BLOG

The Risks of Airbnb and Home Sharing

Just a few years ago, taking a trip involved contacting travel agencies, booking hotel rooms and making plans far in advance. Today, however, smartphones and the internet have helped create new sharing services that allow homeowners to connect with travelers and rent out their homes, spare bedrooms or other accommodations for a fee.

Airbnb, the most popular of these sharing services, offers a convenient platform that can provide homeowners with an extra source of income. However, renting through Airbnb can also expose you to substantial risks and leave you with costly property damage and liability claims.

Potential Insurance Gaps
Relying strictly on your regular homeowners or renters insurance policy while hosting guests through Airbnb can lead to significant gaps in coverage. These policies are designed to protect you and your family from everyday risks, and not from commercial renting.

If a renter uses your home for even a small amount of time, you and your family will be exposed to significantly different risks that weren’t considered when your policy was drafted. As a result, most homeowners and renters policies won’t cover property damage that’s caused by Airbnb guests.

If you’re considering renting through Airbnb, your first step should be to contact your insurance broker to review your current homeowners or renters insurance policy. While your homeowners or renters policy may allow you to rent your property to a guest, it’s important to keep in mind that each insurer has its own restrictions and requirements. Some insurers may require advanced notice of any short-term rental, whereas others might insist that you purchase an endorsement to expand your coverage.

If you plan to rent out your residence on a regular basis, many insurance companies will consider this commercial use. In many cases, regular Airbnb hosts will need to obtain a commercial insurance policy in order to be properly insured. However, a growing number of insurance companies now offer home-sharing liability insurance policies that can be purchased on a month-to-month basis.

Issues with Airbnb’s Provided Protection
Airbnb does offer its hosts two forms of protection through its host guarantee program and host protection insurance. While hosts may be inclined to rely exclusively on these programs to manage their risks, there are significant gaps related to these offerings.

Host Guarantee
Airbnb backs every one of its bookings with its host guarantee program at no cost, which will reimburse eligible hosts for damages up to $1 million. However, Airbnb readily admits that its host guarantee is not insurance and should not be considered a replacement or stand-in for homeowners or renters policies.

Moreover, payments through the host guarantee are subject to a lengthy list of terms, conditions and exclusions. Therefore, hosts should be aware of the following issues related to Airbnb’s host guarantee:

• Hosts must attempt to resolve any issues with the guests involved prior to receiving any compensation. This also means that a host would have to make a claim on his or her own insurance policy before the host guarantee would apply.
• Any sum collected from a standard policy or a security deposit would be deducted from the host guarantee.
• The guarantee will only repair or replace covered property that is damaged during the time frame of an online booking.
• This guarantee does not cover certain items including, but not limited to, cash, collectibles, jewelry, pets, watercrafts or any damage to property that is not considered a covered accommodation.

For more information on specific elements of Airbnb’s host guarantee program, hosts can review its terms and conditions in full on the company’s website.

Host Protection Insurance
In addition to its host guarantee program, Airbnb offers coverage to its patrons through its host protection insurance. Airbnb indicates that the program provides primary liability coverage for up to $1 million per occurrence in the event of third-party claims of bodily injury or property damage. Despite these claims, hosts should be wary of relying solely on this insurance program for a number of reasons:

• Intentional acts that aren’t the result of an accident are not covered under this policy. In addition, Airbnb’s home protection insurance does not cover what it refers to as property issues, which can include things like mold, asbestos and bedbugs.
• Neither Airbnb’s home protection insurance nor its fine print is readily available for review. The policy is also subject to limitations, conditions and exclusions. Together, this means that the specifics of these coverages are vague, and Airbnb hosts may not know exactly what’s protected.
• The personal property of any guest is generally not covered. Additionally, any theft or damage caused by a guest may not be covered either.

With Airbnb’s host protection insurance, it’s best to assume that you aren’t equipped with the proper coverage. For full protection, it is likely that you will need to speak with an insurance professional to better understand the policy adjustments you will need in order to be fully covered.

Considerations for Condo Owners and Renters
While Airbnb opens its services to condo owners and renters, multi-unit buildings often have restrictive bylaws, homeowner association rules or lease terms that could impact the ability to host guests through Airbnb.

In many instances, commercial activities like renting out accommodations—even for short periods of time—are forbidden by lease or condo board policies. In some cases, hosts will need to contact their landlord or condo board before subletting or renting out any accommodations. Failure to do this can result in eviction or other forms of legal action.

Even if you’re allowed to rent out your condo or apartment through Airbnb, doing so can cause tension with neighbors. There’s always the potential that your guests may not be respectful to property in common areas, act inappropriately or noisily, or make other tenants feel uncomfortable.

Local Laws and Considerations
In response to the rising popularity of Airbnb, many states, cities and towns are moving to regulate short-term property rentals through their municipal codes or zoning regulations. In some cases, home rental services like Airbnb could be prohibited altogether.

If you break these local regulations, purposely or otherwise, you could face thousands of dollars in fines. What’s more, Airbnb says alignment with laws and regulations is the responsibility of those renting out accommodations. As a result, you need to review your local laws and regulations before using Airbnb to rent out your accommodations.

The Bottom Line
While Airbnb offers a unique and potentially profitable service to users, it’s not without its faults. Before you decide to try it for yourself, be sure to consider all of the risks. For more information on sharing services, or to review your homeowners or renters policy, contact us at (916) 380-5300 today.

Filed under: Personal Insurance — Jillian Bender-Cormier @ 5:18 pm September 20, 2017


NHTSA Announces Additional Air Bag Recalls

The National Highway Traffic Safety Administration (NHTSA) has announced that the results of new safety tests have prompted the recall of an additional 2.7 million vehicles in relation to defects in air bag inflators manufactured by Takata Corporation. The agency said that the most recent recall applies to driver-side air bags built from 2005-2012 that are included in certain vehicle models manufactured by the Nissan, Mazda and Ford motor companies.

Defects in air bag inflators manufactured by Takata have been linked to 17 deaths and over 180 injuries worldwide, and the total number of recalled vehicles as a result of these issues is now over 100 million. Takata recently pleaded guilty to a felony charge as part of a $1 billion agreement with the Justice Department that also includes financial compensation for automakers and victims of the malfunctions. The company also filed for bankruptcy as a result of the ongoing recalls, but stated that it was prepared to continue shipping replacement parts for affected vehicles.

To learn more about recalls related to Takata’s air bag inflators, visit the NHTSA’s website.

Filed under: Personal Insurance,Safety — Jillian Bender-Cormier @ 5:56 pm August 16, 2017


Congress Considers Flood Insurance Reforms

The National Flood Insurance Program (NFIP) is one of the few ways to get insurance coverage for flood risks, and the program is set to expire later this year. However, Congress is currently examining a number of possible changes to the NFIP before it’s reauthorized.

One of the most important topics regarding the NFIP is its financial stability. The program is currently $24 billion in debt as a result of rising claims costs and severe weather events, and some lawmakers believe that the program needs substantial reforms in order to remain viable.

The following are some of the changes that are being considered to the NFIP:
• Making private flood insurance more available to consumers
• Limiting payments to properties that flood repeatedly
• Reducing taxpayer subsidies for flood insurance
• Creating financial incentives for flood mitigation

Contact us at WGBCO with questions on how we can help you with flood coverage. 916-380-5300

Filed under: Personal Insurance — Jillian Bender-Cormier @ 6:35 pm July 19, 2017


Auto Insurance Prices Likely to Keep Rising

Most lines of insurance cycle between soft and hard markets over a number of years, which has a direct impact on the price of insurance. The auto insurance market is currently hardening after many years of a soft market, which has resulted in higher prices for both commercial and personal auto policies.

Between 2011 and 2016, competition between auto insurance carriers created a soft, buyer-friendly market. Since then, however, the high cost of claims and increasing costs of vehicle repairs have contributed to a noticeable transition in the market.

Contact Warren G. Bender Co. today. We can provide you with resources to help you understand and save on auto insurance, including our new article, “Coverage Insights – The Hardening Auto Insurance Market.”

Filed under: Auto,Personal Insurance — Jillian Bender-Cormier @ 11:22 pm May 3, 2017


53 Million Vehicles Recalled in 2016

Statistics released by the Department of Transportation (DOT) revealed that automakers issued recalls for a record 53 million vehicles in 2016. This marks the third straight year that there have been over 50 million vehicle recalls.

A majority of the recalls were due to ongoing issues with airbag inflators manufactured by Takata, a Japanese auto part supplier. At least 16 deaths have been attributed to the malfunctioning inflators, which led to a recall of over 42 million U.S. vehicles since 2013. Takata recently pleaded guilty to a felony charge as part of a $1 billion agreement with the Justice Department that also includes financial compensation for automakers and victims of the malfunctions.

The high number of recalls in recent years has been accompanied by an increase in highway fatalities. According to the National Highway Traffic Safety Administration (NHTSA), fatalities rose by 7.2 percent in 2015, the latest year for which data is available. Although the NHTSA has yet to release its full set of data for 2016, preliminary reports from the NSC indicate that the number of fatalities continued to rise.

Filed under: Personal Insurance — Jillian Bender-Cormier @ 11:10 pm April 12, 2017