Does Your Homeowner’s Insurance Cover Airbnb?

The sharing economy has grown by leaps and bounds over the last few years, with companies such as Airbnb leading the charge. Home sharing has gained widespread appeal among people seeking short-term rentals and homeowners looking to supplement their income. According to data from Pew Research Center, roughly one in 10 Americans has used a home-sharing service at some point. 

For homeowners, home sharing can be a lucrative proposition, but it’s not without a certain degree of risk. Having the right insurance coverage is a must to protect your property against damage and yourself against personal liability claims. You shouldn’t, however, assume that your homeowners policy automatically covers home sharing. Before you open your home to temporary guests, here’s what you need to know. (For more, see The Pros and Cons of Using Airbnb.)

Homeowners Insurance and Home Sharing

Generally, homeowners insurance is designed to cover the cost of repairing damage to your home caused by fire, wind or certain other natural disasters. It also offers personal liability protection in case someone is injured while on your property. (For more, see Homeowners Insurance Guide: A Beginner’s Overview.)

When it comes to home sharing, the rules are much less black and white. According to the Insurance Information Institute, some insurance companies will allow you to extend your homeowners coverage to a short-term rental if it’s a one-time event and you notify the insurer ahead of time. Other companies, however, may require you to purchase a specific endorsement, which is added on to your existing policy to cover a temporary rental. 

When Home Sharing Is a Business

If you’re renting out part of your home on a regular basis with the goal of generating income, that creates a new wrinkle as far as homeowners insurance is concerned. In most cases the insurance company is going to view that as business activity, which wouldn’t be covered at all by a homeowners policy. Instead, you’d need to purchase business insurance

If you’re planning to rent the entire home for an extended period of time, you’d need to have landlord insurance, as well. Landlord insurance is meant to cover the home itself, as well as any structures that are on the property, such as a garage or shed. These policies typically cover you for losses such as fire or wind damage, but they wouldn’t reimburse you for damage caused by normal wear and tear or for the loss of your tenant’s personal property.

Home Sharing as a Renter

You’ll also need to cover your insurance bases if you’re a renter and subletting to someone else. First things first: You have to be sure that your landlord allows you to sublet. From there, you need to check with your renter’s insurance company to see if your coverage would apply to someone who’s subletting.

If you’re not planning to live in the rental while you’re subletting, the sublessee would need his or her own renter’s insurance. Keep in mind that if the sublessee damages any of your stuff while you’re away, your renter’s policy may not cover it. (For more, see How Renting Out Your Spare Room Can Backfire.)

Which Companies Offer Home-Sharing Coverage?

In response to the growth of the home-sharing industry, a handful of insurance companies are moving toward expanding coverage for homeowners who rent out their homes through Airbnb and similar sites. (For more, see How to Make Money with Airbnb: Risks & Rewards.) Here are four examples.

  • Liberty Mutual Fire Insurance Co. – In October 2016 the company submitted a filing to federal regulators introducing an endorsement expanding its base homeowner’s policy. Currently, Liberty Mutual policyholders can cover short-term rentals up to 31 days, but the new endorsement would allow them to extend that time frame longer.
  • Verisk Analytics ISO Insurance Service Offices Inc. (ISO), a subsidiary of Verisk Analytics, announced new home-sharing insurance options in November 2016. These options are designed to address the unique risks homeowners face when renting their homes online. The coverage includes liability, theft, vandalism and damage to guests’ property.
  • Allstate The company’s HostAdvantage! is specialty coverage that protects your personal belongings when renting out your home. For example, you’d be covered if a renter steals something or if a burglar breaks in while you’re gone. You’d also be covered if a renter accidentally damages your furniture or carpet. It doesn’t, however, offer liability protection. 
  • Airbnb Here you can get something called Host Protection Insurance. This policy provides you with up to $1 million of coverage against third-party claims of bodily injury or property damage. This is different from the Host Guarantee, which offers up to $1 million in coverage for damages to your personal property or the home itself. (For more, see Insurance Tips for Homeowners.

The Bottom Line

It’s vital that you do your research before jumping on the home-sharing bandwagon. If you’re renting out your home on a consistent basis, for example, your insurance company could drop you as policyholder if it considers that to be business activity. Even if you’re renting your home just once, you can’t afford to jeopardize your coverage. Talking to your insurance company about what is and isn’t included in your policy can help you determine what’s needed to fill the gaps.