Legitimate bed and breakfast operations are paying the proper insurance and taxes – but the growing popularity of ordinary homeowners using Airbnb under their homeowners’ policies are creating a problem – and presenting a coverage gap.
Legitimate bed and breakfast operations are paying the proper insurance and taxes – but the growing popularity of ordinary homeowners using Airbnb under their homeowners’ policies are creating a problem – and presenting a coverage gap.
“A regular homeowner’s policy would not extend to such a business,” said Michelle Ohm, a commercial broker with Verge Insurance Group in St. Catharines, Ont. “Quite a bit of that coverage is missing. A claim could very much be denied.”
One man, John Kidder, cancelled his own listing when he was told by his insurance company that his coverage would be revoked if he continued using the service.
“(The insurance broker) said homeowner insurance, the general kind, does not, under any circumstances, cover short-term rentals — that's considered a commercial risk,” Kidder told CBC’s The Early Edition. “And she did not know any insurer on a normal home insurance policy who would cover that risk, period.”
To avoid any potential problems, brokers should be asking clients if they are taking part in any businesses like Airbnb.
“When they renew with the clients,” said Ohm, “brokers should be asking if there is any business going on in the home.”
One B&B owner in Toronto, Ont. told Insurance Business that although they too participate in Airbnb, they offer those rooms under their commercial coverage policy and pay the associated taxes with such an operation.
“We do have a couple of rooms listed on the Airbnb,” says Margaret, a B&B owner who asked not to be identified, “but our rates include the taxes, and reflects the fact that our insurance policy is four times as much as a regular home policy. Our rates are higher (than those private homeowners advertising on Airbnb), so obviously our rooms aren’t getting as many hits.”
Airbnb recently rolled out a million-dollar liability insurance program for hosts, but that is only available in the U.S.
However, Host Guarantee promises to reimburse hosts for up to $900,000 in damage to their eligible property – but that is not actually insurance, as it doesn't cover items like cash and securities, pets or certain types of property like jewelry and artwork.
According to Rich Seto of Reliance Insurance Agency, clients who use Airbnb are treated as mainly short-term rentals, raising concerns of liability exposure and theft and vandalism.
Daniel Mirkovic, with Square One Insurance Services Inc. says he believes his company is the only one in Canada that does cover those participating in home exchange programs.
“You'll be paying a slightly higher rate for the additional risk of having people unknown to you residing in your living unit,” he said. “There is a higher deductible that is applied for crime-related losses like mysterious disappearance.”
