Homesharing sounds like a great deal for property owners. Who wouldn't want to earn a little rental income through a site like Airbnb or VRBO? It turns out there are many things to think about. Not the least is your home insurance, which may not cover you if those paying guests cause damage.
In order to protect yourself, read your policy and talk to your insurer. You might still participate in the home-sharing industry with a few additions to your coverage.
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. When you list your home on Airbnb, you make commercial use of the space. This in and of itself may be enough to invalidate your home insurance. It's important to note that you don't need to have guests booked in order to violate the policy -- just posting the listing is enough.
Even further, your home insurance won't cover you if you are engaged in illegal activity. "Illegal activity" could mean noncompliance with local regulations that apply to home-sharing. New rules in Toronto, for example, obligate short-term rental operators to have a license and charge tax. Your city's rules should be easy to find, so do some research before hanging out your "for rent" shingle.
Airbnb Offers Insurance -- But It Only Covers So Much
Okay, so what about host protection insurance? This would seem to give you backup in case something goes wrong. But the insurance provided by Airbnb and VRBO is limited. It won't cover the damage made to your home by your guests.
That 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 most want to put in an insurance claim. But even with host protection insurance, that claim is also likely to 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 Homesharing
If you want to join the home-sharing industry, you may be able to get appropriate 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.
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. This is called "short term rental" or "home-sharing" insurance.
Search Your Home Insurance Options
Whether you're home-sharing, buying a new home or want an update to your insurance policy, you can compare up-to-date home insurance quotes on Rates.ca.
