Is your Airbnb insured like a business?

A commercial package is bigger than the sum of your homeowners insurance, Airbnb Host Protection and the Host Guarantee.

Being an Airbnb host is more similar to running a cafe or a yoga studio than one might think.

“If you own a home, you’re dealing with business and you’re dealing with the risks. It’s pretty much simple risk and reward,” said Milo Chan, a Chicago restaurant owner and part-time Airbnb host who is considering selling the restaurant and becoming a full-time host.

As small business owners, hosts should insure their Airbnb listings as such, he says. For the two units he owns, he switched from homeowners insurance to a vacation rental-specific commercial package provided by CBIZ, for which he pays up to $800 annually per unit.

Many hosts find Airbnb’s free insurance solutions appealing enough. We recently dissected Airbnb’s Host Guarantee that covers up to $1 million unintentional property damage caused by guests. In 2014, the platform also introduced the Host Protection Insurance, a $1 million commercial general liability policy to shield hosts against third-party claims of bodily injury or property damage.

But for Chan, Airbnb’s offerings are only for “mental security,” and the commercial insurance he owns is “significantly more comprehensive.”

Another advantage of commercial insurance is that hosts are the “named insured,” which gives them full policy right defined by the insurance contract, and the carrier legally must defend them, says Tony Melillo, sales manager of CBIZ’s vacation rental program. Ultimately, he points out, Airbnb is a technology company that is more interested in bookings than insurance claims.

The fine print on commercial insurance options

Parsing through documents
Parsing through the policies

CBIZ’s package covers both the property and commercial liability. On the property side, it covers everything that a typical homeowners insurance policy would, including wind, hail and hurricane to theft, fire and vandalism, Melillo says.

The commercial liability coverage includes amenities such as pools, docks, lakes, hot tubs, bikes and gym equipment. It also covers human injuries caused by pets on the property. Overall, the policy covers $1 million in general liability per occurrence and up to $2 million in total per year, Melillo says.

Prosper, another big name in the short-term rental insurance market, offers a commercial package similar to the CBIZ policy that is designed to “fully replace” hosts’ current homeowners insurance, says Michael Grimland, the company’s sales and marketing manager.

“If you own a home, you’re dealing with business and you’re dealing with the risks. It’s pretty much simple risk and reward.”

Milo Chan, Airbnb host and local restaurant owner

“The majority of short-term rental hosts in the U.S. are inadequately insured or underinsured,” Grimland said. “Ultimately, the responsibility falls on the hosts or the owner of the property to correctly insure their residences.”

Almost every standard homeowners insurance has a “business activity exclusion” clause to make sure owners are not doing any business in their unit, Grimland says, but when people earn money from rental platforms, they are inherently running a business.

Proper’s commercial package policy replicates everything included in a regular homeowners insurance, such as building and content protection, Grimland says. It also covers income loss caused by property damage.

For people considering to become hosts, Grimland suggests they consult with insurance companies to make sure their properties can be covered for home-sharing. For instance, older homes or properties with aluminum wiring might be difficult to insure, he says, and homeowners need to confirm their buildings are insurable by comparing multiple policies.

If something is not written in the insurance contract, it will not be covered — so hosts should carefully read through the terms, he says. They should also send specific questions to agents and get written confirmation before making any decisions.

Growing market, limited offerings

Limited choices on coverage
Insurance options are sparse

The growing number of vacation rentals provides rich ground for more insurance options, but Grimland says few policies are comprehensive enough to be worth people’s time and money.

Some carriers are catching up by adding vacation rental endorsements to their homeowners policies. AllState introduced HostAdvantage Home-Sharing Insurance to protect hosts from theft and damage, but hosts must already have primary homeowner insurance with the company.

However, most of these endorsements only apply to the primary residence and not to secondary or vacation homes, Grimland adds, and there’s no protection for business income. If a guest vandalizes the home or causes smoke damage, these policies won’t pay out for the income loss during the remediation period, he says.

“Ultimately, the responsibility falls on the hosts or the owner of the property to correctly insure their residences.”

Michael Grimland, CBIZ

The reality is many hosts have faced problems dealing with big insurance carriers — even inquiring about vacation rentals can get them dropped from their homeowners insurance, because these carriers are often risk-averse to potential issues around home-sharing.

Alexis McDowell, a Chicago-based lawyer, says legacy insurance companies base everything they do on risk, so the natural inclination is to shy away from new things like Airbnb and Uber. But she says they should update their policies to capitalize on the sharing economy, because the market demand will only continue to grow.

“[As] more people are looking for additional kinds of income, it’s in their interest to embrace it,” she said. “That’s not just where the future is…we’re here now.”

Additional Resources

  • Have your burning insurance questions answered by Darren Pettyjohn, co-owner of Proper.
  • Supermoney has an in-depth guide on which carrier to choose.
  • Want to hear some insight about home-sharing insurance from the biggest home insurance companies? The New York Times has you covered.
  • Here you can find a breakdown of different types of vacation rental insurance policies for homeowners and travelers alike.
  • Check out this insight report by National Association of Insurance Commissioners

Allstate HostAdvantage® Home-Sharing Insurance – The Host HQ Listings

Theft: help protect you if your belongings are stolen while renters are staying in your home. Damage: If a renter were to accidentally damage personal property, like your TV, HostAdvantage can help cover what your home insurance doesn’t, up to $10,000 per rental host period.

CBIZ Insurance – The Host HQ Listings

Our coverage includes: Replacement cost coverage for your buildings and contents Includes damage caused by a guest Loss of use and extra expense coverage when owner-occupied Loss of rental income following an insured property loss Liability coverage which extends to amenities such as pools, docks, lakes, hot tubs, bicycles, exercise equipment, small watercraft and pets

Proper Insurance – The Host HQ Listings

Short-term rental insurance

Slice Home-sharing Insurance – The Host HQ Listings

Customized coverage designed to protect the particular risks you face as a home-share host including vandalism, malicious damage and water damage at full policy limits.