2019/06/27
KBD Insurance

Important Tips for Renting Out Your Home Through Airbnb and Similar Platforms

Online services like Airbnb have changed the way we travel abroad in terms of our “hotel” stays. I’ll bet there’s a solid chance that the last time you traveled, you stayed at someone else’s home / condo that you rented through the Airbnb platform, and if you didn’t, I’m sure that you at least took a look on the app! Renting someone else’s home instead of paying for a hotel is a great way to save money and to have a completely different experience when traveling the world or different parts of the country that you reside.

If you are a condo owner or a home owner planning on renting out your home on a short term basis through a platform like Airbnb or similar service, other wise referred to as becoming a “host”, today’s BLOG is for you; we’re going to look at how you need to insure your condo unit(s) or home(s), and give you some other great tips along the way.

Insurance is a major component when using these services, and it will protect all parties involved in a stay if something happens to go wrong, such as a fire occurring, or a guest that hurts themselves. We have to keep in mind that there are three parties involved in every stay: the guest, the host, and the platform service provider (Airbnb). Due to the fact that there are more than two parties, it can sometimes be difficult for insurance companies to determine who exactly is at fault in the event of a claim, which is why every party involved should have their own insurance policy.

With regards to a “guest” having insurance in the event of an accident whereby they accidentally cause damage to the host’s property, a little FYI, their personal home or renter’s insurance package through KBD Insurance would cover the loss 😉. We’ll save the exposure that is present for the “guest” for another BLOG post though!

So, back to how insurance works as an Airbnb host: For starters, you will most certainly need to have your own insurance policy that covers your unit in the event that something goes wrong, both during the time you have guests and when it’s not rented out. Finding the right insurance can be difficult for people who use “peer-to-peer” or “sharing economy” websites to rent out their building(s) and/or unit(s); in fact, most insurance companies will refuse to insure a situation like this (not here at KBD though!).

If you rent out your unit on a short-term basis (you’re an Airbnb host), here are some important tips that are not related to insurance, but have more to do with certain rules and regulations that you will need to abide by:

Short-Term Basis Definition → In the eyes of insurance companies, a short-term lease is when you rent out your unit/building for any period less than one year, even if it’s not rented out through a “peer-to-peer” platform.

Permits → Depending on the city where you live, you will most probably need to purchase a permit with the city in order to rent out your unit through platforms like Airbnb. If you are renting out your space “illegally” without a permit, insurance companies may refuse to pay out a claim if anything goes wrong during the stay of an Airbnb guest.

Condo by-laws → Many condo syndicates prohibit short-term rentals of the units in their building. Before renting out your unit in a condo building, check the by-laws or consult with a member of the board to make sure that this is allowed. Not only could you potentially be fined for violating the rules, if ever a renter were to cause damage to the building your liability insurance might not cover the damages and you would be forced to pay out of pocket.

Airbnb does not insure your personal belongings → Contrary to popular belief, when you rent out your unit using a website like Airbnb, they do not cover your personal belongings. Some of these websites will give you what’s called “host protection insurance” which may cover your liability in the event you are involved in a lawsuit with a guest, but does not cover any direct damage to your property. All of this to say, it’s very important that you have your own personal insurance policy when renting your unit through these platforms as many exclusions apply to the “master” policy provided by Airbnb or similar companies.

Don’t assume your current insurance policy covers short-term rentals → If you are renting out your home to Airbnb guests, you most certainly need to inform your insurance company. Insurance companies can refuse to pay your claim in the event an accident transpires at your house caused by an Airbnb guest; make sure that you disclose all the facts. If your current insurance company does not cover this type of risk, you’ll need to find one that does (like KBD) to make sure that you are covered.

Now, let’s take a look at what type of insurance you need to have if you are an Airbnb host or if you are simply planning to rent out your building on a short-term basis.

Liability insurance → Arguably the most important protection that you can have in terms of building insurance, this protection provides coverage in the event that you or your building cause third party property damage or bodily injury to a third party (your guest). In the event that you are dragged into a liability claim arising from a guest’s stay at your home, you can have the peace of mind that you are covered up to $1,000,000. Even if you have the “host protection insurance” provided through your rental platform, it’s important to have your own liability policy if ever a claim were to be excluded on the platform’s policy.

All Risk Building Policy → The bulk cost of your insurance premium comes from the insurance on your building. Here are some of the main perils that you should have insured for your rental property, both during the time it’s rented out and when you are using it yourself:

Your contents / personal belongings → Whether you are renting out an entire home or a condo unit, you will need coverage for the furniture and personal belongings in it. If a guest causes damage to your personal property during their stay, this is not covered under the Airbnb policy. We will insure you for damage your guest could cause, as well as the perils listed above.

Rental Income → If your home is uninhabitable due to an insurance claim, you will be losing out on future rental income; KBD can protect this revenue stream.

To conclude, if you are a “host” on Airbnb, you need to have your own insurance policy that is tailored to this specific scenario to make sure that you are properly covered in the event of a claim. Do not assume that a platform like Airbnb, Homeaway, VRBO, or Sonder automatically covers all of your insurance exposure, because they don’t.

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