It is estimated that around 150 million people use Airbnb worldwide and around 45 million of them are in the US. The short-term rental community is growing at a fast pace, especially after COVID when people were looking for safe and neat accommodation. The company’s revenue was around $8.4 billion in 2023. However, these rental spaces have often seen various issues, be it damage, liabilities, insurance, or others.

A $1 million Airbnb burned down in Georgia earlier this year. The insurance company declined to reimburse the expenses since the cause of the fire was unknown. But a settlement in court will inevitably be required in this case.

Using Airbnb to rent out your house can indeed have some negative consequences along with the revenue it can bring. However, the community is growing stronger by every quarter, as the idea of vacation homes and staycations gains popularity across the globe. To prevent homeowners from losing their wealth, it is crucial to be aware of a few issues and resolutions to safeguard the property.

The possible problems homeowners may face

• Damage to property

Last year, when an Airbnb tenant abruptly left, the hosts found themselves drowning in water, with clogged pipelines. It was suggested to the host to make the necessary repairs before submitting a claim via Airbnb host damage protection. However, her claims did not get settled even after six months. The host was extremely upset and confused as a result, losing a hefty amount in repair work, and the cost of temporary accommodation.

For homeowners, physical damage to the property of any kind, theft, fire, burglary, etc.—can lead to serious issues. This can either be done when the property is vacant or when it is being used by a tenant. Most of the cases like fire or theft can be covered by the general property insurance however, investigation is needed to establish who will be liable to pay for the refurbishment. Regarding financial liabilities, a homeowner must face repair costs, loss of rental income, and diminished property value, amongst other implications.

• Liability concerns

One of the most frequent worries for any homeowner or Airbnb host is liability. The most common case to face liability claims is when a tenant trips and falls on the porch or stairs or suffers any physical injury because of a maintenance issue in the property. In addition, any legal case involving torture, physical harm, or mental harm may also be brought before a court or other forum, which could present significant liability-based challenges for an Airbnb host.

In such situations, the homeowners may also face social repercussions in addition to financial ones, such as settlement costs and legal case expenses. Due to the legal case and related procedures, this may cause a loss of business and reputation. Furthermore, the property may be flagged or designated as dangerous, and there may be increased judicial scrutiny. These developments could cause unrest and create an environment where homeowners constantly feel like they are walking on eggshells all the time.

• Zoning problem

When it comes to Airbnb property rentals, every US city and jurisdiction has its own set of proposed and implemented laws. There are restrictions on short-term rentals in many US areas that are designated as residential. To protect the peace and livability factor of any area, rental properties are opposed by the neighbors. As a result, homeowners who rent their apartments or other properties without following zoning laws may find themselves in legal hot water.

Zoning regulations carry heavy fines for noncompliance. In addition, the homeowners may not be permitted to rent the property while the case is pending, resulting in income loss. Additionally, there may be social repercussions from this, such as disturbances in the community and complaints from nearby residents.

• Illegal activity

Numerous illicit activities have taken place in and around Airbnb properties time and again. In one instance, the occupants of a Miami residence were using Airbnb to illegally list the property and sublease it to other individuals. The homeowner was levied all the fines assessed on the property, but little to no assistance was provided as recourse. These kinds of activities are a homeowner’s worst nightmare. Illegal activities can also include drug-related activities, noisy gatherings, and using property without permission, amongst other things.

In these situations, the official homeowner is solely responsible for any financial consequences resulting from liability claims or any legal case. In the worst-case scenarios, the property can be seized, which means loss of assets and loss of income. In addition, there is a chance that the homeowner’s and property’s reputations will suffer.

The homeowners may experience numerous financial, psychological, and social issues as a result of all these issues. Around the world, there are significant differences in Airbnb’s policies for hosts. For instance, some cities have outlawed Airbnb services or imposed stringent guidelines for both renters and hosts.

If taken and used properly, insurance can be a great help in overcoming these financial challenges. Let us take a look at how insurance can help Airbnb hosts or homeowners avoid the above-mentioned problems.

Insurance for Airbnb hosts: How to use them correctly?

It can be difficult to obtain insurance when there are several parties involved, as was the case with the Airbnb hosts previously mentioned. In theory, homeowners’ insurance cannot fully compensate for damages incurred when homeowners rent out their properties on Airbnb. This is because homeowners’ insurance is for owner-occupied properties and in hosted apartments commercial laws are applicable.

So how can hosts on Airbnb fully protect their property? Here are some insurance policies to invest in that can lead to better protection.

• Airbnb host guarantee

Homeowners are shielded from liabilities by Airbnb host guarantee insurance, which offers coverage of more than $1 million per incident. These claims are not approved, though, without careful investigation and fact-checking. In this kind of insurance policy, property damage, liability claims, or any bodily injuries are covered. Any kind of intentional damage done by the host is not covered under Airbnb host guarantee insurance. The host or homeowner receives this insurance policy as part of their partnership with Airbnb, so there is no additional cost to obtain it. Claims issues may be expedited in serious cases, but the procedure may become tiresome and time-consuming.

• Short-term rental insurance

Although homeowners usually have comprehensive homeowners’ insurance, buying short-term rental insurance is still advisable. This kind of insurance offers a defense against liabilities and damages, making it perfect for Airbnb hosts. It covers costs incurred if the renter commits theft or damages someone else’s property. It also covers damage to content or property, legal fees, and medical expenses. This kind of insurance does not cover damage from natural disasters or intentional damage of any kind.

• Business interruption insurance

An extended period during which Airbnb hosts are unable to rent their homes is considered a business interruption. This might be the result of a lawsuit, a natural disaster, maintenance, etc. The homeowner receives a specific amount with this kind of insurance policy to cover income loss due to any calamity.

In addition to all of this, additional comprehensive insurance policies, tailored to specific needs, can be chosen, including liability insurance, property insurance, umbrella insurance, and others. At Gonzalez Insurance, we recognize how critical it is to have complete protection in the current economic situation. We can assist in locating the gaps that could lead to financial damage to a homeowner. Get in touch with us to receive a quote.