Airbnb Hosting Hazards & Short-Term Rental Risks
Properties, second homes and spare rooms that are otherwise vacant can easily be transformed into a source of income these days. So yah, sometimes it’s hard to say no to a little extra cash in the pocket. But the benefit of Airbnb hosting and other short-term rental situations, don’t come risk-free.
If you decide to rent out your home, spare bedroom or other accommodation, you should do so cautiously. It’s important to be aware of these and other common pitfalls so that you can successfully manage the risks of renting your property on a short-term basis.
Standard homeowners and renters insurance policies are designed for personal risks, not commercial use.
If you are considering renting your property through Airbnb, your first step should be to contact your insurance broker to review your current coverage. Each insurer and policy have their own restrictions and possibly exclusions. If you don’t discuss your plans with your agent to make sure you are adequately covered, you could end up financially vulnerable.
In our experience, most insurers at this time exclude coverage for property while it is being used specifically as an Airbnb rental. Safe to say – carriers will have to assess this trend in property use and, as it develops, adjust their coverage options to reflect the level of risk.
But what about Airbnb provided protection?
Airbnb backs every one of its bookings with its host guarantee program at no cost. They claim that this program will reimburse eligible hosts for damages up to $1 million. However, Airbnb readily admits that its host guarantee is not insurance and should not be considered a replacement or stand-in for homeowners or renters insurance.
Moreover, payments through the host guarantee are subject to a lengthy list of terms, conditions and exclusions. Hosts should go through all of Airbnb’s host guarantee to fully understand when coverage will be available, and when it will not apply.
While Airbnb opens its services to condo owners and renters, multi-unit buildings often have restrictive bylaws, association rules or lease terms that could impact one’s ability to host guests through Airbnb.
In many instances, commercial activities like renting out accommodations—even for short period of time—are forbidden by lease or condo board policies. In some cases, hosts will need to contact their landlord or condo board before subletting or renting out any accommodations. Failure to do this can result in eviction or other forms of legal action.
Even if you are allowed to rent out your condo or apartment through Airbnb, hosts should be aware that doing so can cause tension with neighbors. There’s the potential that your guests may not be respectful to property in common areas. You can picture it; acting inappropriately, being noisy…making people generally uncomfortable.
In response to the rising popularity of Airbnb, many states, cities and towns are moving to regulate short-term property rentals through their municipal codes or zoning regulations. In some cases, home rental services like Airbnb could be prohibited altogether.
If you break these local regulations, purposely or otherwise, you could face penalties and fines. As Airbnb states, alignment with laws and regulations is the responsibility of those renting out accommodations.
Again, you’ll want to minimize potential financial fallout by reviewing your current coverage, making the proper adjustments, or purchasing additional protection.
To discuss these options further, contact Davis & Towle Insurance Group today. We’re here to provide honest insight and meet your specific needs.
This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2016-2017 Zywave, Inc. All rights reserved.