“We encourage homeowners to read the fine print of their homeowners insurance policy and check with their agent or insurer to determine if additional coverage is needed to cover the risk of renting to short-term guests.”

Evaluating the risk

The Minnesota Commerce Department poses important questions for homeowners to consider who may be looking to put their homes on the market for Super Bowl weekend: what if your guest vandalizes your property, the common space in your condo, or even your neighbor's landscaping? What if your guest gets injured on your property? Who pays?

The MCD wants you to know it may be you who pays, not your insurance company, because many homeowners insurance policies will not cover property damage caused by paying guests or the costs of injuries they suffer.

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Accidents happen, and while most homeowners policies cover injuries, many will not cover injuries to paying guests on a property offered as a short-term rental. If you decide to list your property on a short-term rental site, talk to your agent or insurer to make sure you are protected.

The MCD is also warning homeowners to review the terms of their homeowners association (HOA) bylaws, if applicable, and check if their local community has an ordinance regarding short-term rentals. Both Minneapolis and Saint Paul recently adopted new regulations, anticipating an increase in short-term rentals during the Super Bowl.

Protecting yourself and your home

Homeowners policies often exclude or provide limited coverage for homeowners running a business in their home. If you list your property for short-term rental with any frequency, the MCD warns this activity may likely be defined in the policy as a home-based business.

Many policies contain a business exclusion that eliminates liability coverage of bodily injury or property damage for business activities. It is typical for a policy to include language allowing an owner to take in boarders on occasion, but “occasional” is generally not defined.

The MCD suggests alternative options for homeowners to protect themselves in this circumstance. One option is to purchase a landlord policy that covers your home, structures on the property, property contents (such as appliances and furniture), lost rental income due to building damage, legal fees and liability claims.

A second option is to rent only to guests who can prove they have homeowners, renters or personal liability insurance, as guests may have coverage under their own policy. However, homeowners policies often provide minimal liability coverage (for example, only up to $1,000) for damage to property of others. Additional coverage may be available.

What are your options?

For Airbnb users, the online platform currently offers a host protection insurance program providing $1 million in liability coverage. This coverage does not include medical expense or personal liability. Airbnb also has a host guarantee that reimburses hosts for property damage caused by guests due to accident or fault, if the guest does not otherwise reimburse the host.

Another online option, HomeAway (a subsidiary of Expedia Inc.), does not provide insurance coverage automatically for hosts. It recommends that hosts purchase a customized policy through an insurance broker.

For any Minnesotans thinking of getting coverage from a company other than your current insurer, check to be sure the company is licensed in Minnesota by using the license lookup tool on the Commerce Department website and confirm that it is a “surplus lines carrier.” This type of insurance covers risk that are considered unique.

The MCD warns that Minnesotans should be aware that surplus lines carriers are not covered by the Minnesota guaranty fund. This means that if the company has financial problems and goes out of business, policyholders would not have the protection of the Minnesota Insurance Guaranty Association, which would pay the company’s outstanding claims.

For Minnesota residents seeking more information, contact the Minnesota Commerce Department’s Consumer Services Center by email at [email protected] or by phone at 651-539-1600 or 800-657-3602 (Greater Minnesota).

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