Are you at Risk as an Airbnb host?
Although I don’t have short term rentals, my family members have vacation rental properties. They use various sites to promote and market their properties, including Airbnb. I wonder the risk associated with using these sites, such as are you at Risk as an Airbnb host?
Is Airbnb growing and you are taking most of the risk?
How does this differ than if you didn’t use a rental website to promote your property?
Sharing economy
In today’s shared economy, many are looking to make money off existing assets or borrow others assets – whether its Airbnb, Uber, etc.
Risks
But are the interests and risks aligned between the platform and the asset owner? Some would argue that the platforms are growing off the insurance risk of the individual driver or owner by asking them to pass damage claims through to your personal insurance company, while knowing your insurance company did not intend to cover rental or livery activity?
Contract
You are taking the majority of the small frequency based claims as your own risk. This is from Airbnb’s host guarantee terms….
“You must use your best efforts to seek recovery from the Responsible Guest for any Covered Losses. If you are unable to recover such Covered Losses or damages within a reasonable period, then you must seek recovery to which you may be entitled, from any person or entity other than the Responsible Guest or Airbnb, with respect to such Covered Losses.”
Insurance provided by platform
Airbnb does offer a $1 million liability coverage that would sit excess or above your original homeowners or condo-owners policy (this is for severity claims). Keep in mind any injuries or deaths to guests of Airbnb at your home would go through your policy first. Therefore, your insurance costs will fluctuate first if the losses are within your policy limits and quicker when compared to the Airbnb excess policy.
Not Covered
Also its important to note, what is not covered:
“The Host Protection Insurance program does not apply to liability arising from (1) Intentional Acts including: (i) Assault and Battery or (ii) Sexual Abuse or Molestation – (by the host or any other insured party), (2) Loss of Earnings, (3) Personal and Advertising Injury, (4) Fungi or Bacteria, (5) Chinese Drywall, (6) Communicable Diseases (7) Acts of Terrorism, (8) Product Liability, (9) Pollution and (10) Asbestos, Lead or Silica.”
In addition to liability, the Airbnb policy doesn’t cover loss of business income due to damage from weather-related events such as hurricanes or tornadoes. Therefore, you would have to file under your own homeowners policy again.
Notifying your Insurer
Keep in mind, unless you specifically disclose you are conducting commercial business or activity out of your home, most insurance companies will deny a claim since it is specifically excluded from the policy. Insurers handle claims on a case by case basis and there are exceptions, certain companies allow rental (with limitations of time), but is it worth the personal risk?
Questions
Some thought provoking questions:
- Is it worth the cost of a lawyer to fight for coverage?
- How much are you really making from your Airbnb rental, would it cover the increased costs of insurance?
- Would it cover the financial exposure if your insurance company denies a claim?
- Would it cover legal costs to defend or seek coverage from Airbnb or insurance company XYZ?
- Should Airbnb offer the primary insurance policy at a fee? or included in their commission?
The viewpoint of competitor HomeAway is that the AirBnb Host Guarantee is “great marketing” but doesn’t provide any additional protection. Homeway offers a similar protection at a lower amount of limit.
Thoughts:
It’s up to you to be informed, aware, and understand the risks you are taking when entering into these business ventures.
Please review your policies, the policies of your business partner, and consult your attorney and insurance agent for their expertise.
Please comment below if you have comments or questions.
