There are more than 150M Airbnb users around the world. They are housed by 640,000 hosts who share opportunities on 4M listings. The company value of Airbnb is around $31B.
Airbnb is a big business and growing more each day. Regardless of whether you’re already a host or thinking about getting started, there are a few things you need to know about liability insurance coverage.
Understanding that the average income from an Airbnb rental is about $14K/year, you may want to think twice before dipping your toe into the Airbnb sandbox. When weighing the risks of liability exposure with the benefits of generating income, here are some things you should keep in mind.
Several initial questions include:
What will happen if someone is seriously injured on your Airbnb property?
What if a criminal act takes place on your Airbnb property?
The answers to these questions and more are shared below.
What You Need to Know About Host Protection Insurance (HPI)
Airbnb now offers hosts (you) insurance. It wasn’t always that way.
In the United States, you are covered with up to $1M in liability insurance if a guest is injured on your Airbnb property. This may also cover accidental loss to surrounding property (a guest lets the bathtub overflow causing water damage to the wood floors in the apartment below). The HPI is applicable in the US but also applies to a Airbnb properties in several other countries.
What’s Not Covered and Exclusions
Often the Airbnb HPI coverage will not cover losses caused or experienced by people who arrive early or depart late. Your own personal liability insurance will apply, if you have it.
Pro Tip: Check with your insurance provider to make sure your homeowner or umbrella coverage will cover you if the Airbnb does not.
Also note that the Airbnb master insurance policy covers $1M per occurrence, $2M per location, and $10M annually for all combined claims. If a serious claim has a value of these limits, then you are personally responsible.
Often, for the Airbnb HPI coverage to apply, you must first submit the claim to your insurance carrier. Once it’s rejected, then the Airbnb HPI will cover the loss.
What do you think happens when there’s a dispute between your personal insurance carrier and the Airbnb HPI coverage provider? The lawyers brings actions against each other to determine what coverage applies and which company pays the claim. If this happens, the Airbnb HPI coverage does not provide you with benefits to cover your attorney fees and litigation expenses.
There are key exclusions to the Airbnb that you need to know about. What’s not covered include, but are not limited to (1) intentional and criminal acts; (2) loss of earnings; (3) product liability; (4) asbestos or lead poisoning claims; (5) acts of terrorism; (6) communicable diseases and several other exclusions. The thing to keep in mind is to make sure that what isn’t included in the Airbnb coverage is included in your own homeowner or umbrella liability policy.
If you’re engaged in a business pursuit, then the Airbnb HPI coverage may not apply. This happens when you purchase a property to rent it out or listing it on Airbnb. The business pursuit exclusion also applies in dozens of other instances. The take-a-way is to independently purchase a business coverage policy from your insurance carrier to provide extra protection.
Another issue many hosts don’t take into consideration is what’s known as the squatter exception. The laws are different in each state but in California, if you “rent” a space for 30 days, then that person is considered a month to month tenant. If you then want that person to leave, formal eviction steps must be taken under California law and independent of any Airbnb contracts. Evictions in California can take four to six months. The law is similar in other states.
Please reach out with any questions. Also, keep in mind that the Airbnb laws are constantly changing and may be different in each state and country around the world.
Contact an experienced lawyer in your state with any questions. Also make sure to discuss all insurance coverage options, and exclusions, with your insurance company.
“Is Renting Your Home on Airbnb Illegal? Maybe.” by Cory Rutz, Esq.