Insurance Questions When Renting Out Your Home Short Term
It is increasingly common for homeowners to rent their houses out for a short period of time (less than 30 days) through short-term hosting websites such as Airbnb. While this can be a great way to earn money, it's important to be aware of the all the relevant issues, such as your liability for any injuries someone has while staying at your home, and insurance coverage for property damage or loss. Here are some of the key questions to consider.
Who's Liable for Renter Injuries?
Accidents can happen even in the best maintained homes. If you slip and fall on the stairs in your own house and break your leg, you can probably turn to your health insurance to cover the costs. But what if the same injury happens to one of your renters? If this renter files a lawsuit against you, claiming his broken leg was caused by your negligence in not keeping the stairway properly lit, the cost of hiring a lawyer to defend against the lawsuit will run into many thousands of dollars. And this doesn't include the cost of any legal settlement or court judgment. Will the hosting company pay for all these costs? The short answer is "no." For example, Airbnb, one of the best known hosting companies, states in its website’s terms and conditions that "Airbnb is not responsible for and disclaims any and all liability related to any and all listings and accommodation." So, if there’s a problem, you’re on your own.
While short-term hosting websites like Airbnb and HomeAway do not provide liability insurance coverage to protect you against the type of renter accidents described above, some hosting companies provide limited coverage in the event a guest damages a host’s property (see below).
Does Your Homeowners' or Renters' Insurance Policy Cover Short-Term Rentals?
Your own insurance policy may provide some protection when you're renting out your home on a short-term basis.
If you own your home or condominium, you undoubtedly have a homeowners' insurance policy. Homeowners' insurance provides coverage for damage to or loss of your home and possessions and liability insurance in the event an accident occurs on your property. So, if a renter suffers an injury in your home, and you’re properly insured, your homeowners' insurance company will be required to pay for your defense and any settlement or damages up to your policy limits. However, without insurance, you’ll have to pay all these costs out of your own pocket.
Before renting your home to anyone, you should read your policy carefully. Homeowners’ policies vary from insurer to insurer and from state to state, but they almost always exclude coverage for homeowners who are running a business in their homes. If you earn money by frequently renting out your home to short-term paying guests, your insurer could claim you’re running a hotel or bed and breakfast business and deny coverage if one of your guests has a problem. On the other hand, if you only rent your home occasionally for a few weeks a year, your insurer may provide coverage. This is a bit of a grey area.
Call your insurance company and specifically ask if your policy covers short-term rentals by paying guests. Make clear how often you plan to rent out your home, whether you’ll be at home while renting, and how many people you’ll be hosting. Send a follow-up email outlining your insurer’s answer, and ask for confirmation so that you have everything in writing.
What should you do if your standard homeowners' policy doesn’t provide the coverage you need? If you continue to live in your home and simply rent out a room, you can typically obtain "unit rented to others" coverage by paying extra. This may be all the additional coverage you need. If not, you’ll need to obtain a landlords' insurance policy that provides coverage for short-term guests. Such coverage is more expensive than a homeowners' policy—anywhere from 15% to 25% more, depending on the level of coverage. Contact an insurance broker or agent who handles such coverage.
If you’re a renter, renters' insurance provides coverage in the event your personal possessions are destroyed or stolen, and liability protection if someone is hurt in your dwelling. Your landlords' insurance only covers the building structure, not your personal property or liability. Thus, for example, a renters' policy provides coverage if a guest in your apartment trips and falls and suffers and injury or damages your property.
However, renters' insurance is subject to the same limitations as homeowners' insurance. It ordinarily provides coverage for tenants who have occasional guests, but not for those engaged in the business of renting out their apartments to paying guests.
Who Pays for Property Damage Caused by Short-Term Renters?
What happens if a guest damages your home or your personal property? If the loss is covered by your homeowners' or landlords' policy, you’ll be reimbursed by your insurer.
However, some hosting companies have begun to offer their own insurance or reimbursement plans. For example, Airbnb has a "host guarantee" in which the company promises to pay up to $1 million to a host for property damage. However, Airbnb makes clear on its website that the guarantee is "not insurance," and does not cover cash and securities, collectibles, rare artwork, jewelry, pets, or personal liability. HomeAway offers damage protection insurance of up to $5,000 for an extra fee.
If you are interested in either homeowners insurance or renter’s insurance, please contact WP Dolle at www.wpdolle.com or 513-421-6515.