Liability Coverage a Hole for Homeshare Hosts Who Are Renters
If your dog attacks a guest or someone slips and falls at your apartment, their medical bills and ensuing lawsuits are covered if you have liability insurance, such as through renter’s insurance. But if you’re renting out your apartment through Airbnb or another homeshare site — and don’t own the unit — chances are you’re not covered.
Renter’s insurance typically covers unintentional accidents, along with personal liability, medical payments, and losses from vandalism, theft and fire. But only the named insured is usually covered, and the policy doesn’t extend to vacation rentals or other forms of subleasing. Personal use is covered, but commercial activity isn’t.
Since most landlords don’t allow tenants to sublease their apartments, the renter is likely violating their lease by renting it out as an Airbnb host, says Tad Devlin, a San Francisco attorney who represents insurance companies and specializes in the sharing economy. They could buy an insurance rider for short-term rental insurance, Devlin says, which will still cover them if they violate their lease by being an Airbnb host, he says.
Coverage through your rental service
Airbnb, for example, has a “Host Guarantee” that coves up to $1 million in damage to a host’s property. It isn’t considered insurance “and should not be considered as a replacement or stand-in for homeowners or renters insurance,” according to Airbnb’s website.
The Airbnb coverage doesn’t protect cash and securities, pets, personal liability and shared or common areas. It wouldn’t cover, for example, a guest slipping and falling, or a host’s dog biting a guest, as happened to an Airbnb guest who was bitten by a host’s Rotweiler in Argentina.
Violating lease agreements
Violating a lease by turning a condominium into a “quasi-hotel” could lead to eviction, Devlin says. And even if the renter has renter’s insurance, a wall that was damaged by an Airbnb guest, for example, wouldn’t be covered because the insurance usually doesn’t cover sublets, Devlin says.
“The landlord is going to be the one that wants the wall fixed,” he says, and that cost will fall to the renter.
The coverage may apply if an Airbnb guest stole a host’s property, Devlin says, adding that insurance is meant to cover known risks and not illegal activities such as subleases that break a lease agreement.
“What they are there for is not to deny claims, but to pay valid claims,” he says.
Know your coverage
If you do have liability coverage, ask your agent if it covers short-term rentals because it’s such a broad term, says Christopher Hackett, a personal lines policy director at the Property Casualty Insurers Association of America.
“How often are you going to be renting out your apartment to someone else?” Hackett asks.
If the answer is a few times a year, then a standard renter’s insurance policy should provide liability coverage, he says. Snowbirds who own two homes and occasionally rent them out would be covered, he says.
But if it’s more a regular part of your income, then you’ll need a commercial policy, Hackett says.
What’s next in insurance
The Peers policy is an example of where insurance companies are heading. Short-term rental insurance is a growing niche that insurers are starting to think about getting into more, Devlin says.
“The industry is rapidly evolving because our economy is rapidly changing,” he says.
It’s an evolving issue that has insurers reexamining their policies, Hackett says. A poor economy caused people to become more creative in how they generate income, and insurers need to catch up.
“The sharing economy is definitely here to stay and will continue to expand,” he says.
Aaron Crowe is a freelance journalist who covers insurance and personal finance topics for a variety of websites, including his personal finance site CashSmarter.com.