Many people have taken advantage of the global popularity of websites such as Airbnb and HomeAway to list their home as rental property. If you do not reside in the property full-time, offering it as a vacation rental is a quick and easy way to earn some extra cash. Unfortunately, many people find out the hard way that becoming a host can also have complicated and potentially costly repercussions if you don’t adequately prepare. One of the most important ways to protect yourself from financial disaster is by securing the appropriate levels of insurance coverage.
In response to the need for some type of insurance protection for those renting out their home, Airbnb introduced Host Protection Insurance (HPI). Described as “coverage of up to $1,000,000 per accident for Airbnb hosts if a guest is accidentally injured anywhere in the host’s building or property during the stay,” this coverage is often criticized for leaving more questions than answers. According to PropertyCasualty360°, gaps include:
- Coverage limited to $1 million per occurrence; $2 million per location. The policy aggregate is $10 million for all insured locations in the United States, which leaves you vulnerable to financial ruin.
- Coverage provided in excess of any other available coverage. The host must submit the claim to his/her homeowners insurance and the claim must be denied by that company before Airbnb’s insurance will pay. Most often, filing such a claim with your homeowners insurance company will result in a policy cancellation since you are utilizing your home for business use.
- Other “key” exclusions of HPI include: (1) intentional acts (of the host or any other insured party), (2) loss of earnings, (3) personal and advertising injury, (4) fungi or bacteria, (5) Chinese drywall, (6) communicable diseases, (7) acts of terrorism, (8) product liability, (9) pollution, (10) asbestos, or lead or silica, and (11) insured vs. insured (i.e., host sues Airbnb or vice versa).
- Coverage limited to an actual stay, not a booking. No show – no coverage. It is also important to note if the guest arrives early or stays late – no coverage.
As illustrated above, insurance coverage offered through home listing sites only goes so far. It is critical that you research your options for complete insurance protection. Some home insurance policies cover short-term rentals; however, if there are multiple short-term visits you may have to purchase a business policy that provides coverage similar to that of a bed and breakfast. Additionally, if you are renting your home for a longer period of time to one person or family, you may require a landlord or rental dwelling policy.
At OceanPoint Insurance, safeguarding your financial future is our top priority. Before you list your home online, we ask that you contact us at 847.5200 to discuss your options with one of our experienced agents. We look forward to hearing from you!