If you're using your home to host Airbnb guests, you need to be aware of the insurance issues that come with it. Airbnb guest homes aren't quite commercial business properties, but they're also not traditional single family homes either. This creates insurance problems that need solutions.
Fortunately, there are other insurance options available for home-sharing hosts, such as short-term rental insurance, landlord insurance and business property insurance. Additional homeowners insurance coverage options, such as endorsements and umbrella policies, are also available. These options, combined with Airbnb's own personal property and liability coverage, give a wide range of coverage that homeowners insurance alone cannot.
This article will cover:
- Does homeowners insurance cover Airbnb hosting?
- Airbnb hosting during COVID-19
- What home share insurance options are available
- Airbnb's insurance coverage
Does homeowners insurance cover Airbnb hosting?
Homeowners insurance companies usually don't cover the commercial use of a home, such as an Airbnb rental. This means that if an Airbnb guest damages your belongings, your homeowners insurance claim would be denied because it's a commercial property issue. However, if you use your home as an Airbnb rental for less than 30 days out of the year, there may be no homeowners insurance issues, depending on your provider. If you rent the house for Airbnb use more than that, your home insurer may not provide the coverage you need. In that case, you may want to look at alternative insurance.
Airbnb hosting during the COVID-19 pandemic
Travel is expected to be vastly different for the foreseeable future. While states have mandated travel restrictions and stay-at-home orders, many Americans are looking for ways to play by the rules and upgrade their “staycation” experience.
What does this mean for hosts/Airbnb homeowners? Airbnb’s booking volumes were significantly impacted by COVID-19. They bottomed out in April 2020, with revenues 79% lower than in April 2019. In May, as high occupancy hotels became unavailable, Airbnb’s booking rates started steadily increasing to the numbers we see today.
The average length of stay increased to six days, and rural units were booked more frequently. Many hosts have converted their units into affordable long-term housing to help those who have been affected by the pandemic.
QuoteWizard analysts looked at states that have the most active Airbnb listings per 100,000 residents during 2020. We then compared that figure to the occupancy rate to determine the top states for Airbnb stays. States with the most listings and the highest rates of Airbnb occupancy include California, Florida and New York.
|State||Active Airbnb listings||Active listings per 100k residents||Occupancy rates|
|Active Airbnb listings and occupancy rates were sourced from AllTheRooms Analytics.|
Insurance options for Airbnb hosts
There is insurance available to fill in the gaps that homeowners insurance would exclude. If your guests wrecked your guest bedroom, business property insurance or short-term rental insurance may cover the damage, while homeowners insurance would not.
In order to make sure your house has the proper insurance for when you open it for home sharing, consider the following insurance coverage choices:
Business property insurance
If you're planning to use your home as an Airbnb rental for more than 30 days a year, hospitality and hotel insurance is needed. Temporary rental properties ranging from resorts to bed-and-breakfasts use this to provide personal property and liability coverage.
Personal property takes care of damages to your home and belongings caused by your Airbnb guests. If a guest is injured on your property and you're responsible, the liability portion of your insurance may cover the resulting medical bills and legal fees. Business property insurance also may cover you for loss of earnings and intentional damage.
Short-term rental insurance
Short-term insurance differs from hospitality and hotel insurance in that it covers not only personal property and liability in your home, but situations such as excess use of utilities, pest infestation and identity theft.
Now here's where short-term rental insurance really stands apart: you can get a policy only for when your place is booked. Short-term rental insurance policies are available for one night, all the way up to 45 consecutive days. Progressive's short-term rental insurance is a good example. You just log onto their website, choose how many nights you need to buy short-term rental insurance for and make your payment.
You'll want landlord insurance if you're renting out a home you don't live in as an Airbnb. Landlord insurance covers personal property and liability, but it also covers the home for damage not directly caused by a guest, such as wind, hail or fire. If you own a home that you're not living in, insurers may consider it high-risk. Having people living in a home infrequently means more opportunities for a problem to occur, such as fire or theft, without anyone nearby to stop it or alert authorities.
A pitfall of landlord insurance is the cost. It typically costs 15% to 20% more than homeowners insurance. However, it's a small price to pay to provide coverage for a home you do not live in. Insurers who offer landlord insurance include:
- State Farm
- American Family
If your Airbnb guest house is also your home, adding a "unit or residence rented to others" endorsement to your homeowners insurance policy may be useful. This rider provides liability and personal property coverage beyond the limits of what your homeowners insurance policy states.
Using the home as both your living space and as a frequent Airbnb rental increases the risk of a claim. If a claim goes over your homeowners policy stated limits, you can be on the hook for a significant amount of money. Keep in mind, however, that your homeowners premium and deductible will probably increase when you purchase the endorsement. Insurance companies that offer unit or residence rented to others endorsements include:
- Liberty Mutual
- American Family
Another good way to increase your liability insurance limits on an Airbnb rental property is an umbrella policy. An umbrella policy gives you extra liability coverage when your homeowners insurance liability limits are spent. It covers personal property, injury claims and legal fees. The higher liability limits make this ideal coverage for Airbnb landlords.
Limits for umbrella policies come in million-dollar increments up to $10 million. Umbrella policy premiums can range from a couple hundred dollars to a thousand dollars a month. Deductibles for umbrella policies can be in the hundred-thousand-dollar range.
Airbnb coverage provided
Airbnb provides its hosts with some coverage. These plans are more supplemental in nature than actual insurance policies unto themselves..
Host protection coverage
Host protection coverage is Airbnb's form of liability coverage offered free to its hosts. Host protection provides coverage for third-party claims due to injury and property damage. This coverage has a limit of $1 million.
Although the coverage is free to Airbnb hosts, you do have to pay a deductible. Furthermore, it excludes mold damage, bed bugs, pests and damage due to neglect.
Airbnb host guarantee
The host guarantee shouldn't be considered insurance of any sort. Rather, it's more of a reimbursement package under strict conditions. The host guarantee only covers damages or theft caused by guests. Theft or damage caused by non-guests is excluded.
Other limitations of the host guarantee include:
- You are only reimbursed for theft or property damage at actual cash value. This means that you are paid out on damaged or stolen items at their depreciated value.
- You need to file a host guarantee claim within 14 days of your current guest's checkout date or before your next guest checks in, whichever is sooner.
- The host guarantee does not cover valuables such as money, jewelry, artwork or antiques.
- The coverage only applies to the space you listed on your Airbnb ad. For example, if your property is stolen from the private room or apartment, it qualifies as covered. If a guest steals something from your room, it is not covered.
Hosting travelers in your home requires proper insurance. Homeowners insurance alone is not sufficient, but there are plenty of insurance options to choose from to make sure that your home remains safe and profitable for you. Depending on whether you're hosting Airbnb guests occasionally or are booked solid for months on end, there are options that can provide the insurance coverage you need.
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