What Type Insurance Do I Need for Airbnb Rentals
If you live in an area that is a popular tourist destination or regularly hosts major events, you may be considering renting out your home for short periods of time. The advent of popular websites such as Airbnb and HomeAway has made it easier than ever to enter the home-sharing market. And the prospect of bringing in extra income from a second property or a spare room or two in your primary residence is very attractive.
If you are thinking about renting your property or part of your property on a short-term basis, you need to consider the risks involved. Guests whom you have never met before can be unpredictable. This type of scenario opens up the possibility of guests becoming injured or injuring others on your property, guests damaging or stealing your personal property, and similar hazards.
Does My Homeowner’s Insurance Cover Me for Home-Sharing: Most people who list all or part of their dwelling, as short-term rentals believe that their homeowner’s policy will cover it. This is a big mistake. The truth is, a homeowner’s policy could rightfully deny any type of claim associated with a short-term rental. The reason is that nearly all homeowner insurance policies carry business pursuits exclusion. And since most insurers view renting a property on sites like Airbnb a “business pursuit”, they are not likely to cover an incident involving a paid guest.
The same holds true if you are renting a dwelling and decide to sublet the property for short-term rentals. You cannot expect your renter’s insurance policy to cover any damage or injuries caused by your guest. In fact, if you decide to go this route, you should first obtain permission from your landlord; otherwise, you may be in violation of the terms and conditions of your lease.
What About Rental Property Insurance: Some property owners who have a rental dwelling believe that their rental property insurance (aka “landlord”) policy will cover short-term Airbnb-type scenarios. This could also be a mistake. Landlord policies are designed for scenarios in which you are leasing a property to a single party (an individual, couple, or family) for an extended period of time (typically six months to a year or in some cases, longer). In general, these types of policies also have exclusions for business pursuits, so claims for incidents involving short-term rentals to multiple parties on an ongoing basis may also be denied.
Obtaining Proper Coverage for Short-Term Rentals: Insurance for rentals on Airbnb and similar home-sharing sites is unique and difficult to obtain. Because short-term renting (on a widespread basis) is a relatively new endeavor and it is more difficult for insurers to price the risk, many carriers have not yet entered this market.
If you want to make sure you are covered for a home-sharing rental, there are a couple potential scenarios:
- One-Time Rentals: Some insurers allow a single short-term rental if you notify them in advance. Others may require you to add an endorsement to your homeowner’s policy for this event. If you want to rent all or part of your dwelling for a one-time special occasion, this may apply to your situation.
- Ongoing Short-Term Rentals: Renting out your home to various guests on an ongoing basis is considered a business pursuit. To be properly covered for this scenario, you would need a business insurance policy with the specific type of coverages you need. This means most likely a hotel or bed and breakfast policy, or a highly specialized policy from an insurer that caters to the sharing economy.
If you are looking for reasonably priced coverage for an Airbnb rental, you are not likely to find it from a traditional insurer. You will need to shop around and compare several options to find the one that fits your needs. The best place to start is to speak with an independent insurance broker. Independent agents have access to several top insurers, and they can often customize a solution that delivers the coverage you need at a price you can afford.