Airbnb Hosting: Are you Covered?
Have you ever considered becoming an Airbnb host?
If so, did you consider what would happen if someone got injured on your property?
EVOLUTION OF THE SHARING ECONOMY
In the past 10 years the sharing economy has taken off. Now companies like Uber, Airbnb, and CarShare have become a daily part of many peoples’ lives. The sharing economy allows the everyday person to earn additional income easily with little to no start-up investment.
The average price of a house in Canada rose 419% from 1985 to 2015, while the median family income has only gone up 133% in that timeline. This spike in the housing market has made purchasing a home and paying a mortgage difficult. Companies like Airbnb are a great way to help homeowners earn extra income and make owning a house more affordable. Airbnb makes it easy to advertise and rent out your home, or a part of your home, without much hassle. It also provides travelers with more affordable and unique travel options than were traditionally available.
In addition to the convenience and extra income, hosting through Airbnb also has its risks.
Airbnb’s website is full of information on risks and responsibilities of hosting with them; however, the documents can be overwhelmingly long, difficult to read, and full of legal terminology. Despite these barriers to information, it is important to fully understand the risks and responsibilities before signing on as a host with Airbnb.
DUTY OF CARE
“Negligence” is an important concept in tort law, which is the failure of a party to meet the expected duty of care. As a homeowner, you have a duty of care to your guests, which is to ensure that your property is reasonably safe. If a homeowner fails to do this and someone is injured due to unsafe conditions, the injured party can seek compensation from the homeowner under the Occupier’s Liability Act. Most homeowners have insurance coverage, so the home owner’s insurer would pay the damages. If a home owner does not have appropriate insurance coverage, however, then the home owner would end up compensating the injured party out of pocket.
NOTIFY YOUR CURRENT HOME INSURANCE PROVIDER
The first thing to do when starting your Airbnb journey is to notify your current home insurance provider. Renting your property to a third party changes the nature of the use of the property, and as a result, your current home owner’s policy will likely be void. Having the appropriate insurance policy for the use of your property is vital to prevent paying large damages out of pocket if someone is injured on your property or your property is damaged while being rented.
Airbnb does provide some insurance at no cost to the host, which limits your potential risk; however, you will still need to have home insurance. Once notified, your current insurer may still insure you under your current plan, they may cancel your current plan and offer a new one, or they may refuse to insure you. If they do refuse to insure you, then you will have to shop around for another company willing to insure Airbnb hosts. Since Airbnb and other similar companies have become increasingly popular, traditional insurance companies have started to provide for these situations.
Airbnb’s Host Protection Insurance
As an Airbnb host, Host Protection Insurance (HPI) is automatically available to you. It is important to read the policy and understand what is included in that coverage. There may be gaps between the Airbnb HPI coverage and what your typical home owners’ policy covers.
Airbnb’s HPI covers is up to $1 million USD per incident for bodily injury and property damage. It does not cover property damage from mold or pollution, or anything intentionally done to the property which damages it. This amount can seem like a lot at first glance, but if you consider an event where both a person is seriously injured and unable to return to work, and your property is severely damaged, then $1 million may not cut it.
Airbnb’s Experience Protection Insurance
As an Airbnb host you also automatically qualify for Experience Protection Insurance (EPI). There is no deductible or premium for this insurance. This is insurance through an outside underwriter, not Airbnb. EPI provides for up to $1 million USD for third party bodily injury. Therefore, you have an additional $1 million USD coverage in the event someone is injured on your property while they are renting.
You may opt-out of your EPI, and then you will not be subject to their Terms of Service. If you choose to not opt-out of EPI it will act as your primary insurance coverage in the event of an incident. Therefore, you may wish to opt-out if you feel as though your home owners’ insurance provider will be sufficient in the event of an accident and you do not wish to be bound by the Terms of Service on the Airbnb website.
Know and Read your Policies
Throughout Airbnb’s information for hosts and the terms of their insurance policies, they continuously caution hosts and recommend they acquire appropriate insurance for their home and review their current policies. While Airbnb does provide insurance, it may not be adequate or always applicable. To ensure that you are adequately covered, you must have appropriate home insurance in addition to what Airbnb provides.
Also remember that if a loss does occur, you must report the loss to Airbnb and/or your other insurance provider within the time required. Required time frames for reporting can be found in your policy or on the Airbnb website.
As the boy scouts would say: Be Prepared
Airbnb hosting can be a great way to earn extra income and a great way for travelers to save money. However, hosts must ensure that they provide a safe and hazard-free environment for guests, and that they are adequately insured. As an Airbnb host, you must be informed and know your responsibilities and obligations to Airbnb, and how to comply with their provided protection policies. Lastly, it is very important to notify your current home owners’ insurance provider and make sure you have an appropriate policy in place.