Short-term rentals have exploded onto the travel scene over the last decade, causing a splash in the real estate market. But, of course, with new opportunities come new risks. In a shifting market, how can insurance underwriters balance risk for their companies? And how can customers work with insurance carriers to be transparent about their short-term rental plans?
Let’s first look at the evolution of the short-term rental market. As companies like Airbnb and VRBO have expanded, opportunities for new hosts to embrace the benefits offered by these companies have expanded as well. Some people might rent out a single room in their home and some might offer an entire investment property for full-time rental; others may try a mix of both. From the host’s perspective, owning a short-term rental property is a flexible and modifiable source of income.
With artificial intelligence developing and becoming more effective, short-term rental platforms are getting more creative, offering chatbots that speedily answer guest questions and improved filters for searching out experiences and photo listings. Resources like these allow hosts to be even more efficient and responsive to their guests.
Financially, the option to invest in short-term real estate is a lucrative one. Current research shows the average host makes nearly $1,000 per month with the possibility to make well into six figures a year.
are renting out their properties on a short-term basis.
So, what are the risks for insurers? This market is still so fresh it’s likely any issues that arise could take on quite the profile in the news. If a house is rented but isn’t covered under the right insurance policy, the implications to safety, property, and financial security can be serious.
Problems arise when people rent out their property without appropriate consideration and hope nothing happens. But what if something does?
Hosts have found themselves on the hook for thousands of dollars in damages, and their homeowner’s insurance may not cover these costs. Airbnb is doing its own crackdown on these kinds of problems with its Million Dollar Guarantee, but it remains up to the host to discern if the protection their policy affords suits each situation.
type of policy, problems can arise.
Wherever your company falls on the pros and cons of short-term rentals, it’s important to consider all your options as this market expands. Here are some factors that might influence your decision to offer coverage:
Whatever your company’s position is on short-term rental coverage, the best way to handle potential underwriting and determine coverage is with transparency. If you know what properties in your book are short-term rentals, you can ensure that your customers have the proper coverage and avoid tragedy if there’s a loss in the end.
[1] Nerdwallet, https://www.nerdwallet.com/article/small-business/how-to-become-an-airbnb-host
[2] Fast Company, https://www.fastcompany.com/3021179/secrets-of-running-a-six-figure-airbnb-business
[3] ABC, https://abcnews.go.com/US/airbnb-guest-accused-throwing-wild-house-party-caused
[4] Airbnb, https://www.airbnb.com/help/article/279/host-damage-protection
[5] Swimply, https://swimply.com