How to protect yourself when providing or staying in a short-term vacation rental.
Short-term rentals (also known as short-term vacation rentals) are becoming increasingly popular — for homeowners and renters as a way to earn extra income and for travelers as alternatives to hotels. By some estimates, there are over 1 million homes and rooms being rented short-term in the U.S. But this growing industry leaves renters, homeowners, and travelers alike with some questions about insurance. Does homeowners insurance cover you when you rent out your home on Airbnb? What about if you’re a renter, will renters insurance cover you?
Read on to find out about:
Homeowners using their all or part of their primary residence as an occasional short-term rental or short-term vacation rental may be fully covered by their homeowners policy — but they should talk to their insurance company first. The oft-cited reason for the “occasional” allowance is that if there’s a special event in your city, like the Olympics, and you want to make some extra cash by renting out your house, you insurance company doesn’t want to keep you from doing that. But every company’s definition of “occasional” may be different, so you need to find out your company’s specific definition. More importantly: it’s very likely your insurance company will only offer coverage if they’ve been notified first — meaning if you forget to ask and someone trashes your place, your homeowners insurance company could deny your claim and even cancel your policy when they find out you were renting your home at as a short-term rental.
Some companies may offer an additional rider to your policy in order to provide property damage and liability coverage to you while someone else is renting out your home.
If you’re planning on regularly renting out your home or a room in it — that is, more than the once or twice that your insurance company considers “occasionally” — or if you have a home that you’re planning to use exclusively as a short-term rental or vacation rental, it’s very likely that your homeowners insurance policy won’t cover you. The reason? As far as your insurance company is concerned, renting out your home is a commercial endeavor, and homeowners insurance policies don’t cover business activities.
Talk to your insurance company about your options — a landlord policy, which you’d buy in addition to your homeowners policy, may be your best option, though some companies are starting to offer policies explicitly to cover vacation home owners. These policies, called vacation rental insurance or pay-per-use homeshare insurance, cover you both when you are using your home and when you have it rented it.
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Homeowners aren’t the only ones to capitalize on the booming short-term vacation rental market: many people who rent their own homes are opening their rooms, houses, and apartments up to travelers, for a fee.
Renters can face considerably more risk when renting their homes as vacation rentals because many landlords have written provisions into their leases that forbid subletting. If your lease forbids you from subletting your home, or if your city has an ordinance that forbids you from leasing out your home as a short-term rental, your renters insurance company could deny any claim you make stemming from a short-term vacation rental on the grounds that you were breaking your lease (or the law).
Like homeowners insurance, renters insurance doesn’t cover commercial activity, even if your lease and local ordinances allow sublets. When you incur damage or liability caused by a subletter, whether you can file a claim under your renters insurance policy depends on how often you are renting out your home as a vacation rental and how your renters insurance company defines “occasionally.” However, some renters insurance companies do offer riders or endorsements to cover you while home-sharing.
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If you’re renting out your home as a short-term vacation rental through a platform like Airbnb or HomeAway, you may be eligible for some coverage through the respective company. But it’s important to study the amount of coverage you’re being offered and the terms of that coverage. Compare it with your own homeowners or renters insurance policy so you’re aware of any insurance gaps and can best assess your risk.
For example, Airbnb offers its hosts liability coverage called Host Protection Insurance. If a guest gets hurt in your home and sues you, the Airbnb liability coverage would pay for your legal costs so you wouldn’t have to make a claim through your homeowners liability insurance or your renters insurance policy. Airbnb also offers property damage protection. It’s not insurance, but instead a guarantee by the company that if a guest damages your personal property, the company will pay back.
Another thing to think about is whether you are covered when you stay in short-term vacation rentals. If you have a homeowners insurance or renters insurance policy of your own, your personal property is covered, up to your policy’s limits, even when you aren’t in your home. So if you’re staying in a short-term rental and your luggage is stolen, you should be covered. Your liability coverage from your homeowners policy or renters policy also follows you outside the home, so if you accidentally cause any damage to the home you’re in, you’ll also be covered.
Logan Sachon is the co-founder of The Billfold, a groundbreaking personal finance site for millennials that was named one of Time's 25 Best Blogs of 2012. Her work has been published in New York Magazine, Glamour, The Guardian, BuzzFeed and more.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.