How the Popularity of Airbnb and Other Home Sharing Companies Is Impacting the Insurance Industry

// December 6, 2017
Reading Time: 4 minutes

Home-sharing companies like Airbnb, HomeAway, Vacation Rental by Owner and Homestay are growing in popularity. Whether someone needs a place to stay for a weekend concert or a week-long getaway, these short-term rentals give travelers a unique experience.

Among all of the rental websites available today, Airbnb is one that has been significantly increasing in popularity in recent years. According to an article posted by DMR Business Statistics, Airbnb’s total valuation as of June 2017 was $31 billion. As of August 2017, there were 660,000 active U.S. homes listed on Airbnb, 43,000 of which were in New York City. By the end of 2017, it is projected that Airbnb will have approximately 100 million guest arrivals in total.

As an insurance professional, you may be wondering how this boom in short-term rentals could impact you. There are more and more houses being listed for rent every day on home-sharing websites, which means more opportunities to make sure your insureds have adequate coverage.

When asked about how coverage is obtained for these short-term rental exposures, the most common response is that coverage is provided for the host via the home-sharing website. For example, Airbnb provides a Host Guarantee program. The website states “our program protects against liability claims up to $1 million USD that occur in a listing, or on an Airbnb property, during a stay.” Many other home-sharing websites have similar programs as well, but do these programs provide full liability coverage for any losses that may arise? Are there gaps in the liability coverage?

Consider the following claims example:

A condo owner rented her unit out to a guest via a home-sharing website for a weekend. She had been having trouble with her dishwasher and knew it had a tendency to leak or not function properly, but she figured it wasn’t worth mentioning to the tenant since they would only be staying in her unit for one weekend.

The tenant ran the dishwasher during their stay, and it leaked into the hallway and lobby of the condo’s building and seeped into the neighbor’s apartment below, damaging the wood floor in that unit as well.

The condo unit owner submitted a claim to the home-sharing company because she was under the impression this type of liability loss would be covered. However, the home-sharing company only paid out a small plumber’s fee, leaving the host on the hook to pay approximately $10,000 worth of damages out of pocket. The claim was denied because the home sharing-company’s liability program only covers the actual unit, not damages outside the unit.

In the example above, the owner of the condo unit was under the impression that she had adequate coverage for her short-term rental exposure but found out the hard way that there were some gaps in her liability coverage, including no coverage for neighbors or common areas in the condo association.

With an HO6 Condo Unit Owners policy with USLI, she could have received up to $1 million in liability coverage, which includes third party water damage coverage up to the liability limit, up to $500,000 in property coverage for the unit itself, and even up to $50,000 for loss of use coverage when she is temporarily unable to rent out her condo unit while damages are being repaired. These coverages are all important to consider when speaking with insureds about their short-term rental exposures.

As home-sharing companies gain more listings and expand into more cities across the U.S., now is the time to have a conversation with your insureds about their short-term rental exposures. For these short-term rental exposures, keep both USLI’s Comprehensive Personal Liability product and HO6 Condo Unit Owners product in mind! Please contact your Personal Lines Underwriter for more information or to obtain a quote today!

As always, thank you for your support and business.

USLI’s HO6 product is not available in AK, AL, CA, FL, HI, KY, LA, MS and WV; USLI’s Comprehensive Personal Liability product is admitted in CA, NC and SC.

Please note in order to be eligible for either our HO6 or Comprehensive Personal Liability products for short-term rentals, the entire unit or home would need to be rented out.

Contact Mark Adelsberger,
Condos Assistant Product Leader | 888-523-5545 Ext. 2253

Written by Lisa Spitko
December 7, 2017