This week, news outlets reported one of those Airbnb horror stories that make hosts cringe: a San Antonio woman rented her home to a single man, only to discover that he used it to throw a party for more than 200 college-aged guests – and cause nearly $20,000 worth of damage to the house in the process.
It’s times like these where we often hear the same question from customers: does my homeowners insurance cover Airbnb activities?
As with many questions in the world of insurance, the answer is “it depends.”
But to be fair: in most cases, the answer is “No.”
To help us understand why most homeowners policies won’t cover the kind of damage the San Antonio woman’s guests did at their party, we chatted with Michael Fitzgibbon, Chief Underwriting Officer at Slice, an on-demand insurance provider that offers coverage for home-share hosts. Here are some highlights.
Why Standard Homeowners Insurance Isn’t Enough for Airbnb Hosts
One of the key points Fitzgibbon highlighted was that homeowners insurance is what’s called a “personal line.” As such, has restrictions and exclusions for business activities – i.e., anything that makes the homeowner money. So if something goes wrong resulting from your money-making activity (i.e., hosting guests), your homeowners policy likely won’t offer coverage.
Okay, we said, that makes sense.
But what about the insurance plans provided by the home-share platforms? Won’t that cover Airbnb hosts?
Fitzgibbon’s answer: not so fast. Those plans are not actually “insurance.
Apparently, platform-provided coverage may not be as robust as it sounds (and, let’s be honest, “$1 million in protection” does sound pretty robust). Take the example of the woman in San Antonio: one of her primary complaints in the news pieces we saw was that it was difficult to work with Airbnb.
She apparently called them several times before they told her they’d need photographic evidence that there were more than 50 people at the residence. She also reportedly said that her primary homeowners insurance didn’t cover the party-related damage and it seemed her calls to Airbnb “fell on deaf ears.”
Until, that is, the story got momentum in the media. Since the reports aired, it seems the platform has resolved her complaints.
What About Self-Insuring?
Another question we had for Fitzgibbon was this: if regular homeowners insurance won’t cover Airbnb rentals and Airbnb’s Host Guarantee isn’t that dependable, can hosts opt to self-insure instead of buying additional coverage?
When Fitzgibbon asked us what we meant by that, we said, essentially, saving up a big pot of money to use in case something went wrong. But he pointed out that true self-insurance would involve some kind of risk financing to fund future losses, which sounds complex and is complex.
Setting aside a cash pile is one thing, but it’s not scientific and it’s also not practical for most people – if you’re renting on Airbnb, you’re probably doing that to increase the pile of cash you already have or create a pile of cash in the first place.
So in summary: self-insurance for home sharing isn’t viable.
So What Insurance Do Home-Share Hosts Need?
There’s no one-size-fits-all policy for home-share hosts, but Fitzgibbon mentioned a few characteristics to look out for when shopping for a policy to cover your Airbnb activity:
- Primary coverage: This means that, in the event of a claim, it’s clear who has to pay (your primary insurer). It saves a lot of time and hassle when something goes wrong.
- Commercial liability coverage: This will protect you for the injuries that happen to guests, damages guests do to other people’s property, and other liabilities associated with your rental activities.
- Business interruption coverage: This handy provision can provide you with income you would have earned from renting out your space, in the event that a covered property incident makes your house un-rentable for a period of time.
- Flexible coverage: Slice’s policies let you pay for coverage for when you need it rather than paying for a full year, in all cases, by default. This is a nice feature for many Airbnb hosts, who may use the platform only during specific seasons.
But Wait, There’s More!
Okay, we’ll be totally honest: this is actually a pretty complicated topic. In fact, we’re working on a more comprehensive resource to help Airbnb hosts understand how they can protect themselves and their homes without running afoul of their insurance agreements. We’ll post a link here when it’s live. If you want, send us your email, and we’ll send the guide your way when it’s finished.