Short-term rentals, otherwise known as vacation or short-stay rentals, have been gaining immense popularity for quite a while now. Around the same time, such services as Airbnb started capturing the headlines.
For most Americans, renting out their personal property, spare rooms, or vacation homes is not a foreign concept. However, short-term renting and hosting is an emerging trend that has been around for only about 13 years. Even so, it proved to be an efficient way to earn extra cash and rent a place for a short time while traveling.
Naturally, the way people live and travel had to change due to the COVID-19 pandemic. And while home-sharing did not vanish completely, the terms and requirements dramatically changed. For instance, most hosts turned to different advertising approaches as the interest and focus of renters shifted to deep-cleaned places, which often means they are coronavirus-proof.
Home-Sharing Background Story
In pre-pandemic times, more than 44 million Americans used sharing economy services. And this figure was projected to reach 86.5 million by the end of 2021. However, such unstable conditions predictably influenced the Airbnb service and the insurance sharing economy as well. In 2020, the amount of home-sharing platform users in the United States dropped to 23.3 million. Compared to 2019 figures, it dropped by 59.5%.
Apart from minor accidents, renters and hosts now have to take care of sanitizing and deep cleaning. Naturally, the variety of possible accidents and general awareness notably increased. So now, hosts and renters need to look for comprehensive protection options. In most cases, they tend to rely on homeowners or renters insurance; and they can also expect Airbnb host and renter protection to take care of the rest.
If you are thinking about renting or hosting through Airbnb or any other service, you need to consider your options and ways to manage home-sharing endorsements.
Keep reading if you want to learn more about safeguarding yourself or your personal property when hosting or renting a place.
Home-Sharing Insurance Explained
The home-sharing economy is a relatively new term. It typically refers to specific situations when people decide to share their home or parts of the house in exchange for money. As for insurance, it can cover property owners and guests. But bear in mind that the coverage types may differ depending on the carrier. The same applies to endorsements.
Most of these policies include liabilities. It means that if a guest (not intentionally) floods your house or gets injured in your apartment, the damages will likely be covered. However, if you plan to list your apartment or house on Airbnb service, you need to consult your agent about home-sharing endorsements.
The endorsements, also known as riders, represent amendments to the existing contract between you and the provider. They can be issued during the purchase, at renewal time, or they can be applied as a midterm adjustment.
Guests should also be aware of the supplemental policy called slice insurance. In a nutshell, it is a trendy on-demand addition to your home insurance. With this add-on, your insurance can become comprehensive.
Typical Home-Sharing Risks
Chances are, your insurance will not cover specific claims. That is why you need to contact your provider and ask about the possibility of including the following:
- Accident risks. It can come in handy if any of your guests suffers an injury.
- Material damage risks. No one is safe from misadventures, accidents, or material damage, especially if you are renting out your home to numerous people.
- Loss of income. Being a host implies a possibility of losing rental income due to damages associated with uninhabitable circumstances.
- Criminal or illegal activities. Paying guests can engage in unlawful actions and activities like doing or dealing drugs or prostitution. Naturally, owners inform the guests about rules and basic requirements. But even if such activities are not likely to happen, you need to consider safeguarding yourself from such behavior.
What Is Airbnb Insurance for Renters?
You might know it under the name host protection insurance. It is typically offered by the rental services and platforms to owners. Since some places can be available for daily or monthly rent, the risks are different.
As for host advantage, it can safeguard you from unpleasant scenarios like theft. But proceed cautiously if you are leasing the place and decide to list it on Airbnb. If that is the case, we recommend double-checking your agreement to avoid fines and penalties.
This type of protection can be enormously helpful if you are dealing with vacation homes. In this case, there is no universal approach to insurance and safety.
When dealing with Airbnb, you need to approve the list of your properties first. On the bright side, their protection insurance covers around $1 million in liabilities. It means that you will be covered if your guest decides to sue you after falling down the staircase, for example. But bear in mind that there are exceptions.
If any of the damages were intentional or you suffered from a loss of income, the protection insurance will not cover these losses. You can check the comprehensive summary for more information.
The service also provides a Host Guarantee aimed at handling material losses. First of all, it is not insurance per se. It is a program that guarantees protection in case the occupants cause any damages. It is generally available to hosts worldwide, except for Chinese, Japanese, experience hosts, and bookings made through Airbnb Travel. In a nutshell, it is an excellent add-on to the protection program.
Understanding Airbnb Insurance for Homeowners
Dealing with Airbnb listings might not seem like a complicated task. And this might be true, but only for apartment or house owners. First of all, they don’t have to jump through hoops to ensure safer renting conditions.
Since owners act like hosts when they list their property on Airbnb, they also have access to protection insurance. The coverage is automatic the moment the listing is approved.
Owners with active home insurance need to bear in mind that it typically does not cover any home-sharing services. Therefore, the platform offers its coverage to gap the bridge. If you do not have any active coverage, take your time before choosing the provider and ask all the alarming questions. And be prepared that they will ask questions in return.
The Typical Questions Homeowners Should Be Ready to Answer
Here is a list of questions the potential insurance provider is likely to ask:
- Are you using or planning on using any services like Airbnb?
- Are you renting out your house, parts of your house, or an apartment?
- How often do you rent out the property? How many months or days a year?
- How much money do you make or plan to make from renting out?
But do not be alarmed. Your answers will help to determine how much coverage (or extra coverage) you need. This way, the provider can help you assess your rental business and recommend the right insurance product.
Victoria is a Senior Content Writer at American REIA. She helps customers find the right educational material through easily-digestible blog posts and buying guides backing their insurance coverage choice. Victoria covers the latest industry news and various insurance topics, including auto, home, health, and life insurance.