This article has been updated from a previous version.
Home sharing sounds like a great deal for homeowners. Who wouldn't want to earn a little rental income through sites like Airbnb or VRBO? It turns out there’s quite a few things to think about before you’re prepared to publish your listing. You might be overlooking something really important – your home insurance.
To protect yourself from any potential damage from your guests, read your policy and talk to your insurance provider. You might still be able to participate in the home-sharing industry with a few additions to your coverage.
- Home insurance protects you, not your paying guests
- Airbnb provides limited coverage through host liability insurance and host damage protection
- What isn't covered by Airbnb
- Secure adequate coverage for home-sharing
- How home-sharing affects your insurance premiums
- Double check your Airbnb listing and avoid getting it taken down
Home insurance is for you — not your paying guests
Home insurance assumes you are the owner-occupier of your property. The policy terms are based on residential use of the home. However, when you list your home on Airbnb, or any other short-term rental site, you make commercial use of the space.
This could not only open you up to lawsuits, litigation, loss of income, but also get your home insurance policy cancelled because of misrepresentation. It's important to note that you don't need to have guests booked in order to violate the policy – simply posting the listing is enough.
In addition, your home insurance won't cover you if you are engaged in illegal activity which suggests noncompliance with local laws and regulations that apply to home-sharing in your city. For example, in Toronto, short-term rental operators are required to register with the city for a licence, include the registration number in the rental listing, and charge tax.
Airbnb offers insurance, but it only covers so much
Airbnb provides hosts with $1 million USD in host liability coverage if you are found legally responsible for a guest getting hurt or their belongings being damaged or stolen while they’re staying at your place. It also provides $3 million USD in damage protection. Let’s dive into what those two insurance coverages include.
What’s covered under Airbnb’s host liability insurance?
Host liability insurance provides coverage if you are found legally responsible for:
- Bodily injury to a guest
- Damage to or theft of property belonging to a guest
- Damage caused by a guest to common areas, such as building lobbies and nearby properties
What’s covered under Airbnb’s host damage protection?
Host damage protection is a component of their insurance package, AirCover for Hosts, which provides hosts with a $3 million USD coverage if there is:
- Damage to your home, valuables, furnishings, or belongings caused by guests
- Damage to parked cars, boats, or other vehicles caused by guests
- Unexpected or extra cleaning costs needed due to guests
- Income lost if you need to cancel confirmed Airbnb bookings due to damage caused by a guest
What isn’t covered
While the $1 million liability coverage from hosting sites may seem substantial, it can be easily surpassed by liability damages. Given the increased risk associated with hosting strangers in your property, opting for a higher limit might be prudent.
Host damage protection and liability insurance provided by Airbnb doesn’t cover any damages or injury resulting from acts done intentionally, damage from everyday wear and tear, loss or theft of currency, or damage done by extreme weather (like earthquakes and hurricanes).
This means your claim will likely be denied if you try to get compensation for losses from a rowdy renter. The nightmare scenario of coming home to find your guest has trashed the suite is when you would most like to file an insurance claim. But even with host protection insurance, that claim may be denied.
Host protection insurance is designed to cover you in the event you are the subject of a third-party lawsuit. For example, if your guest damaged your neighbour's property, this insurance may apply. Your claim might be denied, however, if the damage was done deliberately. In other words, insurance is useful but only applies in specific scenarios.
Insurance for home-sharing
It's essential to note that the coverage offered by Airbnb and VRBO does not replace your personal home insurance policy. While it can supplement home insurance for liability and damages directly linked to your guests, home insurance covers a broader spectrum of losses.
If you want to join the home-sharing industry, you should consider increasing your coverage. Start by reading your existing policy so you are aware of any exclusions. Then, contact your insurer to ask if you can purchase additional coverage to provide a safety net for your home-sharing activities. A good short-term rental insurance policy should cover:
Damage to property: Both intentional and unintentional damage caused by guests
Theft: Airbnb insurance doesn’t cover theft of cash and securities. Opt for coverage to help recover loss of belongings and valuables in your home
Legal liability: Airbnb’s host coverage offers liability protection however, with the exception of negligence and poor home conditions which leave a lot of room for interpretation resulting in claim denials.
Loss of income: Any loss in income resulted from extensive damage caused by a guest making your property unlivable.
Comprehensive coverage: Protect your property from fire, and consider endorsements for overland flooding and sewer back-up. If your insurer does not have the right package, or won't sell you one, consider contacting other insurers. Over the past few years, several companies have started selling insurance specifically for home-sharing property owners.
The cost of your premiums for your short-term rental may vary based on the extent of your coverage needs, location of your rental, the contents within, and other considerations akin to those factored into a standard home insurance policy.
Double check your rental listings before you post
Before you post your rental listings, double-check them to make sure they are updated with accurate information. Ongoing compliance audits by the city of Toronto resulted in the removal of 2,626 Airbnb listings in the month of November last year. Out of these, 65% were taken down due to missing or inaccurate information.
All short-term rental platforms are required to share data with municipalities to enhance local enforcement. These platforms must include the business licenses and registration numbers of listings. Upon registration, they will be issued a unique number, mandatory for advertising on any short-term rental site. The registration incurs a yearly fee of $50, with enforcement handled by the city, not the individual rental platforms.
While someone theoretically could list two properties under the same registration ID, the government, using this data from rental platforms, is poised to catch and fine violators. There are five different fine amounts ranging from $300 to $1,000, and offenders may also face removal from rental sites.
While cities like Vancouver and Toronto have mandatory registration systems, Quebec has tabled a bill, proposing fines of up to $100,000 for each illegal rental listing. Notably, this legislation places the responsibility on Airbnb to obtain the permit from the host instead of the other way around.