Home Sharing: Insuring Your Home or Apartment

By the Mercury Team

With the rise of platforms like Airbnb and Vrbo, an increasing number of homeowners and renters are turning to home sharing as a way to generate extra income. But renting out your beach condo, mountain chalet, or a room in your downtown apartment, even occasionally, can come with a set of risks that your standard homeowners insurance or renters insurance might not cover.

Here are some important things to keep in mind before you set your sights on potential riches by renting out part or all of your home on a vacation rental website. Understanding your vacation rental insurance options is key to protecting both your property and your peace of mind.

What Is Home Sharing?

Home sharing refers to renting out all or part of your residence to paying guests, usually on a short-term basis. This can range from listing a spare room on Airbnb a few weekends a month to regularly renting out your entire vacation property. While not a new concept, home sharing has gained momentum for homeowners and even apartment tenants looking to make additional income. Doing so, however, can change your insurance risk profile.

What Are the Risks of Home Sharing?

Unlike owning your home, home sharing does come with its share of risks. These may include:

• Property damage caused by guests
• Injuries or accidents involving guests on your property
• Theft or vandalism
• Loss of rental income if your property becomes uninhabitable
• Legal liability if a guest sues you due to injury or loss

Even careful guests can unintentionally flood a toilet or injure themselves on a dock, and hosts need to be prepared to deal with potential liabilities that extend beyond what personal insurance typically covers.

Does Homeowners Or Renters Insurance Cover Home Sharing?

It’s pretty likely that your standard homeowners insurance or renters insurance policy doesn’t extend to home sharing. Most traditional insurance policies are designed for personal residential use and not for renting your space to strangers. And if you’re renting out your home even a few times a year and haven’t updated your insurance, you might actually be violating the terms of your existing policy.

Why Standard Homeowners/Renters Insurance May Not Be Enough

Your standard homeowners insurance or renters insurance policy likely doesn’t provide coverage for hosting your home or apartment as a vacation rental. Why?

• Standard insurance policies are designed for personal residences, not commercial activities. Home sharing is often categorized as a business activity, especially if it’s done frequently or for profit. Most homeowners insurance and renters insurance policies explicitly exclude business-related claims.
• Your existing policy might not cover damages caused by your guests, liability for any injuries sustained on your property, or lost rental income if your property becomes uninhabitable.
• If your insurer isn’t informed of your home-sharing activity, they may deny a claim altogether. That would leave you on the hook for a costly lawsuit or property repair bill, all because you didn’t disclose your rental activities.

“Standard homeowners insurance coverage is intended to protect you, your home, and your belongings in the event of damage or theft,” says Bonnie Lee, vice president of property claims at Mercury Insurance. “Deciding to rent out all or part of your home through a platform like Airbnb or Vrbo is a business venture, and your protection has to evolve to meet this change. Ensuring you, your home, your belongings, and your new guests are protected requires a new level of insurance coverage.”

Insurance Options for Home-Sharing Hosts

To protect your property and yourself, you’ll need to find home-sharing insurance tailored to your specific short-term rental scenario. Your first step, though, should be to talk to your current insurance provider. Let them know about your plans to rent out your home and whether you’ll be on-site during guest stays. They can help you understand any coverage gaps and advise whether you need to upgrade or switch policies. Here are a few options your insurer may recommend:

Home-Sharing Endorsement

Some insurers offer home-sharing endorsements, which are add-ons to standard policies. These endorsements may provide limited coverage for property damage caused by guests and liability protection for guest injuries.

While this might be a good starting point, endorsements usually come with strict limitations, including capping the number of rental days per year or restricting the type of guests covered. If you rent your lake house out on a full-time basis, you probably need more comprehensive coverage with fewer limitations.

Landlord Insurance

If you rent your property more frequently or for longer durations, consider landlord Insurance vs. homeowners insurance. This type of policy is designed specifically for rental properties and usually includes property damage coverage and liability protection, along with protection from loss of rental income if a property is considered uninhabitable. You may also add optional coverage for furnishings and appliances in the home.

Specialized Short-Term Rental Insurance

For comprehensive protection, your insurer should steer you toward short-term rental insurance. These policies are specifically created for home-sharing hosts and offer broader coverage than standard endorsements or landlord policies. They usually cover guest-caused damages, bodily injury liabilities, lost income, legal fees, and vandalism and theft.

Platform Coverage

Vacation rental platforms, such as Airbnb and Vrbo, do offer coverage programs that can help cover the cost of damage caused by guests staying in your home. Airbnb insurance coverage, for instance, provides liability coverage should the guest or a third party get injured or have their belongings damaged due to an incident at your home.

However, this coverage isn’t recommended as a replacement for homeowners insurance or other vacation rental insurance. These coverage programs often have limitations to what would be covered. You should always read through home-sharing insurance policies to fully understand what coverage the platform may or may not provide.

Other Important Considerations

Beyond choosing the right vacation rental insurance, there are a few other important factors to keep in mind:

Local Laws and Regulations

Before you even set out to open up your home for income, you’ll need to check into the city and state ordinances that govern short-term rentals. This will help you establish your vacation rental under the proper regulations. Cities such as Los Angeles enforce specific regulations for home sharing, and all hosts must understand and abide by the regulations to avoid possible fines and citations. Some cities even require specific insurance coverage or proof of liability protection. Make sure you’re compliant with local zoning laws, HOA rules, and licensing or permitting requirements.

Rental Frequency and Duration

If you’re renting your property often or for extended stays, you’re operating at a higher risk level. The more frequently you host, the more likely you’ll need dedicated short-term rental insurance or landlord insurance.

Guest Screening and Safety

Even the best insurance policy won’t prevent accidents or poor behavior from guests. Reduce your risk by carefully screening guests before you accept their reservation, installing security systems, smoke detectors, and fire extinguishers on the property, and keeping everything clean and well-maintained. Proactive safety measures can prevent claims and may even lower your premiums.

Final Thoughts on Insuring Short-Term Rentals

Hosting guests in your home can give you another income source, but without the right insurance for renting out your home, it can also become a liability nightmare. Discussing policy options with your insurance agent can help you navigate your own insurance policy as well as the programs offered through the vacation rental platforms. Having the proper coverage prior to listing your home or apartment as a vacation rental can help you avoid expensive damages and fees or possible eviction.

That’s where Mercury comes in. Contact us today for a fast, free quote on insuring your vacation rentals.