It’s undoubtedly a good way to generate extra income, but renting out your mountain or lake home – and even your primary residence – through Airbnb, VRBO or any other service carries some serious risks.
There’s the risk of violating municipal code, for starters. The city of Denver, for example, doesn’t allow you to rent out a home that isn’t your primary residence. It initiated a crackdown against people suspected of running illegal short-term rentals earlier this year and has made a handful of arrests.
More commonly, too many vacation home landlords assume all kinds of risk by failing to have the right kind of insurance policies in place for their rentals.
Although Airbnb and other peer-to-peer home rental platforms include insurance coverage to protect landlords, their policies include exclusions and limitations galore.
Airbnb, for example, provides free host protection insurance, which covers liability claims up to $1 million if a guest sues a host for bodily injury. But its policy does not cover the host’s house.
For that, Airbnb provides a free “host guarantee” that covers up to $1 million in damage to the host’s home or property caused by a guest. But Airbnb itself states that its guarantee “should not be considered a replacement or stand-in for homeowners or renters insurance.”
Problem is, standard homeowners and renters insurance policies are designed for personal risks, not commercial risks.
If you plan to rent out all or part of your vacation home on a regular basis, most insurers will consider this a “business use” and you will need to purchase a business policy — specifically a landlord policy.
Landlord policies provide property insurance coverage for physical damage to the structure of the home caused by fire, lightning, wind, hail, ice, snow or other covered perils. They also offer coverage for any personal property you may leave on-site for maintenance or tenant use, like appliances, lawnmowers, and snow blowers.
Landlord policies also includes liability coverage. If a tenant or one of their guests gets hurt on the property, the liability coverage would take care of legal fees and medical expenses.
Most landlord policies also provide coverage for loss of rental income in the event you are unable to rent out the property while it is being repaired or rebuilt due to damage from a covered loss. This coverage is generally provided for a specific period of time.
The bottom line here is that when you rent your vacation home via Airbnb, VRBO or any other site, you take on risks that are not anticipated or covered by a standard homeowners policy. Even if you’re renting your home just once, there’s no point in jeopardizing your finances. Talk to your insurance broker about what is and isn’t included in your policy to determine what’s needed to fill the gaps.
Mike Rosser leads the Private Client practice at CCIG. Reach him at Mike.Rosser@thinkccig.com or 720-212-2068.
CCIG is a Denver-area insurance brokerage with personal and business insurance clients nationwide. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.