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Home Insurance

Does homeowner's insurance cover an Airbnb rental?

As a home sharing host you put yourself at risk with gaps in your personal homeowners insurance. Learn how to protect yourself before you rent your space.

Disrupting through sharing has become one of the hottest economic trends within the past few years.

Many startups across the United States are taking the idea of “mine” and turning it into a damaging “ours” that has completely flipped industries on their heads.

Whether you need a car or a bed, say goodbye to big corporations because complete strangers are at your service… for a small fee, of course.

You’ve probably heard of or used booming ridesharing services like Uber and Lyft to get around, but what if you wanted to do more than simply pass through a city?

The convenience and personal interaction between driver and user when sharing a vehicle has sparked a consumer craving for local experience when traveling, and at a lower cost. Enter Airbnb.

Airbnb and other house sharing services create platforms for ordinary people to list, discover, and rent any type of accommodation across the world (think apartment, tent, castle, etc.) from the comfort of their smartphone.

Since its debut in 2008, Airbnb has been crushing the hospitality industry. The online marketplace is being blamed for the recent 4% drop in revenue from the NYC hotel tax.

On top of that, a survey conducted by Goldman Sachs reported that Airbnb has roughly a 36% customer retention rate -- people who vow to never stay in a traditional hotel again. But, how is this kind of disruption being achieved?

Ride and home sharing services have struck a chord with their target audiences through humble and intimate advertisement.

Uber’s ads and homepage emphasize the grassroots of the company as, “people like you, going your way [...] They are mothers and fathers. Students and teachers. Veterans. Neighbors. Friends.”

This kind of marketing is suggestive. Not only are you getting a fairly priced ride, but you’re socializing with your neighbors and contributing to their earnings. That makes people feel good about their choices.

Airbnb has a very similar approach. Their advertisements and web page urge customers to not just travel, but to truly live and “belong anywhere.” You aren't just paying for a room, you’re paying for a cultural experience from a welcoming citizen.

Both services talk the talk when it comes to the benefits of sharing, but what about the risks?

If Uber is the easiest way to monetize the extra seats in your car, Airbnb is the best way to profit from an extra bedroom or couch. But, this cash cow could easily turn into a leech if an accident involving your guests occurs on your property.

And if you think your homeowners insurance will cover the cost of medical and maintenance bills, you’ll want to think again.

In terms of insurance, Airbnb’s company policy is actually very similar to Uber and Lyft’s rideshare insurance coverage.

Basically, it all depends on the kind of coverage you have to begin with. However, both Uber, Lyft, and Airbnb provide some extra protection for their customers.

Let’s start with your own personal homeowners insurance. Homeowner policies vary from carrier to carrier and from state to state. However, the vast majority of policies exclude people who are running a “business” in their homes.

A business can be defined as a homeowner who regularly earns money by renting their property to short term guests. Home insurance policies only cover you (the policyholder) and your guests who are relatives or individuals you care for under the age of 21.

Therefore, your insurer has the right to deny coverage if they learn you’re running a hotel or bed and breakfast type business. In short, this leaves you and your assets vulnerable to lawsuits that would slip through your coverage gaps.

In this case, Airbnb offers their own Host Protection Coverage.

It provides liability coverage for up to $1 million per occurrence for third party claims of bodily injury or property damage. This protection doesn’t apply to certain liabilities like asbestos, communicable diseases, and other intentional acts.

Between personal homeowners insurance and Airbnb’s additional coverage, hosts still face limited options when it comes to protecting themselves against potential lawsuits from short term rental guests.

In order to serve this need, Allstate has recently announced that by August 2016 it plans to roll out a specialized home sharing protection policy in six states including Arizona, Colorado, Illinois, Michigan, Tennessee and Utah.

This product, called “HostAdvantage Endorsement,” will mark Allstate as the first major insurance carrier to offer property protection for home-sharing hosts.

In the initial rollout, homeowners will be able to add this unique coverage to their existing policy for only an additional $50 a year.

Fast growing services like Uber and Airbnb do a lot more than impact the lives of their users by offering convenient services at a fair price.

Their success as a company has a domino effect on almost every industry whether it involves public transit, hotels, or personal insurance. Insurance carriers are being kept on their toes with each new technology that could create a gap in traditional coverage plans.