In 2011, “EJ” arrived home from vacation to find her beautifulcondo trashed and ransacked. Her furniture had beendestroyed, her clothes had been ruined, priceless family photoswere scattered around and her passport and heirloom jewelry hadbeen stolen. The culprit? Her Airbnb guest.

At that time Airbnb didn't offer any host coverage, but agreedto help “EJ” when the story went viral. Airbnb now offers hostsavenues of reimbursement for lost or stolen items, though one couldhardly call it “insurance.” Airbnb has recently added a Host Protection Insurance under a “general commercialliability policy.”

Is this coverage enough? We did some digging:

Forget your homeowners insurance

Homeowners coverage is not for businesses. The Homeowners3 — Special Form (HO 00 03 10 00)* lists several definitions thathomeowners should consider before hosting through Airbnb:

• Business. The policy defines “business” as atrade, profession or occupation engaged in either full-time,part-time or occasionally, or one or more activities for which aninsured receives no more than $2,000 in total compensation for the12 months prior to the beginning of the policy period. This issweeping language that covers a multitude of businesses, includinginnkeeper.
• Insured. Insureds are “you and residents ofyour household that are your relatives or are under the age of 21,”and in the care of anyone previously named, as well as studentsunder age 24 attending school full time who were residents of thehousehold prior to leaving for school. Not an insured: nonresident,nonrelative vacationing tenants.
• Insured location. The insured location is theresidence premises (the dwelling where you reside), the part of thepremises used by the insured as a residence. If the location is notbeing used by you as a residence, it is not an insuredlocation.

On an Airbnb forum, several hosts report their insurancecarriers advise purchasing commercial coverage for businessoperations (at significantly higher premiums). Others reportcarriers sending out cancellation notices when they find out rentaloperations are being carried out on the insured premises.

*Different insurance companies use different forms. Consultyour policy or insurance broker to find out more.

(Photo: Thinkstock)

'Host guarantee' or property problem?

Vacation rental homes are often tastefully appointed. Personalfurnishings would be covered under the Homeowners policy unless thehome is being used as a business.

Airbnb offers a type of HostGuarantee “coverage” (at no additional charge) with a limit of$1 million for property damage. There are reasons why you might notbe getting what you pay for with this “coverage”:

• Prior to contacting Airbnb for reimbursement, the homeownermust attempt to resolve the property damage issue with the guest.
• The damage must have occurred during the booking period. Damageoccurring before or after the booking period is not covered.
• The host must be in compliance with all requirements of theAirbnb contract prior to the loss.
• The damage must be reported within 14 days.
• Payout may be actual cash value on some items, rather thanreplacement cost.
• Not covered: cash, securities, pets, personal liability andcommon areas.

Should a guest cause property damage or theft, many exclusionsin the Host Guarantee expose the host to monetary losses. Out ofpocket could easily be higher than the rental fee.

(Photo: Thinkstock)

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 isaccidentally injured anywhere in a host's building or propertyduring a stay.”

That description and the program summary leave the host with more questionsthan answers. A few gaps:

• Coverage is limited to $1 million per occurrence; $2 millionper location. The policy aggregate is $10 million for all insuredlocations in the U.S. Shared limits are not your friend.
• Coverage is in excess of any other available coverage. The hostmust submit the claim to his Homeowners insurance and the claimmust be denied by that company before Airbnb's insurance will pay.Presumably, the Homeowners insurance may also be cancelled forbusiness use.
• The summary document lists these other “key” exclusions: (1)intentional acts (of the host or any other insured party), (2) lossof earnings, (3) personal and advertising injury, (4) fungi orbacteria, (5) Chinese drywall, (6) communicable diseases (7) actsof terrorism, (8) product liability, (9) pollution, (10) asbestos,or lead or silica, and (11) insured vs. insured (i.e., host suesAirbnb or vice versa).
• The coverage is limited to an actual stay, not a booking. Noshow — no coverage. Overstay or early arrival? Nocoverage.

(Photo: Thinkstock)

The scary reality

The HPI page states, “If you'd like more details on what's notcovered under the Host Protection Insurance program, please contactus.” We reached out, and Airbnb customer service directed us backto the HPI page and stated they “do not have any further documentsto provide with this.”

The HPI page indicates this coverage is for guests who might beinjured or sickened while staying in the host's home. What coverageis there for the host beyond that?

What if a guest breaks into the host's gun safe, steals guns andgoes on a crime spree? Is there coverage for the host from anyensuing lawsuits? Probably not.

What if a guest burns down an entire condo building worth $2.5million? Even if there is coverage for this scenario, anythingbeyond the initial $1 million offered by HPI would be theresponsibility of the host. If the host's Homeowners policydeclines to cover them, so will the host's personal umbrellapolicy.

Ouch.

Vacation rental websites like Airbnb are doing their best toprotect themselves by offering what looks like insurance to theirhosts. But hosts are shouldering a lot of risks with limitedprotection.

So before you sign up or rent your home again, you may want tothink 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.

Related: 6 things to know before signing up with ahome-sharing rental site