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The insurance industry has yet to catch up with the “sharing economy.” In particular, Airbnb has made the home and rental insurance picture more complicated for both insureds and insurers. There is a definite need for agents and brokers to ask whether an insured intends to use a property for Airbnb rentals.

If they don’t ask, insureds may not disclose—and this can have big consequences later on. Insurance companies consider Airbnb hosts to be in business—and expect to cover them that way. The law is just starting to catch up with this view, although slowly; for example, in San Francisco, a law just passed requiring property owners who rent short-term to carry at least $500,000 in liability insurance.

The problem is that there is no good one-size-fits-all insurance option for Airbnb hosts. Airbnb hosting is a short-term rental activity. Insurers consider anything under a 30-day stay a short-term rental situation, and these are higher risks than long-term leasing. It can sometimes be difficult to find the right policy or insurer to cover the risk.

Many hosts are renting rooms in their primary homes through Airbnb, which further complicates things. Homeowners’ policies don’t cover business activity in the home or fully compensate insureds for loss of income if something renders the property unrentable. While some homeowners’ policies will cover hosts who rent rooms in their homes out on a very occasional basis, this isn’t a good solution for anyone who does it regularly or earns a significant amount of income this way.

Some insureds buy landlord policies, but these are designed for long-term rentals and usually have an exclusion for business activities as well. Others might look into business policies designed for bed and breakfasts or hotels, which can also be problematic—as homes are generally not designed to function as hotels. For instance, a residence may not have the fire alarm systems and safety features a hotel is required to have.

Airbnb offers a Host Guarantee, which will cover up to $1 million in property damage. It’s by no means comprehensive, however. The Airbnb website states explicitly that the coverage “is not insurance and should not be considered as a replacement or stand-in for homeowners’ or renters’ insurance.”

There are good reasons for this. The Host Guarantee only applies in a few countries, including the United States. It does not cover cash and securities, and offers scant coverage for items such as jewelry, artwork, collectibles, and other valuable property that’s difficult to replace. It also does not cover wear and tear, or damage done to a common area of the property.

Vacation rental insurance may be a better solution for homeowners. These policies are specifically designed for short-term rentals run as a business. However, standard vacation rental policies are usually not designed to function as homeowners’ policies, and are made for properties that are not also a primary residence.

That may be changing, however. HomeAway, an Airbnb competitor, offers an insurance product, HomeAwayAssure, with liability and replacement coverage for the property and items inside, loss of income, and liability coverage if a guest is injured or dies on the property. Homeowners do not have to be HomeAway hosts to purchase the coverage.

Some other insurance companies are slowly beginning to offer similar types of vacation rental insurance, which are designed for homeowners who rent out of their primary residences. These policies are intended to replace traditional homeowners’ insurance.

Of course, every coverage situation is different and as yet there is no established, standard solution for homeowners who rent through Airbnb and similar sites. As the industry matures, it’s likely that more claims will start coming in—and renters will start realizing that they don’t have the safety net they need. It is definitely essential for agents and brokers to question insureds about their rental activities, as this can have a huge effect on the level and type of risk to be insured.

Check out our vacation rental insurance—and talk with us about the best way to cover your clients who rent through Airbnb and other sites. Get in touch today.