The importance of insurance for your Airbnb

We could all use a little extra cash now and then, right? Many homeowners are monetizing their home by renting it out on Airbnb, or even purchasing additional properties for this purpose. Short-term rentals give homeowners flexibility and control over availability and pricing of their home while still making it available to them when they need it. Beyond the monetary benefit of using your house as an Airbnb rental property, it can be a rewarding experience that allows you to meet new people from other regions and cultures.

It's not as easy as putting your address on the platform though. Hosting on Airbnb requires time and effort, including managing bookings, guest communication and property maintenance resulting from additional wear and tear. There is also potential for property damage, theft or disruptive behavior from guests. And, of course, local laws and regulations surrounding short-term rentals.

While we can’t speak to the property management challenges, we can tell you about home insurance for your Airbnb and considerations you should make before you host your first guest.

Does homeowners insurance cover Airbnb properties and short-term rentals?

Probably not. Most standard homeowners insurance policies are designed to cover owner-occupied residences and may exclude coverage for commercial activities or rental properties and operations including Airbnb properties and short-term rentals.

That said, some insurance companies now offer specialized home sharing or short-term rental insurance policies. While not exactly Airbnb insurance, homeowners can purchase these policies to provide coverage when renting out their properties on platforms like Airbnb.

Short-term rental insurance policies typically provide coverage for property damage, liability protection and loss of rental income. They may also offer additional coverage for theft, vandalism and some guest-related incidents. It's important to carefully review the terms, conditions and coverage limits of such policies to be certain they align with your specific needs and the risks associated with hosting guests.

If you are considering using your property like this, you need to contact your homeowners insurance company or the VIU by HUB Advisory Team to talk about your options and make sure that you have adequate insurance coverage.

What is home sharing insurance? 

Short-Term Rental coverage is a specialized type of insurance coverage designed for homeowners who use platforms like Airbnb or Vrbo. This insurance provides coverage for the unique risks associated with hosting guests in your home on a short-term basis.

Home sharing insurance typically offers a homeowners policy combination of property protection, liability coverage and loss of rental income coverage. Here are some key aspects of home sharing insurance:

• Property protection – Home sharing insurance covers property damage to your home and its contents caused by guests. It typically includes coverage for accidental damage, vandalism, theft and other covered perils.
• Liability coverage – These policies provide liability protection in case a guest suffers an injury or property damage during their stay and they hold you responsible. This coverage can help cover legal expenses and any settlement or judgment costs.
• Loss of rental income – If your home becomes uninhabitable due to covered damage or an insured event, home sharing insurance can reimburse you for the income you would have earned from renting out your property during the period of repair or restoration.

You may also want to consider these coverages and policies. A VIU by HUB Advisor can help you make sense of which of these are necessary, which are nice to have and which might not apply to your specific situation.

• Umbrella insurance – Umbrella insurance provides an extra layer of liability protection that goes beyond the limits of your standard homeowners insurance or short-term rental insurance. It offers additional coverage in case you face a major liability claim or lawsuit.
• Landlord insurance – If you regularly rent out your entire home or multiple properties on Airbnb, you may want to consider a landlord insurance policy. This type of insurance is designed for property owners who rent out their properties. It typically provides coverage for the structure, liability protection and loss of rental income.
• Commercial property insurance – For hosts who own properties solely for the purpose of short-term rentals like Airbnb, commercial property insurance might be an option. This specialized insurance provides coverage for the unique risks associated with commercial properties, offering protection for the building, equipment, inventory and other property assets.

What insurance is provided by Airbnb and what do I need?

It's important to understand the Airbnb insurance for homeowners in order to know what additional homeowners insurance coverage you may need. Note that these coverages do not replace personal insurance. You still need to have homeowners, renters or condo insurance for your property. Here's a breakdown of the insurance coverage typically offered by Airbnb through AirCover, according to the Airbnb website:

• Host damage protection – This program aims to protect hosts by providing coverage for eligible damages to their property, up to a certain limit, caused by guests during their stay. It covers a range of scenarios, including damage to the building, contents and personal belongings, as well as extra cleaning costs and lost income if you need to cancel future bookings.
• Host liability insurance – This program provides liability coverage to hosts for incidents that occur on their property. Host liability insurance It includes injury to guests, theft of guest property and damage caused by guests to common areas and nearby properties.

What doesn't Airbnb insurance cover?

While Airbnb provides insurance coverage for hosts through the AirCover program outlined above, it's important to understand the limitations and exclusions of their coverage. Here are some situations that may not be covered by Airbnb's insurance:

• Damage caused by the host – Airbnb's insurance generally covers damage caused by guests, but it may not cover damage caused by you or your family.
• Wear and tear – Normal wear and tear to your property or its contents is typically not covered by Airbnb's insurance. Homeowners have the responsibility to maintain the property in good condition.
• Cash and valuable items – AirCover may not cover loss or damage to cash or valuable items, such as jewelry, artwork or collectibles. Secure these items separately or consider additional insurance coverage.
• Shared or common areas – If you live in a condominium or apartment complex with shared or common areas, Airbnb's insurance may not cover damage or liability arising from those areas. Check with your building's management or consider additional coverage.
• Intentional acts or illegal activities –Any illegal or prohibited activities may void the insurance coverage.
• Pets – Damage or liability related to guest pets may not be covered by Airbnb's insurance. Consider additional coverage or restrictions on pet stays.
• Loss of income from cancellations – While Airbnb offers some coverage for loss of income due to guest cancellations, there may be limitations and specific criteria that need to be met to qualify for reimbursement.

What is the difference between Airbnb insurance and Vrbo insurance?

The insurance offered by the two short-term rental companies is quite similar. Here’s a comparison of the two programs:

• Primary vs. Non-Primary coverage – Airbnb's insurance coverage is primary, meaning it will be your first point of contact before any other insurance policies you may have. It will reimburse you to its limit and then you can pursue additional reimbursement from your personal insurance companies. Vrbo’s insurance is non-primary and will respond at the same time as other policies you have. However, if you don’t have a liability policy (which you are likely legally required to have as part of your homeowners insurance), Vrbo becomes primary.
• Coverage limit – Both Airbnb and Vrbo offer Liability coverage with a limit of up to $1 million per occurrence. This coverage applies to liability claims resulting from guest injuries or damage to third-party property. Airbnb also includes up to $3 million in Host damage protection. Vrbo has a program where you can require your guests to purchase Property Damage Protection (PDP) or pay a deposit.
• Lost Income coverage – Host damage protection from Airbnb covers loss of income resulting from damages. While Vrbo’s Liability coverage does not cover loss of income, they recommend adding supplemental coverage that will.
• Damage to your property – Airbnb’s Host damage protection covers damage to your property caused by guests or their invitees. Vrbo does not have a similar automatic insurance coverage, instead they recommend that you require PDP or a deposit from your guests.

Does renters insurance cover Airbnb?

Standard renters insurance policies typically do not cover business activity for Airbnb or short-term rentals. Most renters insurance policies are designed to cover personal liability and personal property for long-term rentals, not structures, commercial activities or short-term rental operations.

What are the risks of home sharing?

Home sharing platforms like Airbnb or Vrbo can offer lucrative opportunities for hosts, but they also come with certain risks. Here are some risks that you should be aware of before you begin hosting:

• Property damage – There is always a risk of property damage when hosting guests. Accidental damage, negligence or even intentional actions by guests can result in costly repairs or replacements.
• Liability – Hosting guests opens up the potential for liability claims. If a guest gets injured during their stay or if their property is damaged, they may hold you responsible and seek compensation.
• Security and theft – While rare, there is a risk of theft or damage to personal belongings. Take precautions to secure valuable items and protect their property.
• Non-compliance with regulations – Some areas have regulations or restrictions on short-term rentals. Hosts may face legal consequences if they fail to comply with these regulations, even if they’re unaware of them.
• Negative guest experiences – Unhappy guests may leave negative reviews, impacting your reputation and potential future bookings.
• Cancellations and loss of income – Guests may cancel bookings last-minute, resulting in a loss of anticipated income.
• Neighbor and community issues – Hosting guests in residential areas can sometimes lead to conflicts with neighbors or homeowner associations. Complaints about noise, parking or disruption from guests are common and could result in ongoing problems with your community.
• Insurance coverage gaps – Avoid this by working with the VIU by HUB Advisory Team to make sure that you are fully covered for this type of activity.

While renting your house on Airbnb has benefits, it also requires active management and involves potential legal fees and risk risks. Consider the pros and cons carefully before deciding if hosting on Airbnb or Vrbo is the right choice for you.