Airbnb has invaded the travel scene by offering vacationers a 'home away from home' — a sentiment some renters value more than others.

From property damage to stolen goods, allowing strangers into a home comes with plenty of risks, and the insurance market is still learning how to best cover the needs of homeowners who choose to list their property on home-share platforms.

Insurance coverage issues

Unlike a coastal or beach home, for example, which a homeowner might rent out for a season and have risks covered under a standard property policy, Airbnb allows homeowners to rent their primary dwelling on multiple, short-term bases, which isn't accounted for in the underwriting process.

"[Homeowners insurance] rates don't reflect the exposure that goes with a total stranger living in your primary living space," says Jim Kane, senior vice president and personal risk practice leader with USI Insurance Services.

While this situation can risk the application of a policy, in most cases, property coverage is already underwritten when a home becomes an Airbnb rental. The factor that most affects whether coverage will — or will not — apply is revenue, according to Kane.

"I think most companies would say less than $10,000 in revenue is immaterial; it's not really a business; it's a hobby. But when you get into the $50,000 revenue range, where you're regularly renting the house … now you could be up against a potential business exclusion because that's real income," he says. "[When it's] happening at a frequency and/or size that's becoming a business, then it will have us concerned, because that's not what the rates bear."

Insurers' response

The sharing economy has no doubt rattled insurers, and the industry is still gaining its footing in the market. As insurance companies accept the reality of the sharing economy, more and more carriers are responding with coverage options.

"We're seeing some of the standard carriers come through with endorsements because [Airbnbs] are becoming more common," comments Kane.

The E&S market and direct-to-consumer startups are also answering the increasing need for proper Airbnb coverage, such as Slice, which offers on-demand home-share insurance through a digital platform.

Ensuring adequate coverage and protection

For Kane, it's better for homeowners to be safe than sorry. He recommends Airbnb owners add additional personal liability coverage, as well as umbrella coverage, on top of their standard policy.

"[Adding coverage] is a smart thing to do because it's an expansion of the original exposure for the coverage that's already put together, and it's confined to the risks that are created by having a total stranger coming to your home," he explains.

Furthermore, implementing loss control efforts can help Airbnb owners mitigate exposures. Kane suggests owners should:

• Create temporary security codes for each guest;
• Apply better protections around internet access, such as temporary Wi-Fi codes that only work for specific time-periods;
• And make sure valuables are locked up and/or removed from the home before renting it out as an Airbnb.

Establishing better internet security can also protect an Airbnb owner from cyber hackers who can take control of postings or siphon money into their accounts when a listing is booked.

But at the end of the day, Airbnb owners must reflect on the risks of allowing strangers to rent out their home and take the necessary precautions. "The fact is that when you're staying in another building or home that you don't own, you certainly don't treat it the same as when you're paying the mortgage," Kane concludes.

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