airbnb could be
prohibited altogether.
If you break these local regulations,
purposely or otherwise, you could face
thousands of dollars in fines. What’s more,
Airbnb says alignment with laws and
regulations is the responsibility of those
renting out accommodations. As a result,
you need to review your local laws and
regulations before using Airbnb to rent out
your accommodations.
The Bottom Line
While Airbnb offers a unique and
potentially profitable service to users, it’s
not without its faults. Before you decide to
try it for yourself, be sure to consider all of
the risks. For more information on sharing
services, or to review your homeowners or
renters policy, contact us at 888-851-5572
today.
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