Many homeowners view home-sharing services such as Airbnb as a way to make a fast buck by renting out their homes – but if they do not alert their insurance agent first, they run huge risks.
Earlier this year, for example, a Calgary family using Airbnb returned to find its home had been trashed, with damage estimated at close to $150,000.
The San Francisco technology company agreed to cover the cost of the damage. But other homeowners in similar circumstances, and without the luxury of a bailout by a home-sharing company, might find themselves out of luck when submitting a claim to their insurance company without previously disclosing that they’re using a home-swap service, brokers say.
“When a company offers coverage at a certain premium and they’re not told that the home is being rented short-term, they’re quoting a premium based on normal occupancy by the owner,” said Doreen Rigby, who is director of personal insurance at B.C.-based Capri Insurance, which has a dozen locations.
She added that not all insurance companies are willing to cover homes that are rented to strangers through Airbnb or competing home-sharing ventures such as industry pioneer Couchsurfing or relative newcomer Nightswapping.
That’s why contacting the insurance broker is imperative, she said, adding that part of the broker’s job is to find an alternative insurance company in case the first one will not cover short-term rentals.
In a worst-case scenario, in the event of an Airbnb guest damaging a home, the homeowner’s insurance agency would decline to cover the damages and void the policy, leaving the homeowner scrambling to find a new insurance company to cover their home, Rigby said.
“It’s no different than using your car for a commercial purpose,” she said. “If you’re using your car every day for business, you have to disclose it to ICBC because they will have a different premium rate.”
Airbnb spokesman Jakob Kerr told Business in Vancouver that his company has what it calls a host guarantee program that provides protection of up to $1 million for a host’s property in case of damage.
That insurance applies only to damage to the premises, however, and does not provide coverage in the event a guest sues after, say, becoming injured in an accident on the property.
“Our host protection insurance liability program is currently available only in the U.S.,” Kerr said. “We are working hard on expanding it internationally.”
The program covers hosts but not guests who lose valuables while staying with an Airbnb host.
Upstart home-sharing ventures have their own insurance policies.
Nightswapping, for example, has a partnership with the global insurance giant Allianz, which automatically covers all hosts and travellers against any potential damages without additional charge, Nightswapping spokesman Josh Hibbard told BIV.
“If you arrived and found that the host is not there, we will put you up in a hotel, and if you have a medical emergency, we will fly you home to ensure that you can see a doctor.”
Hibbard also believes that Nightswapping’s business model makes it a better alternative than Airbnb for tenants who want to rent out a home that they themselves are renting from a landlord.
“If you’re renting your place, it could be against your lease agreement to rent it out to someone else,” Hibbard said. “With our system you’re not collecting any money. So, it’s similar to having your parents stay with you, so it would not be in conflict with your lease.”
Nightswapping users are granted a credit for the number of nights that they have hosted others. Hibbard said they can use that credit by staying with another user on the site. They can also buy a credit for a designated number of nights through the Nightswapping website. •
