Thinking of renting out your home on Airbnb for the Christmas holidays? There are a couple things you should know first.
Airbnb has enjoyed incredible growth since its inception eight years ago in San Francisco. According to the founders, the business happened by mistake when three friends needed help paying the rent and let out space by means of three lilos in their living room.
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Airbnb founders from left to right: Joe Gebbia, Nathan Blecharczyk and Brian Chesky.[/caption]
The service has received a warm welcoming by South Africa with well over 9400 homes currently advertised on Airbnb. Customers have welcomed a more 'personal' form of accommodation, when on the move around SA. Renting out private property, instead of standard and only-slightly-personal hotel lodging, gives travellers the feeling of having a "home away from home". Something which is highly attractive to a 'foreigner'.
This new alternative to hotels has seen a tremendous growth of over 267% from 2014 to 2015 for tourists. And, 163%, in the same period, for South Africans travelling around the country.
Airbnb, 10% of their human traffic are businessmen who are choosing to forgo the stuffy and somewhat-cabin-fever feel of a hotel room. Instead, they are opting for a more soothing alternative to that homesick feeling in the form of Airbnb.
Likewise, for property owners, Airbnb is a means to make additional income by simply offering up an unused room in their house. Or, renting out the entire property to make a tidy profit.
Airbnb's Host Guarantee And Your Home Insurance
So, what are the legalities tied in with Airbnb and how does it affect your current home insurance policy?
What The Host Guarantee Includes
Airbnb provides protection to its hosts by covering "up to $1 000 000 for damages to covered property. This in the rare event of guest damages above the security deposit or if no security deposit is in place".
This, essentially, means if a guest slips and falls in your house and wants to sue you, Airbnb has a mechanism in place for that. It also means if they burn the gazebo in the garden down, you're covered.
What The Host Guarantee Doesn't Include
The Host Guarantee Program does not replace your homeowner's insurance or renter's insurance. Most people who have gone through the Airbnb process, as both a guest and a host, have said the process was pretty seamless. But, some may assume Airbnb will pay out should any household contents go missing.
"The Host Guarantee Program doesn't cover cash and securities, collectibles, rare artwork, jewellery, pets, or personal liability. We recommend that hosts secure or remove valuables when renting their place. Not all insurance will cover damage or loss to property caused by a guest renting your space."
This means that if you don't currently have home insurance or household contents insurance in place, it is highly advisable to do so before you open your doors to potential guests.
CLICK BELOW to read about whether or not you have insured your household contents properly.
The Airbnb Rental Process
- Potential guests will pick a date on the Airbnb application and agree to house rules set by the host.
- The request is sent through Airbnb to the host.
- The host can either agree or disagree to the request, if not happy with the potential guest's profile.
- Upon agreement, Airbnb handles payment between parties.
- A small portion of the payment is pocketed by Airbnb (they say to discourage any scams).
- Cancellation fees will vary from property to property as stated on the advert (take note of all specified terms before you agree to house rules).
Do Insurers Need To Know About Your Rented Room On Airbnb?
The short answer is yes. Full disclosure with your insurance provider is always best. This, instead of claiming for an activity your insurer was not aware of, and which has brought risk to the safety of your property.
Monique Swart, founder of the African Business Travel Association (ABTA), says, "There is always a risk when renting out a property. Even big name hotel GMs will tell you that they have had some monster guests trashing hotel rooms. So, I think that, as with any other business venture, risk versus reward must be measured and ways of mitigating the risk must be put in place before going ahead".
What To Ask Your Insurance Provider
Depending on your policy, 'business pursuits' on your private property may be excluded from cover. It is highly advisable to contact your insurance provider to find out how renting a room in your house, via Airbnb, may affect your risk profile, and as a result, your premiums.
CLICK BELOW to read about how combining your car insurance and home insurance can result in you saving on BOTH monthly premiums!
Christelle Fourie, chief executive at MUA Insurance Acceptances warns that another risk for hosts could be that most homeowner’s insurance policies require visible signs of forced entry before they pay out for any theft.
To help combat this, she suggests having a written and signed agreement with the lessee. The agreement will indicate that they will be held liable for any stolen or damaged items if there are no signs of forced entry.
"It’s likely that hosts who have not yet encountered any difficulties would not be aware of loopholes in their insurance policies or the need for extra paperwork to protect themselves."
You may even be able to rent out your property for a short period of time, depending on your insurance provider. Some insurance providers may ask for a backup of your current Home Insurance policy before providing cover for injuries and damage as a result of hiring out your space.
If you choose to use Airbnb on a continuous basis, to earn a more fruitful income than a long-term rental, your insurer may regard this as a business. In such
cases, you will be advised to take out Business Insurance, as Home Insurance policies do not cover business pursuits operated at home.