This is a Q&A with Loretta Worters of the Insurance Information Institute on insurance coverage and short-term rental sites like Airbnb. See the companion piece which looks at other risks with Airbnb and includes comments from State Farm.
If a guest is paying to rent your house or apartment damages your property, is it typically covered by your homeowners/renters/condo insurance?
No. The guest must have their own rental insurance.
If a guest is paying to rent your house or apartment trips or falls or is otherwise injured, is it typically covered by your homeowners/renters/condo insurance?
No. Homeowners who rent their property can protect themselves from financial loss by purchasing a landlord policy.
If a guest is paying to rent your house or apartment gets drunk and jumps off the roof, is it typically covered by your homeowners/renters/condo insurance?
There is no coverage under your homeowners/renters or condo policy.
Does it matter how many days a year you rent out your home/apartment?
Would any of this be covered by umbrella liability insurance?
Umbrella insurance is designed to provide liability protection beyond the limits of homeowners, auto and watercraft personal insurance policies. With an umbrella policy, depending on the insurance company, the policyholder can add an additional $1 million to $5 million in liability protection. This protection is designed to “kick-in” when the underlying liability on other current policies has been exhausted. Most likely the insurance company would want you to have the landlord policy as your “underlying policy.”
Is there a specific type of policy that consumers should purchase to ensure they are covered?
§ The house. Much like a homeowners policy, it usually provides coverage against hazards such as fire, lightning, falling objects, smoke, explosion, wind and hail, water damage, among others.
- Other structures located on the property (garages, sheds, etc.). This coverage is often limited to 10 percent of the overall coverage on the house. For example, for a home with a $200,000 policy limit, no more than $20,000 would be paid to a policyholder to cover losses incurred to structures on the property but apart from the house itself.
- Property contents. While landlord insurance policies do not insure a tenant’s belongings, they do typically cover any of the landlord’s personal property that might be used by a tenant, such as tools, landscaping equipment, appliances and furniture (either stored on site or provided by landlords for use by their tenants). The best way to be sure of having enough personal property coverage is to take an accurate inventory of the contents on the premises.
- Lost rental income. This coverage reimburses a landlord for any lost rental income due to building damage. Typically it provides up to 12 months of lost rental income.
- Legal fees and liability protection. Landlords may be liable if a tenant is injured on the property. Most landlord insurance policies cover the landlord’s legal fees should a tenant file a lawsuit. This type of policy would also pay out in the event of a judgment against a landlord, protecting his or her personal belongings and assets if the tenant prevails in court. The policy may also cover medical payments in the event that a tenant is injured.
Landlord policies generally cost about 25 percent more than a standard homeowners policy because landlords need more protection than a typical homeowner. There are many factors used to determine the price of a landlord policy, including:
- The square footage of the house and any additional structures, such as a detached garage.
- Building costs in the area.
- The features of the home, and construction materials used to build it.
- The crime rate in the neighborhood.
- The likelihood of damage from natural disasters, such as hurricanes and hail storms.
- The home’s proximity to a fire hydrant (or other source of water) and to a fire station; whether the community has a professional or volunteer fire service; and other factors that can affect the time it takes to put out a fire.
- The condition of the home’s plumbing, heating and electrical systems.
When planning to rent out a home, it is important to take some basic precautions:
- Require tenants to show proof of renters insurance for personal property, family liability, guest medical and additional living expenses. This not only provides them with protection, but will prevent tenants from trying to sue the landlord if there is a fire or other disaster.
- Notify an insurance agent or company representative that the home is being rented out, and discuss the implications. Be aware that many insurance companies do not provide coverage for vehicles that are left at a landlord’s home and remain accessible to tenants.
Have P&C insurers dealt with claims related to Airbnb?
WE SHALL NOT BE LIABLE FOR DAMAGES OF ANY KIND (INCLUDING, BUT NOT LIMITED TO, ANY DIRECT, INCIDENTAL, GENERAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES) EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING FROM OR RELATING TO: (A) THE USE OR INABILITY TO USE OUR SERVICES; (B) HARM OR DAMAGE TO YOUR PROPERTY AS A RESULT OF USING OUR SERVICES; (C) DISCLOSURE OF, UNAUTHORIZED ACCESS TO OR ALTERATION OF YOUR CONTENT; (D) ANY HARM TO YOU CAUSED IN WHOLE OR PART BY A THIRD PARTY, INCLUDING BUT NOT LIMITED TO ANOTHER USER OF THE SERVICES;
That’s why it is so important for people who rent out their home to make sure they demand the person have insurance before they allow them to take possession of the rental property.
Assume I have homeowner’s/renter’s/condo insurance and I stay at someone’s place. While there, my iPad, laptop and camera are stolen. Would my insurance cover that? I know there is usually some off-premises coverage. (It may not be worth filing a claim over, but would be good to know the coverages.)
Your homeowners/condo or renters insurance provides protection for the camera under off-premises coverage (which is anywhere in the world). Something like an iPad or laptop usually has a rider that you can purchase from your insurer. For the person who rents, it is important to have renters insurance which includes liability to protect you if someone sues you for falling, etc. The person who falls, might try to sue you and the owner, so you need to protect yourself.