A party held at an AirBnB rental home made headlines earlier this year after police had to be called in to deal with the revellers. The Calgary home was so badly damaged over the weekend that the cost to replace or repair things was estimated at around $150,000.
AirBnB is a popular site that allows people to rent out their homes to others. For its part, the company is paying for the restorations under its insurance, which provides up to $1 million to "eligible properties in the rare event of guest damages, which are not resolved directly with the guest." The work is expected to take months in which the couple who own the home will need to find other accommodations. Airbnb is, again, covering those costs. But how much of the cost will the homeowners' insurance cover, if any? What are the risks of renting out your home through a service like AirBnB? How difficult is it to get insurance on a home listed on AirBnB?
What's very important to note is that:
- You MUST complete and file an Airbnb Host Guarantee Payment Request Form with Airbnb within the earlier of fourteen (14) days following the end of the guest's booking OR the date of which the next booking for this same accommodation begins. If you miss to do this, AirBnb will not pay you.
- Host Guarantee is PROPERTY DAMAGE COVERAGE ONLY, so it doesn't cover liability. This means you must get separate liability coverage for cases if a guests hurts themselves in your home, gets bitten by your dog or any other accident that happens on your property. It also excludes cash and securities, collectibles, rare artwork, jewellery and pets.
- not all countries have a host guarantee, so check if your country is eligible.
- You always must first try and resolve the issue with the guest and seek compensiation from your home insurance policy first - only after you've exausted all other options can you submit a form to AirBnB.
Guests with a long history on the site and many good reviews are far lower risk, as they have a lot to lose
Steve Kee, Director, Media & Digital Communications at the Insurance Bureau of Canada says anyone considering renting out their home should speak with their insurance company first.
"The concern is that consumers may be unaware about some insurance gaps and risks and limit," Kee says.
It's not unheard of for things to go amiss when renting out your homes to strangers either, as clearly evidenced by the incident in Calgary. But even minor clashes can cause headaches for homeowners.
We have a no smoking rule and ended up with five German guys smoking up a storm, blasting music full blast and drinking themselves falling down drunk. We had to get AirBnB to tell them to pack and leave. Then they didn't want to, but we forced the issue.
says Alec Kinnear, who rents his home out through the service.
The company did help Kinnear, but it wasn't always a pleasant experience.
AirBnb does pick up the phone and does have people trained on these situations... But the whole process is very time consuming and AirBnb puts too much emphasis on not hurting the renters' feelings,
I mean for heaven's sake, the property description says no smoking, our house rules say no smoking, we send an email saying no smoking, we tell the guests no smoking when we meet them.
No Smoking by Son of Groucho
Radka Solcanska also had a difficult experience with renters.
I had a group of young people in my new, renovated apartment. I met them the first day and I was thinking that they are drunk. I asked them to not throw a party in the apartment,
Things were quiet on the first night, but on the second evening her neighbours called to tell her the tenants were shouting and breaking things. She rushed to the apartment to find dirtied walls, a removed kitchen fan, and her WiFi password changed.
When they left I saw the apartment and I was shocked. The Internet was also not working because they changed the password without leaving me the new one,
Her story has a happy ending, since AirBnB has paid for all the repair works.
Now it's unlikely your insurance company can do anything to help you out with unruly guests, but they can certainly help protect you from liability. Steve Kee says it's understandable that more people are turning to Airbnb to try and make a few extra dollars and the concept of renting out a dwelling isn't new by any stretch of the imagination, so you shouldn't be afraid of reaching out to your insurance broker.
"You know, with the economy the way it is people are looking for ways they can make an extra buck and it seems fairly easy but they really haven't thought it out about what the insurance implications are," says Kee.
Now, people for years have traditionally rented cottages out and so if you tell your insurance company they may be able to alter your coverage to take this into account. But if you don't tell them and something happens then you may not be covered and that would be horribly unfortunate.
According to Kee you don't need to be worried about insurance companies patrolling sites like AirBnB, just looking for lying clients.
"I don't think it comes to that extent but we're seeing the growth in these types of services and an insurance company isn't going to be checking each individual listing that they have," he says.
However, if something happens and you are making a claim they're going to be asking you questions about what happened. And if it is because you rented out the property and that's not what your policy is set out to do then you may have a problem and you could be denied coverage.
He's also quick to point out that insurance companies don't say you can't have guests at your home without fear of losing coverage.
With any policy right now you are assessed a risk, and in home policies, for example, they'll take into account that from time to time you may have friends or family staying in your property but they don't set it out to say that you're going to be renting it every other weekend to somebody.
And Kee doesn't believe this is a technology to be shunned. The winds of progress are strong, and he thinks it's more likely that companies will try and take advantage of this new economy than try to stop it.
The shared economy is a new industry and for the insurance companies there are new exposures and new risks,
A competitive insurance market will see opportunities and create products. The simple answer here is if you're going to rent your property or you're going to use your car for something other than personal use then just pick up the phone and call your insurance representative and you'll get an answer and you'll have peace of mind.
Even the bad experiences aren't enough to scare some renters away from the service. Radka Solcanska says she plans on renting out her home again. She says she's met many nice people from all over the world through the service who she considers friends.
Alec Kinnear on the other hand is more apprehensive.
It has made us even more cautious. We have had few bad experiences as we require really good references. I would suggest hosts maintain high standards unless they want to move into the hostel space and regularly be cleaning up vomit from the living room floor. It can be difficult to find that peace of mind when renting out your home to complete strangers.
Here are some tips on how to make sure your property is safe in the hands of Air BnB renters:
- put your houserules into the description
- meet your guests personally and note any suspicious behaviour
- check on guest behaviour if you are at all worried
- guests with a long history on the site and many good reviews are far lower risk, as they have a lot to lose
- don't offer really expensive glassware
- don't have too powerful a stereo system. People will abuse what you have (and a powerful stereo is sure to attract the neighbours)
- make sure you don't have locked closets with visible booze or valuables
But as Steve Kee says, calling your insurance broker is a good first step.