09 May Covering Your Bases With Airbnb Liability Insurance
Do you ever worry that your current Airbnb liability insurance coverage is not enough to protect your property? Are you new to Airbnb and don’t even know where to start?
Thinking of all the ends of having a new business can seem overwhelming at first, but here is how I handle my Airbnb listings.
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Dealing With Airbnb Liability Insurance Complications
It’s hard to know if you’ve covered all your bases until you go to file a claim and find out that it’s well, not entirely up to par. But there has to be a better way!
Recent statistics have shown that seven percent of renters and homeowners ever actually file a claim. While a necessary evil for anyone that owns a property, you may find yourself not covered at all!
In the past renter’s or homeowner’s insurance has been able to rightfully deny claims involving guests, even if you are covered! What’s this all about?
They’re Kind Of All Alike…
Currently, all of the major insurance companies have similar forms for their clients to fill out. These have all been developed and created by the ISO or International Organization for Standardization. While the forms have differed over time, some overall concepts remain the same.
All of the different policies available happen to carry a “Business Pursuit Exclusion.”
What Is A Business Pursuit Exclusion?
A business pursuit exclusion, or a business activity exclusion, pretty much means that if you have a claim involving a business, it will be denied under your renters or homeowner’s insurance form. Insurances claim that these forms are for the occasional report for your residential purposes.
I suppose that the main problem and the way that companies can get away with this is the definition of a residence. Going by the books, a residence is a permanent dwelling where someone stays for an extended length of time. However, when someone rents on Airbnb this is for a day, weekend, or a few weeks at most. It’s anything but a permanent type of residence.
When you go to rent out a listing on Airbnb, even if it’s the whole place, it is as a short-term stay. You are not changing your current address or sending your mail there. You’re not paying rent for the entire year. The host is the one who collects your money and rents the location out, no different than how a hotel functions.
How Do Hotels Get Away With It?
Instead of getting renters insurance or a homeowners policy, a hotel business will purchase a business insurance policy. However, this policy is expensive. It is no way designed to cover a homeowners insurance nor should you try to replace it.
The biggest problem with the insurance companies is that they see short-term rentals as opportunities for high amounts of risk. Which, honestly, is somewhat accurate. When someone books your listing on Airbnb, you’re never sure who you’re going to get. 99.5% of the time, nothing will happen, but it’s that .05% of the time where your STR insurance will protect you. That’s why it’s vital to leave honest reviews.
All in all, this boils down to your Airbnb liability insurance not protecting what you need it to because the company sees you as a commercial opportunity within a home.
Is My Rental A Business?
Yes. Even if you rent out the place once per month, you’re still making income. In the recent years, there has even been an influx in the number of cities that require short-term rental owners to pay for and eventually carry a type of business license. These are usually more prominent cities and locations, such as Santa Barbara, Chicago, and Austin.
With these changes have also come to a change in tax codes. Short-term rentals in these locations and others are required to file a business Schedule C on their yearly taxes for income. San Francisco, for example, requires short-term rental owners of thirty days or less to pay the city a 14% hotel tax along with $500,000 in any type of Airbnb liability insurance. Crazy, right?
Another thing to be aware of is that landlord policies do not cover short-term rental spaces. They also hold the exclusion claiming that a long-term rental is not a business. The difference between this is that if a renter is living in a home for three months, slips, and falls – it lies on the renter to be covered by their own insurance for the accident. However, if someone slips and falls after living their one week because the place isn’t clean you can bet that the responsibility falls on the owner.
Who Can Help You Get Proper Coverage?
Honestly, there’s no right answer for this. Trying to figure out if you’re legally covered is a hassle of jumping through unnecessary bureaucratic hoops. Contact your current insurance company and see what their policy is on short-term rental or Airbnb coverage. Each company works differently how they’re able to handle rental opportunities.
When push comes to shove, do your research, ask questions, and be smart about your Airbnb liability insurance. The last thing you want is an accident. This is for your sake, and for any of your future guests.
The best way to guard yourself, next to getting liability insurance, is to clearly communicate with your guests. Meet with your guests and make sure that house rules are clear ahead of time.
But Are There Experts?
There are actual insurance companies that focus on short-term vacation rental property insurance because of the rising trend in Airbnb rentals and independent renters. Some great examples of this that I would personally recommend is Proper Insurance and Slice.
Proper Insurance offers a five-minute online quote and is specifically developed for short-term vacation rental properties such as townhomes, duplexes, cabins, apartments, your own personal home, and more! If you’re looking to replace your landowners or homeowners insurance this is just one of the many possible options. They currently have coverage in all fifty states.
Slice is another insurance company that focuses on both homeshare and rideshare insurances. Even Uber and Lyft drivers aren’t necessarily covered by their auto insurances for unruly passengers. One of the best features about Slice is that you only pay for the days the guests stay, or the days that you want coverage! It truly allows for a customizable experience.
One more thing that I think is truly worth mentioning is that Airbnb does have a $1,000,000 Host Guarantee. Every booking you make through Airbnb is protected by them at no additional costs. However, make sure that you take a look at the page into what is covered by Airbnb and what isn’t. For example, any shared or common areas within the house or the loss of certain items aren’t protected.
Do You Have Airbnb Liability Insurance?
If you think that you have a great system set up for your Airbnb liability insurance, write down in the comments section below. I love to hear what works best as well as get input on how others handle their unique situations.