Airbnb Insurance Overview
Some of the more common insurance-related questions asked by Airbnb hosts are offered below:
- Is my room or property fully insured by Airbnb host protection insurance?
- Do I need to get additional insurance for my Airbnb property?
- What happens if someone damages my Airbnb property?
- Will my current home insurer terminate my insurance if they find out I’m renting my room or home using Airbnb?
- If I do want additional insurance for my Airbnb property—beyond Airbnb—what are my options?
First off, it’s important to put the issue of property insurance in proper perspective. While home owners rarely file property claims, you’ll be welcoming strangers into your personal residence who may or may not take care of your property. In a worst-case scenario, which you should always assume is possible, your guest may severely damage your property or personal belongings. After managing a high-volume vacation rental property for more than 10 years, I can safely say I’ve seen it all with problematic guests. Don’t forget, the higher your rental traffic, the more guest problems you’ll have.
While we never needed to submit an insurance claim, our guests managed to destroy our Jacuzzi tub pump, break appliances, punch holes in walls and damage furniture. In one case, a guest shoved a glass bottle down our garbage disposal and tried to grind the glass through the disposal teeth. When this didn’t work, they pulled the wires out of the bottom of the disposal; leaving them fully exposed. In most cases, guests reached out to us directly to take the blame for the damage and to let us know they would cover the costs of repair. The challenge arises when a guest won’t assume responsibility for something they’ve damaged. While the purpose of an Airbnb security deposit is to cover the cost of guest negligence–like missing towels, stained carpets or damaged furniture–you have to first prove your guest was responsible for the damage. You then have to convince Airbnb that they should disburse some or all of the deposit to you the host—no trivial matter since it’s really your word against your guest’s word.
Unfortunately, broken lamps and missing towels are the least of your worries. Don’t overlook situations where a guest might flood your property with a bathtub-related issue or break your high-end TV. In this 2014 story, an Airbnb host was responsible for a $10,000 bill after a guest stopped up the host’s toilet and caused considerable damage to the multiple properties. Airbnb was unwilling to cover the costs for reasons we’ll discuss below. Adding insult to injury, the landlord of the larger condo complex terminated Airbnb rentals in her complex after this incident leaving the Airbnb host without property rental revenue she had come to depend upon. Situations like this highlight the growing disconnect between insurance companies and property owners and the tenuous nature of short-term rental property. In Canada, this topic of property rental insurance for short-term guests has taken on a more urgent tone.
Because of the many ways a guest can damage your property—and harm themselves–you should think carefully about liability issues. At a vacation property down the street from ours, a guest fell on an owner’s furniture (a sharp bamboo pole) and lacerated her cornea—causing blindness. Have you scanned your property to ensure you’ve limited any potentially dangerous situations or features? Could someone, like a toddler, fall down your stairs? What can you do to mitigate these kinds of potential problems? Use your imagination to picture the worst case scenarios. Can you install night lights or a retractable stair guard at the top of your stairs? In one case, we had a middle-aged guest wander down our hall and then tumble down our stairway after mistaking our stairwell with the hallway. Thankfully, the guest was OK, but left a large hole in the wall after he launched the laptop he was carrying threw the sheet rock. Needless to say, after this accident, we took the necessary measures to make sure this never happened again.
If I’ve scared you into wanting to ensure you have the appropriate liability insurance for your property, good—mission accomplished. If you need some more scaring, I recommend you scan this blog for more examples from Airbnb hosts of what can go wrong.
Before we get into some of the more challenging questions, it’s important to note that AirBnB does provide two different types of property insurance for hosts: the Host Guarantee, and Host Protection Insurance. Reviewing the details of each option will help you answer the first question, “Is my room or property fully insured by Airbnb host protection insurance.”
The Host Protection Insurance Program
This is AirBnB’s primary insurance program, which is built into each of your Airbnb reservations at no additional cost. This policy covers up to $1 million per listing and covers both hosts and landlords. The Host Protection Insurance program also protects against third-party claims of property damage or bodily injury. For instance, if our guest how had tumbled down the stairs had broken a leg and claimed we were responsible for his injury, the AirBnB Host Protection program would be our first line of coverage. However, there are limits to this insurance policy, which are referenced on Airbnb’s website. You should also be aware that Aibnb Host Protection insurance is only available in 15 countries across Europe, North America, Asia, Africa, and Australia. For an updated list of the covered countries, check out Airbnb’s website for more information.
The Host Guarantee
To help supplement their primary insurance policy—the Host Protection plan—Airbnb introduced Host Guarantee insurance. This policy offers an additional million dollars of coverage to protect hosts from third-party (guests) claims of bodily injury or property damage. What kinds of situations are covered by this supplemental insurance you might ask? Airbnb provides the following description on their website (see bullet list below). Please note that the PDF at the bottom of these bullet points offers a more comprehensive description of the policy.
The Host Protection Insurance program provides primary liability coverage for up to $1 million per occurrence in the event of third party claims of bodily injury or property damage. This coverage is also subject to a $1 million cap per listing location and certain conditions, limitations, and exclusions may apply.
- The Host Protection Insurance program covers landlords and homeowners associations in many cases when claims are brought against them because a guest suffers injury during a stay. For examples of what’s covered and what’s not, please visit the Airbnb Help Center.
- The Host Protection Insurance program may also cover claims if a guest damages building property. This often includes claims filed by a landlord against a host. For examples of what’s covered and what’s not, please visit our Help Center.
- The Host Protection Insurance program can now serve as your primary coverage for eligible claims filed as a result of Airbnb stays. Landlords are covered only if Airbnb and/or the host is also a party to the claim.
- Download HPI Program Summary.pdf
Though it covers up to $1 million in damage caused by guests, the Host Guarantee isn’t an insurance program. It doesn’t cover third-party damage, and it doesn’t protect landlords. For instance, take this 2014 Airbnb story about a renter who hosted a guest that flushed feminine products down the toilet and caused water damage that spilled into her neighbors’ units. The only thing the Host Guarantee covered was the plumbing bill for the unit. The landlord had to foot the bill for the damage to the other units since neither Airbnb policies cover surrounding properties and there are also limitations around when claims can be filed. With that in mind, here are some of our top insurance tips:
Top Insurance Tips
- Screen guests. Do whatever you can to build a workflow into your business to screen your guests. If something doesn’t add up, follow up and “go with your gut.”
- Airbnb usually won’t cover guest damages unless guest(s) admit to damaging your property or you can somehow prove damage was caused by guests–good luck with that.
- Think about worst case scenarios and manage your property appropriately to reduce these risks, e.g. number of people allowed at your property, checking in on guests, screening, increasing price, age limits, no parties, etc.
- Don’t allow more than 1- or 2-week rentals and consider placing a video camera at the entry point of property (even if it’s fake) if you have issues with guests attempting to throw parties at your property. You should also check out the Party Squasher app and consider installing one of these at your property if you’re managing a home that lends itself to large groups or possible party scenarios.
- Make sure you get the right property insurance and verify that your insurer covers Airbnb activity; understand the limits of your coverage.
- Set up an LLC to help limit or “sequester” your liability. Whether you’re a first-time AirBnB user or a bona fide Superhost, there’s always risk involved in running a business. By registering as a limited liability corporation (LLC), you can protect your personal liability.
- Focus on safety: Keeping your home at its best may be a regular practice when you’re a homeowner, but the maintenance involved in running a bed and breakfast is a whole new game. Ramp up your property’s safety level with non-slip bathmats, fire extinguishers, and childproofing. Pad the corners of coffee tables, put childproof locks on cabinet doors, and plug electric sockets. Not only is child proofing your listing important for the children, but it also makes it safe for elderly (or clumsy!) adults.
- Keep an eye on what your state or city allow in terms of Airbnb rental activity. Some cities like Boston or New York are often implementing new rules to limit or control Airbnb activity. Other states like Idaho passed a law that taxes the activity, but ensures cities or municipalities can’t stop a property owner from renting their property on Airbnb.
Who can help you with an additional insurance policy?
There are only a few insurance carriers willing to write an Airbnb liability insurance policy. Feel free to reach out to us via email if you’d like more information about the company we recommend. A recent article by Fast Company suggests that the future of insurance in the sharing economy will shift so that more companies sharing services will offer their own insurance to their clients, based on their internal analytics and assessment of risk. Home Away also shed some light on the deficiencies you should be aware of with the Airbnb insurance policies.
Top 10 Questions about Airbnb Liability Insurance
So you know you need Airbnb insurance, but you still have questions. Below are the most frequently asked questions about Airbnb liability insurance. Feel free to post any additional questions you might have in the comment section of this post.
- Why does my homeowner’s policy not cover my short-term rental?
All homeowner’s policies carry a “business activity exclusion.” Since Airbnb is considered a business which results in revenue or loss, your insurance agency will treat your insurance claims as such.
- Is my short-term rental really a business?
If you scan the Internet, you’ll find that many cities around the US are requiring Airbnb owners to secure a business license for their Airbnb property. Airbnb has a list of other considerations you should assess like zoning, permits and taxes. If you look hard enough, you should also be able to find some high-level short-term rental property information for larger cities like New York City, Vancouver, Las Vegas. These laws will give you some sense of what might be required in your own city.
- I have a landlord policy and have been told this covers my short-term rental, is this correct?
Usually this is not correct. Just like any other property or rental insurance, Landlord policies usually carry a “business activity” exclusion.
- How do I get covered for business activity?
You buy a business insurance policy. See our information above about where you obtain such a policy.
- If I insure my short-term rental as a business, can I also stay or live there?
There are no standard occupancy restrictions on a business policy. This means the property is insured while you stay there, friends or family, and of course paying guests.
- If I have a business policy do I keep my homeowner’s or landlord policy in place?
The business policy is designed to fully replace the current coverage you have. You can typically cancel your current policy, but be aware that these kinds of policies are typically more expensive than your personal insurance.
- What is a commercial umbrella?
A commercial umbrella is a policy that covers “above and beyond” a standard business policies liability limits. Most business policies carry $1,000,000/$2,000,000 in commercial general liability, and would suffice as the underlying policy for a commercial umbrella. If you read more about Airbnb’s Host Guarantee insurance, you’ll find that it is meant to kick in only after your other personal insurance is applied to your claim. And even then, there are serious limitations as to what is covered.
In addition to the information provided below, feel free to review our Aibrnb Host Beginner’s Guide where you’ll find some additional tips about insuring your property.