What You Need to Know About Airbnb & Short-Term Rental Insurance
The popularity of short-term rentals has blown up in recent years as they are an excellent way for guests to find incredible deals on overnight stays, extended vacations and large group rentals. In addition to the savings, many guests prefer short-term rentals over traditional hotels because they generally feel roomier or more luxurious. Access to amenities like a full fridge and stove is especially beneficial and budget-friendly for extended short-term stays.
As such, many Canadians looking to make some additional money are turning their homes into short-term rentals, thanks to websites such as Airbnb, VBRO and HomeAway. However, with the extra cash comes extra risks. And it’s likely that the one won’t outweigh the other. Therefore, short-term rental owners need short-term rental insurance to safeguard their homes from the new risks they face by hosting temporary guests.
Insurance Coverage Options
The key to Airbnb & short-term rental insurance is putting together an insurance portfolio that includes explicit protection for your business. While short-term rentals can be a fantastic source of extra income, opening your home to strangers also opens you up to various risks that could cost you thousands of dollars in legal fees or repairs and replacements. This is where having a comprehensive Airbnb & short-term rental insurance policy comes in.
What is Airbnb & short-term rental insurance?
Airbnb & short-term rental insurance is insurance that is tailored to meet the unique needs of homeowners and landlords who rent their property short-term. It protects them from industry-related risks, such as damages, losses and injuries.
Each insurance company defines the length of a short-term rental differently, but generally, it describes rentals of up to six months.
Why do I need Airbnb & short-term rental insurance?
Many owners of short-term rentals need to be made aware that their personal home insurance does not include coverage for income property. As your home has now become a commercial business property, you need different coverage to ensure that you are protected should a guest file a third-party claim or damage your home.
If you plan to rent your home to short-term guests, your standard home insurance policy won’t offer the right protection to you as the renter. Even if you are just planning to rent out a single room within your home, it instantly changes the terms of your home insurance contract.
If you haven’t informed your insurance provider yet, you’ve likely voided your contract already by not disclosing the occupancy change. As such, your provider can deny any claim you make because you misrepresented the occupancy of your home — a major breach of your policy conditions. To avoid this situation altogether, talk to your insurance provider as soon as you decide to rent that you want to your home short-term.
Adding on short-term rental insurance will protect you and extend your homeowner insurance to include financial coverage for property damage, theft, or vandalism caused by your guests or tenants. Some examples of short-term renting include:
Listing your property on Airbnb, VBRO, HomeAway and other short-term rental websites
Renting out your home while on vacation
Renting out your cottage or vacation home when not in use
Renting out a room in your home
Renting out your condo or apartment while you’re out of town for an extended period of time
Doesn’t the short-term rental platform I am using cover me?
Short-term rental platforms do offer coverage, but it’s not necessarily enough to financially cover all liability claims and damages you could face. For example, Airbnb offers its own host protection insurance that covers up to $1 million in the event of third-party claims, such as bodily injury to your guests and damage to your rental or your neighbour’s. They also have host guarantee protection which covers up to $1 million in property damage, safeguarding hosts against damage to their home and possessions by guests/renters.
And sure, while $1 million in coverage sounds like it would be more than enough, what if a short-term renter accidentally sets fire to your home and burns it down? Is that enough to replace your home and all of your possessions? Or what if they injure themselves severely by falling down a flight of stairs because of a loose step or unsecured railing? Would that be enough to cover their medical bills? Furthermore, could you afford to cover their loss of income? As that isn’t part of host protection, should your guest be off work for an extended period, you would be responsible.
And that’s just what Airbnb offers. Other sites like VRBO only provide $1 million in liability protection, meaning you are on the hook for any damages to your property.
Either way, keep in mind that none of what these hosting sites offer replaces actual home insurance. You still need that, regardless. Their protection only acts as supplemental insurance for your guests.
What risks do Airbnb & short-term rental owners face?
Between home repairs, legal fees, settlements and property or contents replacement, short-term rental owners’ costs sure add up quickly. All of these fees can quickly extend beyond the hosting site’s own insurance coverage, requiring you to pay out of pocket for the rest. One nasty legal battle could send you quickly into financial ruin.
Here are some short-term rental risks to consider:
The increased possibility of significant damage to or theft of your property
The very limited screening process for guests
You cannot guarantee your income
Not everywhere allows short-term rentals
Someone may rent your property for illicit reasons
You could upset your neighbours
Is Airbnb & short-term rental insurance mandatory?
No. Within the province of Ontario, home, condo and tenant insurance are not required by law.
However, even though it is not required, having Airbnb & short-term rental insurance is highly recommended and beneficial. After all, your home is more than just temporary accommodation for guests while you’re away. Short-term rental insurance protects your home, condo, or secondary property and the contents inside. It also covers any detached structures, such as a shed, and their contents as well.
Also, hosting sites like Airbnb and VRBO strongly encourage you to have your own insurance and not rely on theirs alone.
What does Airbnb & short-term rental insurance cover?
Commercial General Liability Insurance
Commercial general liability protects you, your business and your employees from legal liability against third-party bodily injury or property damage claims that occurred at your business. This policy covers the costs of medical bills, legal fees, and repairs or replacements and also protects you against any advertising and reputational injuries (e.g., slander, libel, copyright infringement).
Commercial Property Insurance
Commercial property insurance protects your business and the contents inside (e.g., equipment, files, inventory, etc.) by covering the financial loss from such perils as:
Property damage due to natural disasters, flood, fire, vandalism or theft.
Property damage or theft of electronics, equipment, company documents or employees’ personal belongings.
Inventory theft by employees.
Commercial property insurance can also include business interruption, which protects your business should you be unable to work due to an illness or injury and have to shut it down temporarily. This also helps offset ongoing costs from income losses, such as bills, employee wages, etc.
Property managers store a lot of confidential information regarding their tenants. Most information these days is stored electronically, which opens you up to the risk of cyberattacks. Cyber and privacy liability insurance protects your business by covering damages and legal claims if your customers’ personal information is leaked or stolen due to a data breach, ransom attack or theft. It can also cover the costs of any necessary network repairs after a breach or ransom attack.
What other coverages should property managers consider adding to their insurance policy?
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance, is absolutely essential for any business offering a service. It is the most important coverage for you to have. It protects your business against claims of misconduct, negligence, failure to deliver a service or inadequate work. Professional liability covers:
Errors, mistakes and oversights
Failure to meet deadlines
Failure to deliver your product/service as advertised
Equipment breakdown insurance covers financial costs for equipment that need repairs or to be replaced due to internal damage. While you have some coverage for external event damage under commercial property insurance, this policy covers internal damages, such as power surges, motor burnout, electrical shorts, operator errors and mechanical breakdowns. It covers a broad range of equipment that is crucial to operating your business, including the following:
Hot water boilers
Heating and cooling systems
Electric power distribution systems
Get an Airbnb & Short-Term Rental Insurance Quote Today
With the right insurance coverage for your short-term rental property, you can rest assured no matter what unforeseen event you have to face. Let Insurance Hero help manage your risk and insurance costs by conducting a full commercial insurance policy review to determine what kind of coverage is best for you!
For reliable, affordable Ontario Airbnb and short-term rental insurance, please request a quote online or give us a call at 1-855-777-4376. Our team of Insurance Heroes is happy to answer any questions you have!