In 2011, “EJ” arrived home from vacation to find her beautiful condo trashed and ransacked. Her furniture had been destroyed, her clothes had been ruined, priceless family photos were scattered around and her passport and heirloom jewelry had been stolen. The culprit? Her Airbnb guest.
At that time Airbnb didn’t offer any host coverage, but agreed to help “EJ” when the story went viral. Airbnb now offers hosts avenues of reimbursement for lost or stolen items, though one could hardly call it “insurance.” Airbnb has recently added a Host Protection Insurance under a “general commercial liability policy.”
Is this coverage enough? We did some digging:
Forget your homeowners insurance
Homeowners coverage is not for businesses. The Homeowners 3 — Special Form (HO 00 03 10 00)* lists several definitions that homeowners should consider before hosting through Airbnb:
- Business. The policy defines “business” as a trade, profession or occupation engaged in either full-time, part-time or occasionally, or one or more activities for which an insured receives no more than $2,000 in total compensation for the 12 months prior to the beginning of the policy period. This is sweeping language that covers a multitude of businesses, including innkeeper.
- Insured. Insureds are “you and residents of your household that are your relatives or are under the age of 21,” and in the care of anyone previously named, as well as students under age 24 attending school full time who were residents of the household prior to leaving for school. Not an insured: nonresident, nonrelative vacationing tenants.
- Insured location. The insured location is the residence premises (the dwelling where you reside), the part of the premises used by the insured as a residence. If the location is not being used by you as a residence, it is not an insured location.
On an Airbnb forum, several hosts report their insurance carriers advise purchasing commercial coverage for business operations (at significantly higher premiums). Others report carriers sending out cancellation notices when they find out rental operations are being carried out on the insured premises.
*Different insurance companies use different forms. Consult your policy or insurance broker to find out more.
'Host guarantee' or property problem?
Vacation rental homes are often tastefully appointed. Personal furnishings would be covered under the Homeowners policy unless the home is being used as a business.
Airbnb offers a type of Host Guarantee “coverage” (at no additional charge) with a limit of $1 million for property damage. There are reasons why you might not be getting what you pay for with this “coverage”:
- Prior to contacting Airbnb for reimbursement, the homeowner must attempt to resolve the property damage issue with the guest.
- The damage must have occurred during the booking period. Damage occurring before or after the booking period is not covered.
- The host must be in compliance with all requirements of the Airbnb contract prior to the loss.
- The damage must be reported within 14 days.
- Payout may be actual cash value on some items, rather than replacement cost.
- Not covered: cash, securities, pets, personal liability and common areas.
Should a guest cause property damage or theft, many exclusions in the Host Guarantee expose the host to monetary losses. Out of pocket could easily be higher than the rental fee.
The mystery of host protection insurance
In January 2015, Airbnb introduced Host Protection Insurance (HPI). This insurance is described as “coverage of up to $1,000,000 per incident for Airbnb hosts in the US...if a guest is accidentally injured anywhere in a host’s building or property during a stay.”
That description and the program summary leave the host with more questions than answers. A few gaps:
- Coverage is limited to $1 million per occurrence; $2 million per location. The policy aggregate is $10 million for all insured locations in the U.S. Shared limits are not your friend.
- Coverage is in excess of any other available coverage. The host must submit the claim to his Homeowners insurance and the claim must be denied by that company before Airbnb’s insurance will pay. Presumably, the Homeowners insurance may also be cancelled for business use.
- The summary document lists these other “key” exclusions: (1) intentional acts (of the host or any other insured party), (2) loss of earnings, (3) personal and advertising injury, (4) fungi or bacteria, (5) Chinese drywall, (6) communicable diseases (7) acts of terrorism, (8) product liability, (9) pollution, (10) asbestos, or lead or silica, and (11) insured vs. insured (i.e., host sues Airbnb or vice versa).
- The coverage is limited to an actual stay, not a booking. No show — no coverage. Overstay or early arrival? No coverage.
The scary reality
The HPI page states, “If you'd like more details on what's not covered under the Host Protection Insurance program, please contact us.” We reached out, and Airbnb customer service directed us back to the HPI page and stated they “do not have any further documents to provide with this.”
The HPI page indicates this coverage is for guests who might be injured or sickened while staying in the host’s home. What coverage is there for the host beyond that?
What if a guest breaks into the host’s gun safe, steals guns and goes on a crime spree? Is there coverage for the host from any ensuing lawsuits? Probably not.
What if a guest burns down an entire condo building worth $2.5 million? Even if there is coverage for this scenario, anything beyond the initial $1 million offered by HPI would be the responsibility of the host. If the host’s Homeowners policy declines to cover them, so will the host’s personal umbrella policy.
Vacation rental websites like Airbnb are doing their best to protect themselves by offering what looks like insurance to their hosts. But hosts are shouldering a lot of risks with limited protection.
So before you sign up or rent your home again, you may want to think twice. The bottom line appears more red than green.
Galen Hayesis president of El Sobrante, Calif.-based Hayes Insurance, which focuses on hard to place risks.