Airbnb listings spike ahead of Super Bowl LII, but does a typical home insurance policy cover damages caused by renters?
As fans flock to Minneapolis for Super Bowl LII on February 4, many homeowners in the area have listed their homes on short-term rental site Airbnb, hoping to gain some extra cash by housing guests for the big game. According to the Minneapolis-St. Paul Business Journal, the Twin Cities already sported 5,000 Airbnb listings by January 26. Of that number, 1,800 have been booked at an average cost of $240 a night.
All told, Minneapolis expects more than one million fans, journalists, and tourists to visit the city for the Super Bowl and the events leading to it. According to Rockport Analytics, they’ll spend more than $407 million over the course of the week, including $88 million from overnight stays.
With so much cash flowing into the city, it’s not surprising that homeowners jumped at the opportunity to generate some rental income from their homes. Before they decide to list their property on a short-term rental platform, however, they should be aware of the insurance implications.
What Home Insurance Doesn’t Cover
Airbnb guests pose the same risks as visiting family or friends such as property damage or an injury to the guest. Homeowners may mistakenly believe that their standard homeowner’s policy covers such perils, but it most likely doesn’t.That’s because insurers usually classify a short-term rental as a home-based business operation. Under a standard homeowner’s policy, an insurer either excludes or provides only limited coverage for damages arising from commercial activities within the home.
Homeowners can add on extra coverage when renting to guests, however. The Minnesota Department of Commerce recommends that homeowners purchase a landlord policy that insures the home, any structures on the property, and its contents (furniture and appliances). Such policies also cover lost rental income while the home is being repaired following any damages, legal fees, and liability claims.
Homeowners could also require renters to show proof of insurance such as a homeowner’s, renter’s, or personal liability policy. The Minnesota Department of Commerce notes, however, that homeowner’s policies offer very little liability coverage, typically around $1,000, for damages to another person’s property.
In addition, homeowners who want to list their homes on Airbnb have the option to sign up for its host guarantee program, which reimburses hosts for damages up to $1 million. Before a host obtains a payment, he or she must first attempt to work out a resolution with the guest. If the homeowner and the guest can’t reach an agreement, then Airbnb will review the claim and settle the dispute.
Airbnb cautions that its host guarantee program is not insurance, and that homeowners should consider obtaining extra coverage beyond a homeowner’s or renter’s policy. It also suggests that homeowners opt into its Host Protection Insurance Program. Now available in the U.S., participating homeowners are eligible for up $1 million in liability coverage for property damage by a guest or any claimed injury on the property.
While Airbnb offers its hosts insurance options, other similar platforms, like HomeAway, do not. HomeAway advises homeowners to discuss special coverage with an agent.
Insurance agents should also inform their homeowner’s insurance clients of any city regulations regarding short-term rentals if their clients are considering renting out their property. Prior to the Super Bowl, Minneapolis approved a city ordinance requiring homeowners who rent out their homes for short periods obtain a license. Similarly, San Francisco mandates that hosts carry at least $500,000 in liability insurance. Homeowner association rules may also contain bylaws regarding short-term rentals.
While homeowners might be tempted to pocket some extra cash by occasionally renting out their homes, they must also protect themselves against any possible damages. Insurance agents can give them the peace of mind they need and the proper insurance to make short-term rentals a safe and profitable venture at any time of the year — even the week of the Super Bowl.