What insurance do you need as an Airbnb host?

Airbnb launched in South Africa in 2015. Since then, the number of home hosts has grown to more than 35 000 with South Africans pocketing more than R3.8 billion over this time. The ripple effect of this booming Airbnb community has also proved significant, resulting in an economic impact of approximately R10 billion and supporting upwards of 22 000 jobs. So what’s the catch?

“You just never know what you’re letting yourself in for when renting to virtual strangers, and a big risk for homeowners is that their property will be damaged,” warns Christelle Colman, Managing Director of Elite Risk Acceptances, who offers tailor-made short-term insurance solutions to meet the changing insurance needs of their high-net-worth clients.

While most stays go without incident, there are stories of entire houses being wrecked by dozens of partygoers. For instance, the case where 70 guests trashed a Melbourne beachfront property causing $150,000 worth of damage. Other infamous reports include a guest who put a sofa, a single bed and chest of drawers in the shallow end of a swimming pool while another guest recreated a beach inside an owner’s property.

There was also a public liability claim of £26,000 (about R500 000) brought about in Wales when a guest slipped on decking steps. Despite a sign at the back door warning that decking could be slippery when wet, the guest claimed for personal injuries, time off work and legal fees.

“With the holiday season looming and many homeowners gearing up to rent their homes out over this period, it’s critical that they have the necessary insurance in place for both property damage and third-party claims,” says Colman.

Airbnb’s insurance offerings

Airbnb offers Host Guarantee and Host Protection Insurance.

Host Guarantee is designed to protect hosts in the rare instance of property damage (up to $1million) to their own possessions, unit or home by a guest staying in the space. While the Host Guarantee does offer the host some cover, it does not replace your homeowner’s or renter’s insurance policy.
The Host Protection Insurance program is designed to cover hosts in the event of third-party claims for bodily injury or property damage. This is available to hosts regardless of their other insurance arrangements, but will only act as primary insurance coverage for incidents related to an Airbnb stay.
Sounds fair, but several incidents suffered by Airbnb guests have shown that it’s not always as simple as it seems. The claims process can get very complicated, with guests often suffering personal financial setbacks when covering medical bills they thought would be covered by Airbnb Host Protection Insurance.

Insurance tips for Airbnb hosts

“It’s important to know exactly what your homeowner’s insurance policy covers. Many companies exclude short-term rentals and therefore do not cover your Airbnb rental. At Elite, we offer our client’s specialty policies to help them adequately insure against loss or damage to personal property suffered as a result of short-term rentals,” says Colman.

What is however important to note, is that the property owner’s liability risks incurred by paying guests will only be covered under most local insurers’ policies if they are purely a personal insurance risk. The liability policy therefore specifically excludes liability incurred by the client’s business. As such, if the Airbnb is a residential property which is used to supplement the client’s income, the liability will be covered. However, if the client is a property owner, whose sole business is the owning and letting out of properties, it is considered a commercial risk and the personal liability policy will not provide cover.

Also important to consider, is that if you are renting out part of your home on a regular basis in order to generate income, it is general insurance practice in South Africa that your insurance company may view that as a business activity, which is typically not covered by a homeowner’s policy. Property owners would instead, need to purchase a commercial insurance policy to ensure they are covered against damages.

“It is therefore important to always declare the occupancy purpose of your private home, even for short-term rentals. With Elite, you automatically enjoy the extended cover for short- and long-term home rentals,” notes Colman.

Three important questions to ask your insurance provider

What happens when my short-term paying guest:
1. Burns down my building?
2. Falls down my steps and sues me?
3. Forgets to lock my front door and I get burgled?

If the answer to any of these questions is “you’re not covered”, then you may want to take out additional insurance. Colman cautions homeowners to seek professional advice regarding their specific insurance requirements. “A reputable company will be able to identify all the relevant risk exposures involved with short-term rentals. While Airbnb rentals can be very lucrative, homeowners must be aware of the pitfalls. Not having the correct insurance can end up costing you a lot more than the rental income you earn,” she concludes.

With thanks to : Christelle Colman, Managing Director of Elite Risk Acceptances