How short-term rentals impact insurance

Thinking about using your home, cottage or condo as an Airbnb?

There’s lots of things to consider and making sure you are properly insured is one of them.

Homeowners usually have some form of a standard home insurance policy, but a regular policy generally won’t cover anything beyond the first time the policy owner rents out or shares their home. After that, most brokers would likely treat it as a commercial enterprise.

Market growing

One thing is for certain, the short-term rental market is growing. In Canada, it’s extremely popular in some of the nation’s largest cities. According to figures from AirDNA, a company that tracks markets for property owners or investors looking to jump into the market, figures indicate short-term rental listings in Montreal, for example, jumped from 2,900 in 2017 to more than 16,000 in 2016. In Toronto, active listings went from 1,900 to about 10,000 over the same time period. Meanwhile, a quick search for Airbnb listings in Windsor reveals lots of choices.

While many of these services, such as Airbnb, offer their own coverage these services can come with strict rules and regulations. It’s important to know insurance gaps can still exist.

For instance, if an incident occurs before or after the defined period of stay – even by a few hours – it’s highly likely it’s not covered by Airbnb. Hosts must be compliant with the rental contract in order to be covered, and any claims need to be filed within 14 days of occurrence. Also, the insurance payout may only cover the cash value as opposed the replacement cost of damaged property.

Not covered

Airbnb’s Host Guarantee covers damage to the property such as the home, unit, rooms or possession but are subject to certain limitations, documentation, photos and receipts, for example. But it’s more interesting to review what is not covered. According to the Airbnb website, damages or injury not included are:

• Personal injury and property damage claims from third parties (although additional insurance can be purchased from the service provider)
• Damage to shared or common areas that aren’t part of the listing itself
• Cash and securities
• Damage caused by pets
• Jewellery, collectibles, and artwork can have more limited protections. Ordinary wear and tear is not protected.

If your current home insurance or service-provided coverage doesn’t provide the necessary protection, there are other options. Speak to your insurance broker about short-term coverage. This may be a solution for homeowners that are renting out their condos, secondary properties or seasonal homes such as a cottage. While it does not apply to subletting, it can cover those who rent out the entire home or just a portion of it. Other coverage could include water and sewer backup issues and possibly vandalism and theft.

The bottom line? Airbnb renters and others in the short-term rental industry need to ensure they’re adequately covered so there aren’t any surprises.