Renting out your home or cottage can be a great source of income, but it does come with risks. Short-term renters won’t necessarily take care of your property in the same way friends or family would. If you’re looking to make extra money by turning your house into an Airbnb listing, it’s important to know the details of your home insurance. Creating an Airbnb turns your home into a business property. So, how can you benefit from renting out your property and still protect your space? That’s where short-term rental insurance can be an option.
Short-term rental insurance, defined
Short-term rental, or home-share insurance, is insurance for landlords or homeowners who rent out their primary home or vacation property for a short period of time, usually up to six months. You might also see it offered as Airbnb Insurance.
Primary home insurance vs. short-term rental insurance
Primary Homeowner’s Policy
Your primary home insurance policy is intended to protect you while you’re living in a home by providing coverage for the building and its contents, as well as third-party liability coverage. However, if you are planning on renting out your primary home on a short-term basis, it’s a good idea to talk to your insurance provider or isure broker to determine if your current policy covers you for short-term rental. When you rent out the home on a rental platform like Airbnb, you are changing its use. By doing so, it affects the coverage you’ll need and the level of risk the insurance company is taking.
If your plan is to rent out your property on a regular basis, your regular homeowners’ policy probably won’t cover any damages incurred. That’s because most home insurance policies can be invalidated if homes are unoccupied for more than 30 to 90 days. In the eyes of the insurance provider, the longer your property is unoccupied and the greater the risk of a peril happening and being overlooked.
Airbnb or short-term rental insurance policy
Short-term rental insurance, or Airbnb insurance, can provide additional coverage. It offers protection from:
- Accidental and deliberate damage caused by guests or tenants
- Theft by guests or tenants
- Legal liability
- A loss of income in case guests damage the property and make it inhabitable
- The cost of utilities if guests get too enthusiastic about using water or hydro
- The cost of having to replace the keys and change the locks
What short-term rental insurance doesn’t offer
Even though rental companies do provide you with basic coverage, there are many things not included. It’s important to read the terms and conditions carefully to understand the coverage you have with them. This will help you determine how much additional insurance you require. As an example, here are common things not included in the plan from Airbnb:
- Intentional acts by your guests
- Safety or health issues in your residence causing harm to guests
- Plans from Airbnb are only valid when guests are staying at your residence
- It does not cover loss of earnings if someone is hurt during their stay
- You only have protection up to the limit in the Airbnb policy
- Defamation
- Weather damage
If you’re planning on listing your property for short-term rental, you’ll need to let your current provider know. This can potentially void your contract as not all insurance companies offer Airbnb or short-term rental insurance.
Insurance offered by rental companies
If you are thinking about obtaining short-term rental insurance for your property, Lowestrates.ca breaks down coverages offered by both Airbnb and Vrbo to help you decide how short-term rental insurance you will need:
Airbnb
AirCover for hosts includes $3 million in damage protection which covers the cost of damage caused to the property by Airbnb guests. It also offers $1 million in third-party liability insurance, which covers you in case something goes wrong while your property is being rented out. It doesn’t, however, cover all contingencies. The Host Guarantee doesn’t cover damage caused by acts of nature or guests’ pets. And the liability coverage doesn’t cover intentional damage or injuries.
Vrbo
Vrbo, another online vacation rental company, also offers liability coverage for hosts in case of accidents on the property. But it doesn’t offer any coverage or protection against property damage. Instead, you can ask for a refundable security deposit from your guests either at the time of the booking or when they arrive. Vrbo suggests that all fees, including the security deposit, be covered in a rental agreement.
So, you will get some coverage via Airbnb and Vrbo, but they don’t offer full coverage. It might be a good idea to add short-term rental insurance to your homeowner’s insurance to help cover some of the holes left by these companies’ coverage.
Understanding why both coverages are needed
No one wants to imagine a ‘worse-case scenario’. However, for the purposes of understanding why both homeowners’ and short-term rental insurance is necessary, we’ve created a scenario to illustrate coverage:
Your washing machine breaks down while a guest is doing laundry, destroying the appliance and causing water damage throughout the house. Who pays to repair the damage?
- Airbnb’s coverage only extends to damage caused by guests during their stay. While it was the guest who used the machine, Airbnb can easily argue they didn’t cause the flooding; it was caused by your faulty equipment.
- Your insurance company, meanwhile, can argue they shouldn’t pay because the property was being used commercially. The water damage didn’t start while you were living in the home; it started while your guest was paying rent to be there. Had they known you were using it for short-term rentals, they would have calculated the risk–and your premiums–accordingly.
Without adequate coverage, you have no choice but to pay out-of-pocket for the repairs. And as Airbnb’s income loss coverage wouldn’t apply either, you would have to find a way to continue paying the mortgage, taxes, and condo fees without any rental income. If the guest sues you over the incident, Airbnb’s third-party liability insurance will likely cover you for up to $1 million. But without commercial liability insurance, you would be responsible for any additional amount.
Which insurance companies insure Airbnb in Canada?
In Canada, there are a select few insurance companies that provide home-sharing insurance. You may have to switch providers entirely to access these services, as they are add-ons to existing coverages. Since it’s a specialized product, not all insurance companies offer Airbnb insurance policies. At isure, we have a long-standing relationship with two of the few short-term rental insurers in Ontario:
1. Aviva Airbnb Insurance
Aviva Insurance offers short-term rental insurance that can be purchased as an add-on to a regular home insurance policy or as standalone coverage. The endorsement covers:
- Loss or damage to buildings and personal property
- Intentional acts, criminal acts, or failure to act by a guest
- Loss or damage to a guest’s property up to $1,500
- Loss of rental income (fair rental value) liability arising out of the short-term rental
2. Wawanesa Short-Term Rental Insurance
Wawanesa Insurance offers a short-term rental endorsement that can be added to a new or existing Wawanesa home insurance policy. The endorsement covers you against:
- Theft and attempted theft by tenants and their guests
- Damage caused by tenant vandalism
- Theft of, or damage to, your tenant’s property (up to $1,500)
- Fair rental value
Speak with one of our isure representatives to compare the best short-term rental insurance quotes.
The insurance industry is catching up
The Insurance Bureau of Canada said many brokers have already started to develop add-on products to help cover short-term rentals. “The insurance industry has caught up very quickly with the advent of Airbnb and recognize fully that not everyone who offers their home to visitors through Airbnb is doing so 365 days a year,” says Amanda Dean, VP Atlantic for the Insurance Bureau of Canada. “People may opt to do it for a couple of months of the year, so a full commercial property policy may not be what is needed.”
How much does short-term rental insurance cost?
Typically, insurance for Airbnb can cost as little as $12-40 dollars per month. However, short-term rental insurance costs are determined based on your property and the coverage requirements. Insurers use a series of factors, similar to those used in home policies, to determine the cost of your premiums including:
- Your claims history
- Location of your property
- Type of property and size of the space
- Contents – everything inside the structure and on the property itself
- Replacement cost of the contents
- Your rental activity levels
Hosting guests in your home or short-term rentals is not only a way to earn additional rental income, but it’s also a business venture with risks. Property damage, vandalism, theft, and personal injury can happen. You need insurance that covers Airbnb rentals above and beyond your homeowner’s policy. Let us help make sure you’re protected with home-sharing insurance. Talk to your isure broker to see if you should add it to your home coverage today.
