4 Big Insurance Considerations for Airbnb/VRBO Hosts
Within the last 10-15 years, short term rentals, such as Airbnb and VRBO, have become considerably more popular choices for vacation and overnight trip accommodations. Whereas hotels used to be the typical go-to for overnight planning, short-term home rentals have proven to be a convenient, unique and affordable option.
Additionally, property owners with extra space to rent can find that being a short-term rental host offers
financial advantages as extra income. Win-win, right? Depends. Take note: if you are considering hosting an Airbnb, VRBO or other short-term rental property, understanding how to insure the property for comprehensive coverage is critical. Here are four reasons why:
1. Having Homeowner’s or Rental Property insurance may not cover all short-term rental risks.
Homeowner’s insurance is structured to cover the everyday risks of individuals and their family
members who are listed on the policy. Rental Property insurance is structured to cover property owners where a renter is using the home as if it were their own. BOTH policy types have built-in definitions and exclusions that create real concern — there will be damages and risks not accounted for, leaving both the property owner and renters liable for uncovered occurrences.
Once major concern within a Homeowner’s or Rental Property insurance when used for hosting an
Airbnb or VRBO is what occupancy the insurance carrier allows. While your carrier may allow you to rent out the property for a period of time, each carrier will have their own restrictions and requirements, including what that “period of time” can be. Some carriers may require advance notice for short-term rentals, while others may require an endorsement to expand coverage for short-term rental occupants. Confused yet? Just wait.
2. Be sure you fully understand host protection insurance offered through Airbnb.
Airbnb currently offers hosts two types of insurance protection through its “AirCover” program for
hosts. It may appear to be a convenient way to obtain coverage, but we’ve found significant gaps in
their offerings (hey, that’s what we get paid for). $3M Damage Protection – Airbnb indicates that it would reimburse hosts for damages to their home and/or belonging caused by guests at no cost. Thanks, Airbnb! However, Airbnb itself states that the Host Damage Protection is not an insurance policy. This ‘protections’ should not be considered a replacement for Homeowner’s or Rental Property insurance policies. What’s more, there are a LOT of terms, conditions and exclusions to consider. Uh…thanks, Airbnb?
We recommend going through the Host Damage Protection information with your insurance advisor to be sure you’re covered in areas that are important to you and your guests. $1M Liability Insurance – Airbnb offers additional coverage to hosts that provides liability coverage for up to $1 million per occurrence in the event of third-party claims of bodily injury or property damage. Again, there are details that should be discussed with your insurance advisor, including the fact that the Host Liability Insurance Program details (in other words, the fine print we all know and love) are not readily available for review. We don’t know about you, but that makes us a little uneasy…
3. Many, if not most, insurance companies consider Airbnbs and VRBOs commercial-use properties.
Another big concern is how an insurance policy defines a “business” and what exclusions exist for “business exposures.” Personal insurance policies aren’t structured to cover hotel-like business exposures OR liability concerns that come with the increased foot traffic short-term rentals create. This means that hosts will need to obtain a commercial insurance policy to ensure they are fully covered. A growing number of carriers now offer home-sharing liability insurance policies that can be purchased on a month-to-month basis. This coverage may address the exposure of increased in foot traffic at your rental property and remove the need to rely on the vague “Host Liability Insurance Program,” but it doesn’t necessarily address the property damage exclusions that may exist within the policy itself. We’ll say it again for those in the back — it is really in your best interest to speak with an insurance advisor about the differences. Even if it’s not us, you’ll feel a lot more at ease if you’re confident you’re fully covered.
4. Look into local laws and even your neighborhood association.
With more and more people hosting Airbnb and VRBO properties, many states, cities and towns are looking at ways to regulate short-term property rentals which, in some areas, could even be prohibited altogether. Airbnb even says that state and local laws and regulations are the responsibility of rental owners. In other words…that’s on you. For this reason, we seriously recommend that anyone considering turning a property into a short-term rental check on current laws and regulations in their area.
The bottom line? Make sure your short-term rental property risks are accounted for — those you know of and those you may not have even considered. (Did we mention talking to an insurance advisor?) We want you to make the most of your properties that can bring you extra income; we also don’t want them to cost you much more than all the rentals were worth. Still have questions? That’s what we’re here for —we’re happy to chat!
