Sheri and I are completing the planning of our vacation this year. We’ll go backpacking with a friend in Colorado for four days but need accommodations for three adults before and after backpacking. We’ve looked into condos, cabins, and hotel rooms when Sheri asked me if I’d be interested in looking at options through Airbnb or Vacation Rentals by Owner (VRBO)? As an independent insurance agent, I wondered if a Texas home insurance policy would cover a short term rental like this.
The short term rental market has exploded over the past few years. Benefits abound for guests and hosts. Hosts enjoy a little extra income and guests like Sheri and I can stay in a place that’s usually less expensive than a hotel or bed and breakfast, meet a local person and enjoy accommodations that are perhaps more charming and spacious than a hotel. The fastest growing market for owners providing temporary lodging is the over 60 crowd which grew by 102% in 2015 on Airbnb.
In order to answer my question whether home insurance would cover a home on Airbnb or VRBO, I talked with underwriters from each of the companies I represent. Each underwriter gave me the same answer, that their home insurance policy would not cover a loss if the homeowner is providing temporary lodging via any of these services. The reason is there is too much risk exposure for the home insurance company for any type of loss.
I also spoke with one of my brokers to see if they have a commercial policy that provides coverage for a homeowner. They do provide a policy for owners of bed and breakfast establishments, however, it does not include coverage for assault and battery if charges were brought against the owner. This is a better though incomplete solution.
VRBO does offer owner’s an insurance policy that covers losses incurred when renting your home. Once the keys are handed to the renter, their policy takes over from the owner’s home insurance policy. Airbnb doesn’t offer similar coverage at this time.
Home insurance companies are struggling to address this space. Whether it will be addressed as an endorsement or option on a standard home insurance policy or through a commercial policy is up in the air. The question insurance companies are wrestling with is whether a temporary lodging service constitutes a commercial business or not.
Allstate is rolling out an option on a trial basis on their home insurance policy pending regulatory approval in mid-August. It’s called HostAdvantage and the trial will take place in six states – Arizona, Colorado, Illinois, Michigan, Tennessee, and Utah. HomeAdvantage provides homeowners with $10,000 in personal property coverage for furniture, appliances, kitchenware, etc., however, the home insurance deductible will apply. This option will initially cost $50 a year to add it to the homeowner’s policies in these states. The questions I have are
- Will it extend to cover a major loss to the home or personal property that could arise from a fire or major water leak?
- Will the personal liability coverage apply in this case to protect the homeowner if a guest is injured on premises?
What does the future hold for homeowner’s who provide short term lodging services? I believe home insurance companies and commercial insurance companies will offer more complete coverage in the next year or two. Until then, I recommend any homeowner renting a room or their home have an in-depth conversation with their insurance agent to confirm what is and what’s not covered before listing their home on any of these services. Better to answer those questions before an incident happens than after the fact.
What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!