Summary of Vacation Rental Insurance For Owners + Airbnb Host Insurance
- Know your coverages and exclusions, most policy’s have coverage lapses when it comes to vacation rental risks. At the end of this post you will have a better idea of what type of policy may be right for you
- The biggest killers of wealth are taxes and lawsuits
- The Good News: There are policy’s designed to cover the unique risks of owning and renting a vacation home
- Intro to the Airbnb Host Insurance (Now the Host Protection Program) AND our Airbnb House Fire claim update
Rad News & Opportunities!
- Updated & New Content: Vacation Rental Dojo, Mike & Maria’s Free online vacation rental learning center
- Vacation Rental Confidential, Our Book: VRC is a quick showcase of the Live Swell Story & Proven Biz Model Download Chapters 1 & 2 Free, Our Gift to You
- Exclusive NEW Release: Live Swell’s Sparkling Clean Training & Certification Program
Vacation Rental Insurance: The Skinny
It’s important to recognize most insurance policies, like a homeowners policy, will likely NOT cover certain investments, vacation rentals or dwelling types. Each property insurance policy is written with a specific set of terms that must be adhered to for a payout to be valid if an insurance claim is filed. For example, Homeowners insurance policies are written for the “homeowner” as the occupant, NOT renters and especially NOT short term renters, which come with some unique risks. This is a “term” of the policy.
It is however, very common for a short term rental owner to have a homeowners policy, which is simply not designed as short term vacation rental insurance. In this case, if a claim was filed, by a tenant, neighbor or other 3rd party and the homeowner is named in a lawsuit, unfortunately, the policy will likely have whats called, “coverage lapses.” Whats a “Coverage Lapse?” You guessed it! It means the your policy does not cover the LOSS! Yikes.
More specifically, these traditional policies, like homeowners and renters, exclude what is called “commercial activity.” Whats “commercial activity?” Renting a property short term on Airbnb, VRBO, HomeAway and others. Again, any property or liability claim could be denied as the result of short-term renting your property as homeowners and renter dwelling policies exclude “commercial activity.” And that is just ONE example of coverage lapses, there are sooo many!!!
Biggest Wealth Killers: Taxes and Lawsuits
It is said that the biggest killers of wealth are taxes and lawsuits. One of the consequences of NOT having the correct vacation rental insurance policy in place is a Lawsuit. For this reason, we are big believers in vacation rental insurance.
Vacation Rental Insurance: Short Story
“Imagine for a moment, you are at home sleeping and the phone rings at 11pm at night. Half asleep and startled you answer, it is your Property Manager. Hastily she says to you, “We have a problem, one of the teenage kids of the current guest was on the roof, drinking alcohol, partying with friends and fell off the roof. We have everything under control here, we don’t know how severe the fall was but the parents are on the phone with an attorney right now. What do you do next?”
This is one of the worst fears and nightmares of anyone that owns real estate, accidents! Accidents will happen, are we prepared for them? When a home is titled in the personal name of the owners, not only are they at risk most if not all of their personal assets can be too, including any college funds, legacy reserved for children, savings, equities and possibly primary residence. We believe in asset and wealth preservation. We do not “own” anything but control all of our assets via a combination of revocable living trusts and limited liability companies. There is no one “right” way to structure assets, some simply have more layers or protection and take advantage of incorporating in states, like Nevada, that have more protection for business owners.”
Excerpt From: Michael Hamilton. “Vacation Rental Confidential.” Apple Books.
The Good News: There is Vacation Rental Insurance for Owners + Airbnb Host Insurance
As short term rentals are becoming more popular many insurance companies are custom designing policy’s specific to the risks of these type of rental properties which can be a hybrid of homeowners, landlord and a business policy. Additionally, a policy can now have coverage for common vacation rental amenities like, bicycles, watercraft, surfboards and things like these. I know it provides us with peace of mind.
Airbnb Host Insurance, Now “AirCover”
In a kind effort to reduce the anxiety and fears some owners may have in renting their space, AirBnb, designed a pseudo insurance program, better referred to as “protection program” for their hosts. The program has went by several names including “Host Guarantee,” yet as of December, 2021 the program is under the AirCover, “Host Protection Program.”
This program is NOT “insurance,” nor is a substitute for adequate insurance coverage. The program will provide up to $1 Million if the loss is deemed coverable.
What’s covered and Not Covered with AirCover
Host damage protection covers you for:
- Damage to your place or belongings caused by a guest (or others)
- Unexpected cleaning costs you incur due to the behavior of a guest (or others) during an Airbnb stay
- Income lost if you need to cancel confirmed Airbnb bookings due to damage caused by a guest (or others)
When you offer an emergency place to stay through Airbnb.org, you’re still covered by Host damage protection.
Host damage protection doesn’t cover:
- Damage from wear and tear due to ordinary and reasonable use
- Loss due to acts of nature (like earthquakes and hurricanes)
- Injury or property damage to guests or others (those may be covered by Host liability insurance)
- Other exclusions apply
The reimbursement process
Here’s how to get reimbursed if damage does happen during a stay:
- Gather evidence of the damage (photos, videos, estimates for repairs or cleaning, and/or receipts).
- Within 14 days of the responsible guest’s checkout, file an AirCover request through our Resolution Center.
- After you submit your AirCover request, your guest will have 72 hours to pay. If they decline to pay the full amount or don’t respond, you’ll be prompted to involve Airbnb Support. Keep in mind that if you do involve Airbnb Support in your AirCover request, you must do so within 30 days of the damage or loss.
What Airbnb Is NOT Telling You about AirCover
As a owner of a vacation rental that suffered an Airbnb House Fire, caused by a careless guest, I have first hand experience in dealing with this program. It sure sounds nice and comforting from the marketing but I can tell you I hope you never have to go though this process. The availability of this program has created much confusion, increase delays and started to impact my future real estate opportunities, big problems!
First, Airbnb will forward a claim request to the guest, who can elect to accept or decline. This process can be very uncomfortable. Further, Airbnb uses time pressure intimidation as an attempt to avoid the claim in the altogether, for example, if you do not submit documents in the tight timelines any coverage may be lost. They may also hire an “independent investigator” to determine if the guest is “at fault.” Airbnb did invest thousands of dollars for a fire investigator for our house fire, unfortunately for Airbnb, the investigator was not able to eliminate the guest as a cause fo the fire. If they were able to eliminate the guest, the program would not pay a dime. In fact, early in the process, the Crawford Adjustor was signaling that our claim would likely not be paid.
How They Pay (If they ever do):
While this program not “Insurance,” Airbnb does elect to use insurance companies and their licensed insurance adjustors to settle the reimbursement request. For my fire claim, they used Crawford and Co, for my neighbors adjacent fire damage (a much smaller claim), they used Generali.
It is important to note that his program pays actual cash value not replacement cost. You may be able to elect to pursue Airbnb’s program first (before your primary insurance) or second (as “excess” to your primary insurance, in the event there are losses that were not covered). It can get very confusing, and maybe this is the point!!!
My feeling is this program helps Airbnb avoid litigation in scenarios where losses occur to hosts as many large loss scenarios have ended up in court, like these Airbnb House Fires in Sonoma and Texas. Since taxes and lawsuits are the biggest killers of wealth, this program may be a smart move by Airbnb. But the question does need to be asked, does this really benefit a host or is it simply beneficial marketing banter and corporate protection? We will see.
Should I get Vacation Rental Insurance?
The answer depends. We will never tell anyone what to do, we only showcase what we do and some of the reasoning behind why we do it so it can make sense. A comprehensive vacation rental insurance policy will be more expensive than traditional policies, so you need to be prepared to pay a bit more.
If you are the kind of vacation rental owner that desires peace of mind and a higher likelihood of success than I would say “Absolutely, Yes” get a vacation rental insurance policy as soon as you can.