The boom in internet accommodation sites like Airbnb has led to more Australians opening their doors to people we don’t know. But what if something goes wrong? Lia de sousa, General Manager, Strata, at Whitbread Insurance Brokers, checks out what happens after strangers check-in.
It’s Saturday night and you’re catching up over a few quiet drinks with friends who tell you about this wonderful new way of making money off your property – Airbnb. This prospect gets your brain ticking.
You have a five-week holiday booked in a month’s time, and your home will be sitting there empty while you venture off overseas. So you think, why not give Airbnb a go? It’s a great opportunity to make a little money on the side. It could even pay for most of your overseas accommodation costs. Sounds wonderful, right? We think so too. However there is one thing you should check out before taking the Airbnb plunge with your property; your insurance. You shouldn’t assume your Strata or Home Contents Insurance policy will cover you for any malicious damage or theft whilst Airbnb tenants are living in your home.
Take this claim scenario for example: Kate and William let their apartment out to a couple via Airbnb while they travelled to London for six weeks to visit their son George. They returned from their holiday to find their apartment trashed, and their entertainment system worth more than $10,000 gone. Bad turned to worse when they tried to lodge a claim under their Contents Insurance policy and it was denied in full.
Why your insurer can deny your contents claim…
When entering into an insurance contract, you are required to notify the insurer if there is any change to your circumstances, as this may affect your insurance cover. A Contents policy will generally not cover your possessions when your property is being used for short-term letting. Failure to notify your insurer of a change in living conditions could be considered a breach of the contract, and as such your policy can be voided, leaving you exposed.
No evidence of forced entry
For theft of contents to be covered, many Contents Insurance policies require clear evidence of “break and enter” to respond. In the instance above, Kate and Will willingly gave their keys to a short- term tenant, and as such there was no sign of a break and enter when their home entertainment system was stolen.
You are making an income
Your insurer may perceive an Airbnb short-term letting as carrying out a business activity within your home. This may void your cover, as the intention of a domestic Contents Insurance policy is not to cover business activities in your home. You may be exposed to significant financial loss where your Contents Insurance policy fails to provide cover when letting your apartment through Airbnb or another peer-to-peer leasing site. If, after reading this, you still think Airbnb is for you, then we urge you to follow our tips to protect your assets.
- Do your homework – read reviews on prospective tenants.
- Before committing your property to Airbnb, notify your insurer immediately.
- If your insurer agrees to provide Contents cover despite changes to your circumstances, request the insurer’s confirmation of cover in writing.
- If your insurer chooses not to provide Contents cover for short-term letting, we would strongly recommend that you speak to your insurance advisor.
- Obtain clarification from your insurance advisor on what your Strata building Insurance will provide cover for. Each policy will vary regarding their specific exclusions and inclusions, and you should be well informed before opening yourself up to any potential asset exposures.
Is there a solution?
You will be pleased to know that there are definitely solutions out there to cover your Public Liability exposure. However, the Australian market has no tailored insurance solution designed for Airbnb or other peer-to-peer leasing websites to cover the contents of your home.
While such solutions are now becoming available in the United States, Australian insurance companies appear to be slow in responding to this disruptive business model. There may, however, be a light at the end of the tunnel. The emergence of specific Airbnb insurance cover in the US may inspire the Australian market to develop an appropriate policy, and capitalize on what is fast becoming a burgeoning industry. Watch this space!
This article is not intended to be advice and you should not rely on it as a substitute for any form of advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website: www.whitbread.com.au