Airbnb Hosting Risk Management with Insurance
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Airbnb Hosting Risk Management with Insurance

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What are the risks I should be aware of as a host?

Short-term rental through airbnb has become a growing segment in the real estate economy. While the laws and regulations around the globe have mostly come around to facilitate economic activities in the fastly growing marketplace, the hosting industry is still early in its maturity phase.

Property rental, especially short-term rental, comes with inevitable risks such as:

  • Contractual violations if mortgage or lease agreements for the property include restrictions against subletting or hosting
  • Violations of present or future local regulations in a constantly evolving regulatory environment
  • Property damage
  • Legal liability in case of guest injury
  • Guests becoming tenants (legal uncertainties)
  • Financial failure from unsuccessful hosting
  • Safety threats to guests, host or neighbours

You can manage your risks by becoming knowledgeable about the local regulations and any contractual restrictions that may be applicable to your or your property. Guest screening with house rules (link to internal) and strategic furnishing (link to internal) can be helpful in minimising the risk of undesirable guests occupying the space or causing damages to your property and belongings.

Similar to management of most risks, insurance schemes are useful in mitigating exposure and provide hosts with a peace of mind. Airbnb offers $1M host protection insurance and $1M host guarantee to almost all hosts globally. The host guarantee is not insurance but a resolution program offered by Airbnb to help hosts in cases of theft or property damages. But more serious hosts and experienced property investors often seek additional insurance coverage to minimise their risk exposure in scenarios not covered by Airbnb.

Airbnb Host Guarantee and Protection Insurance Cover

The host guarantee provides $1 million USD in reimbursement for damages incurred by the guests. The host protection insurance provides coverage up to $1 million for any bodily injuries or damages to properties belonging to guests during their stay in case of legal claims from the guests. The host guarantee is not insurance and does not replace your homeowner’s or renter’s insurance. Short-term rental may not be covered by your current homeowner’s or renter’s insurance policy so you should check with your insurance provider.

Additional Insurance Covers

Standard home or landlord insurance only covers damages related to a lease of 90 days or more. While consideration of short term stay guests as tenants and the agreement as a lease/licence is an ongoing conversation across Australian courts, for now short-term stays do not qualify under these common insurance policies. Moreover, some insurers will cancel your policy upon learning about your airbnb activities.

There are insurers that offer landlord insurance plans tailored for owners hosting short-term rentals such as Aspire Insurance Solutions, NRMA Insurance, and Ceneta Insurance Services. These plans provide coverage for loss of rent income in case of unexpected challenges as well as additional coverage for property/content damages and public liability. Your premium will depend on your building regulations and the characteristics of your property.

SELF MANAGED GUIDES

Overview

Airbnb Hosting 101

You can post either the entire place or part of the property for rent (private room or shared room) on Airbnb. Airbnb will take 3% commission from the hosts and 6-12% from the guests.
Be memorable

Furnishing and Amenities

You want to make sure the guests have access to the bare minimum they would have come to expect nowadays and also deliver pleasant surprises to make their stay memorable in a positive way.
Attract attention

Making a Good Listing

You want to include the photos highlighting the best features of the property but also want to set realistic expectations with the guests.
What to charge

Pricing Strategy

While the maximum and minimum you can charge are likely set by the value of your property (based on size, location, etc.), you have quite more control over the revenue stream than you realise.
Guidelines

Guest Screening & House Rules

If expectations are not clearly set, you can be on the hook for damages caused by guest behaviours not explicitly prohibited by your house rules.
Ratings affect your status

Reviews & Becoming a Super Host

According to the survey, 94% of consumers will avoid dealing with a business with bad reviews. People don’t trust businesses with lower than 4-star ratings. So listings with lower ratings will have to compromise seriously on the price to attract bookings.
Listing occupancy

Maximising Airbnb Occupancy

You want your occupancy rate to be 80% or higher for the next couple weeks and be at about 30-60% for the next 2 months.
What you should know

Insurance & Risk Management

Airbnb offers $1M host protection insurance and $1M host guarantee to almost all hosts globally. The host guarantee is not insurance but a resolution program offered by Airbnb to help hosts in cases of theft or property damages.
Dedicated management

Using Property Managers

Oftentimes property managers will offer a shared revenue model in exchange for full management services. Some (although not a lot) offer a la carte services where a host can cherry pick some key services a property manager can offer.
What is it?

Airbnb Plus & Luxe

Airbnb Plus is an invite-only programme made up of top superhosts and places. Airbnb Luxe, on the other hand, is even more of an elite programme for the most extraordinary homes handpicked by the Airbnb team.
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