Though it has seen a few setbacks of late – notably in a few major cities with strong hotel lobbies – the homestay industry pioneered by Airbnb and a few other firms looks poised to remain a major part of the commercial travel and tourism market. As more and more homeowners rent their houses, apartments, and condos out to a rotating cast of guests foreign and domestic, the demand for specific forms of short-term rental and commercial insurance will grow.
Anyone who’s entertained houseguests, whether for a day or months at a time, knows they always bring some type of property risk with them. Whether it’s overflowing plumbing, out-of-control pets, collateral damage from parties or simple accidents, new people in an unfamiliar space they don’t own can mean problems. In the event of serious injury or catastrophic damage, not being covered can wipe out a homeowner’s savings or forfeit their property in the ensuing suit.
Rising markets for Airbnb insurance
Specific figures for the short-term rental insurance industry are hard to come by. Fortunately, we can look at some third-party data to gauge the growth of this sector. AirDNA, a firm which tracks hundreds of markets for property owners or investors looking to capitalize on the short-term rental trend, shows the cumulative number of active listings in the Montreal market rising from about 2,900 in 2014, to 7,000 in 2015, to over 14,000 in 2016. Montreal remains the biggest and most popular Canadian Airbnb market, but the trends hold elsewhere. In slightly less popular Toronto, cumulative active listings climbed from 1,900 to 4,700 to about 10,000 over that same period.
All of these short-term renters need insurance for their guests – or at least, they should purchase some if they want to be financially responsible.
“We encourage everyone to check with their insurance providers,” in order to make sure they’re properly covered, said Aaron Zifkin, Airbnb’s Country Manager for Canada, in an interview with Insurance Business Canada.
Airbnb renters and others in the short-term rental industry need to ensure they’re adequately covered by insurance solutions.
The case for short-term rental coverage
Homeowners often have some form of standard home insurance policy, and services like Airbnb do offer their own products. However, a regular homeowner’s policy generally won’t cover anything beyond the very first time the policyholder rents out or shares their home – after that, most brokers treat it as a commercial enterprise. And while owners can contract through the services they’re using to connect with guests, those services come with strict rules and regulations.
For instance, if the liability is incurred before or after the defined period of stay – even by a few hours – it’s highly likely it’s not covered by Airbnb. Hosts need to remain in compliance with all of the stipulations of the rental contract in order to remain covered, and any claims need to be filed within 14 days of occurrence. Even more concerning for some hosts, the insurance payout from the service might cover only the cash value, rather than the replacement cost, of damaged property. That’s bad news if replacing your property or fixing your home costs considerably more than it’s worth at the moment.
“Its great that the Airbnb Host Guarantee exists” states Lucie Lee Frapier team leader residential lines for APRIL Canada. It offers some peace of mind, however homeowners should be aware of the coverage gaps too. Some of these are quite surprising for example shared areas are not covered in the Airbnb Host Guarantee and liability allocation can be complicated”.
Important considerations for short-term insurance
Where existing home insurance or the service-provided coverage falls short, brokers can step in to provide dedicated short-term coverage. This can apply to dedicated homeowners, including those who are renting out condos, secondary homes, or seasonal homes. In addition, it also applies to those who rent out the entirety of their residence at once, as well as those just sharing a portion of it. However, short-term rental insurance does not apply to subletting arrangements.
The plans can include coverage for water and sewer back up issues and damage, as well as potentially addressing vandalism and theft. APRIL Canada’s underwriting includes flexible terms that address issues related to building use, including short-term rentals in mixed-use dwellings.
If you’re already in the homeowners’ and renters’ insurance space, it makes a great deal of sense to consider expanding into coverage for short-term rentals such as Airbnb and HomeAway. This becomes doubly true if your primary client base is focused within a major urban area or tourist destination such as Montreal, Toronto, or Vancouver, where the majority of short-term rentals take place.