Renting your home can be lucrative, but your homeowners policy may not automatically cover home sharing. Before you open your home to temporary guests, protect your property against damage and yourself against personal liability claims with the right insurance coverage . (For more, see The Pros and Cons of Using Airbnb.)
Homeowners Insurance and Home Sharing
Homeowners insurance generally covers 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.)
With 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 to generate income, the insurance company generally views that as business activity, which is not covered 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'll need landlord insurance, as well. Landlord insurance covers 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 won'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 personal belongings 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. – Liberty Mutual policyholders can extend their current policy if you share your home for more than 31 days.
- Verisk Analytics ISO – Insurance Service Offices Inc. (ISO), a subsidiary of Verisk Analytics offers options 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. The company doesn’t, however, offer liability protection.
- Airbnb – Airbnb offers 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.