How Does Airbnb Affect Your Home Insurance Rates?


Q: “I'm a college student living in my parent’s second home while I go to school. They have let me rent out a spare room in the house to another student, but I was thinking I could make more money renting it out regularly on a website like Airbnb. My parents are worried, though, that this regular short term renting will affect their home insurance costs. Will it? How much more will they owe?” –Penny Pinching College Student

A: While websites like Airbnb offer a great economic opportunity, they can also really increase the need for liability coverage. Your parents are right to be hesitant for this reason, Penny Pinching College Student. The most important thing to do before renting a part of your home out on websites like Airbnb is to read the home insurance policy. Keep an eye out for clauses that get rid of liability for commercial endeavors. Those will be your biggest hurdle.

SEE ALSO: 9 Hidden Airbnb Gems You Have To Book Now

What Airbnb Covers

Most likely, your standard home insurance policy will not cover injuries or accidents that visitors may experience when in your home, including travelers using your place as a hotel. On the other end, though, the websites might cover some of the cost if something happens. Let’s stick with Airbnb as an example. Airbnb boasts a $1,000,000 Host Guarantee. This guarantee covers damages to your property from a guest. However, there are some limitations to this coverage. Airbnb does not cover:
  • Collectibles
  • Cash and securities
  • Jewelry
  • Rare artwork
  • Pets
  • Personal liability
  • Damage in some countries (see Airbnb’s website for the areas covered by the Host Guarantee)
In other words, if someone you’ve rented that extra room to comes home inebriated and shatters a window, Airbnb will most likely cover it. On the other hand, if that inebriated person sues you for the cuts, scrapes, and bruises on his arm from breaking the window, you will not be covered by Airbnb or, most likely, your home insurance.

Getting The Extra Coverage

With this in mind, Penny Pinching College Student, before you rent your room out to another college student, have them sign a contract beforehand. But, if you are still sold on the idea of renting out that extra room through sites like Airbnb, you might want to check with your parents to see if they have purchased an umbrella policy. With an umbrella policy, your parents can get more than the basic home insurance plan.Umbrella policies cover a wide variety of incidents, including injuries, false arrest, and even slander. But even then, your parent’s belongings might not be fully covered. Do they have fancy artwork hanging from the walls? A pool table? A medieval suit of armor? Well, if Joe Shmoe from Airbnb destroys any of these things, Airbnb won’t cover it, and neither will your basic insurance plan. For these items, your parents will have to purchase additional coverage. Coverage for valuable goods will protect the items listed in the plan up to its appraised value, which would give your parents money to replace it, in theory. The pricing of these plans vary based on your provider, but all of them are cheaper than a multi-million dollar lawsuit or the cost of a medieval antique. Consider both the risks and benefits of renting out a part of your home through this website before listing it on Airbnb. You won’t regret thinking it through.

SEE ALSO: Home Insurance Advice: Why You Need Umbrella Insurance

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