The Biggest Risks Faced by Airbnb Hosts & How to Best Manage Them

Legal Risks of Hosting an Airbnb, Vrbo or Vacation Rental 

The first roadblock to Airbnb hosting is the legality issue. Is it legal to rent your apartment or home as an Airbnb? Does your HOA allow short-term rentals? Are you located in a zone that limits or bans hosts from operating an Airbnb? 

The legal landscape is always changing for Airbnb hosts. The risks associated with the fluid nature of Airbnb legality are (1) not being educated on the current short-term rental regulations and (2) not keeping up to date on developments in the Airbnb laws in your state, county, and city.  

For instance, did you know? –  

Florida 

Florida’s short-term rental regulations for Airbnb hosts are quickly expanding as Florida becomes one of the nation’s biggest short-term rental markets. Cities and counties across the state are enacting new restrictions and standards for Airbnb hosts in order to monitor this emerging market, including registration, resort taxes, parking limitations/requirements, pool safety regulations, and more. 

New York 

New York is one of the biggest travel hubs in the US, so it makes sense that laws are constantly tightening to control New York’s short-term rental market. There are rules on things like guest length of stay, the property owner being present for Airbnb guest stays, emergency exits, license to operate, and building codes. 

California

Short-term rental laws in some of California’s biggest destinations, like LA and San Francisco, impose heavy restrictions on whether Airbnbs are allowed, where they are allowed, what types of properties are allowed to be used as vacation rentals, permitting processes, registration certificates, and more. 

And this is all before you even get down to a specific zone and specific property. Browse our Regulations Map to get started on learning your state’s short-term rental laws.

Airbnb Hosting Risks Associated with Guests 

The biggest source of risk for Airbnb hosts is the guests. Where a landlord has a long-term, well-defined relationship with a tenant, an Airbnb host has short-term, poorly-defined relationships with their guests. This opens up a series of possible pitfalls for the short-term rental host: 

A Guest is Injured During Their Stay, On Your Property or Off 

Accidents happen. But when they happen to a guest who is staying at your property, you may be found liable for the injuries of those accidents, whether the injury happens to your guest or because of them, and whether it happens on the stairs inside your home or in your backyard, the lake of your waterfront property, or down the street in your neighborhood. 

What if someone slips in the shower? What if they get hurt or worse in your backyard pool? What if your neighbor’s dog gets loose and bites your guests? What if the wine provided in your welcome basket gets into the hands of curious minors?  The scenarios are truly endless.

You could end up on the hook for medical care, lost income, negligence, and more. Liability is your greatest exposure and the most costly risk you face as a short-term rental owner; many lawsuits in the category of liability approach or exceed $1M.  

Maintaining the appropriate insurance policy offers liability coverage for Airbnb hosts, but there are also measures you, as the host, should take.

To minimize the risk of guest injury, make your property as fool-proof as possible (literally): 

• Treat your Airbnb like a hotel
  • Make everything as safe and accessible as possible. For instance, minimize risks of falling in the shower with high-grip bath mats, low-step shower pans, handrails, and ensure the shower is always free of slippery soap residue before each stay. 
• Treat your Airbnb like a public space
  • Consider how commercial buildings protect public safety: fire alarms, easy access to fire extinguishers, emergency exits, adhering to building codes, properly maintaining the property, outdoor security cameras, etc. 
• Assume your guests know nothing
  • Provide a comprehensive “User Guide” for guests. This should include emergency numbers, names and locations of emergency services, contact information for yourself or whoever is managing the stay, information about the neighborhood and building, how to use electronics and appliances, and locations for emergency shut-off valves, fuse box, etc. 

A Guest Causes Theft, Damage or Injury

What if your guest gets a little too rowdy and breaks a window? Or what if they accidentally cause damage to your neighbor’s home from a rogue firework on the fourth of July? What if they steal your TV and other valuable furnishings of your Airbnb? Occasionally, Airbnb does background checks on users, randomly and inconsistently, so there is no guarantee that your guests have been verified as decent, non-criminal people before they enter your property. 

Airbnb’s Guest Verification also falls short. For one, the inconsistency of the background checks. But the bigger issue is that all Airbnb requires from a guest is a verified government ID with face and date of birth. This information is extremely basic, and not an effective screening tool and hosts are not even provided with photos of these IDs to perform their own screening – just a name and an under/over age 25 designation. 

The unequivocal solution to this inevitability is the right insurance coverage. Every guest is an unknown, and most insurance coverage for Airbnb hosts doesn’t cover this specific risk of guests causing damage to you or others. This is another reason verifying your insurance is an absolute must before you approve that first booking as an Airbnb host. 

A Guest Becomes a Squatter

Another brand of nightmare guest is one who overstays their welcome. Often, you’ll see red flags with guests, like poor communication, evasiveness, frequent extra requests, disrespecting house rules, and then, of course, refusing to leave.  

The first thing to do is set clearly defined house rules on your listing and provide an additional copy of said rules in the guide you created for guest stays. It is easier to justify a formal complaint to Airbnb or local law enforcement when you have solid evidence a guest has intentionally overstayed and doesn’t intend to leave. 

While you can and should report a squatter to Airbnb, they will often defer to the local laws on squatters rights for the eviction process. Meaning that, until and if you can have that guest removed from your property, you’re on your own, dealing with a property you can’t rent out and an illegal “tenant” who likely isn’t treating your property with a lot of respect. 

Guests who participate in illegal activity, make neighbors feel unsafe, or have too many people at the property are all grounds for eviction, but the problem is the time and the toll. Make sure your Airbnb insurance eliminates risks associated with squatters by offering appropriate coverage for loss of income and legal fees. 

Unfortunately, there’s no sure way to eliminate the risks of being an Airbnb host. 

Most of your guests will be a breezy, positive experience. However, between accidents, life’s unpredictability, and people who just aren’t good people, those few guest stays that end up poorly can ruin your budding Airbnb business in one fell swoop.  

The best way to protect yourself from guest-related risks is to keep an insurance policy specifically designed for the risks of hosting short-term rentals on platforms like Airbnb and Vrbo. But that, too, can be its own treacherous journey if you don’t choose the best Airbnb insurance coverage.

Problems with Airbnb’s Insurance for Hosts 

So, why not keep all of your Airbnb hosting logistics on the same platform by using Airbnb’s free Aircover for Hosts? It certainly sounds like an Airbnb-specific insurance policy, doesn’t it? Well, that’s the whole point. Airbnb needs its hosts; providing a coverage program for things like liability and damages makes it more attractive to list on their booking platform compared to others. But what is the reality of Aircover? Does it actually protect Airbnb hosts against the risks we’ve discussed? 

The answer is maybe. If they feel like it. 

Airbnb’s Aircover for Hosts is riddled with red flags. The four biggest are: 

1. Aircover should not be considered a replacement nor a substitute for a personal insurance policy for your property and short-term rental business. 

2. The policy includes a class action waiver, meaning that should Airbnb fail to cover damages, hosts waive their right to sue Airbnb for not following through on the contract. 

3. You are not named on the policy, meaning you are not a policyholder, and you have no direct rights. 

4. Aircover is riddled with exclusions buried pages deep on the site, and even still, their lists state that it is not exhaustive.  

If Aircover is to protect Airbnb hosts, why is the policy filled with clauses that serve to protect Airbnb from its hosts? 

The Airbnb Reddit community is filled with threads about how much Aircover doesn’t actually cover. There are endless stories of damage claims being rejected because the host didn’t figure it out within 14 days of the stay or because Airbnb arbitrarily decided the damage wasn’t bad enough to be considered anything more than normal wear and tear.  

With nearly 6000 complaints on BBB and a 1/5 rating on Trustpilot, the internet is full of Airbnb hosts who learned about Aircover the hard way, issuing warnings to new hosts to retain their own short-term rental insurance policy.

Don’t become an article about how a guest accidentally burnt down the home and the Airbnb host was on the hook for it; heed the advice of your predecessors and get the right insurance.

Risks of Hosting an Airbnb Without the Right Insurance 

What, exactly, are the risks associated with not having the right insurance coverage for a short-term rental? Simply put: everything everywhere all at once. All the risks we’ve discussed are part of the nature of being an Airbnb host; that’s just the reality of renting to a revolving door of guests. If you don’t carry the correct insurance, you carry the liability for any and all of those potential misfortunes and well as anything related to guest-caused property damage.

Consider: 

Homeowners Insurance is Insufficient  

Homeowners insurance does not cover short-term rentals because of a business activity exclusion, which includes renting your home for money. You may add a rider or piecemeal endorsements to your Homeowner’s policy to include the business activity of your short-term rental only if the property also serves as your primary residence. Even still the policy will always fall short in offering true comprehensive protection. If the property is not your primary residence and you opt for a Homeowner’s policy, in most cases, any claim, even with a short-term rental rider, can be denied.

Landlord Insurance is Mismatched 

Landlord insurance does not adequately apply to short-term rentals, as the nature of landlord-tenant relationships is completely different from host-guest relationships.

Think of it this way: in a long-term rental, it’s typically the tenant’s belongings inside; it’s what they consider to be their neighborhood, they know about the handrail on the front porch that is a little wonky, and they have a stake in the community for the long-term. A short-term rental guest is just there for a glimmer in time, the furnishings inside do not belong to them, they don’t know the property’s quirks, and they have no greater connection to the community.

The roles and responsibilities of these relationships are different as well, which opens massive gaps in Landlord policies.

Furthermore, Landlord policies are meant to cover passive income, whereas a short-term rental is an active income-generating business.

Aircover for Hosts is Only a Guarantee

We’ve already outlined that Aircover isn’t the same as an insurance policy with your name on it. You may think, Well, why not just utilize Aircover in addition to my Homeowners policy? But that’s not so simple, either.

Reminder: Your standard Homeowners insurance likely doesn’t cover operating your property as a business, which means it won’t cover guest-related issues like liability or damage.

And we know that Aircover is about as ephemeral as air itself, so banking on it alongside your Homeowners or Landlord policy still isn’t an adequate solution. Aircover will only even consider responding to a claim that happens during a booking period. So, if something happens outside of the booking period, or if you don’t report the claim during the allotted time period, AirCover will not step in at all. AirCover is also a long, grueling process of receiving any sort of resolution. Don’t just take our word for it; read any forum on the topic between even Airbnb’s Super Hosts.

The Wrong Insurance is the Same as No Insurance 

The biggest risk of failing to purchase the proper insurance policy for Airbnb hosts is that your insurance will just deny the claim. Period. And once your insurance has denied a claim under an exclusion, loophole, waiver, or violation of the contract, you alone are left to foot the bill for the injury or damage, however large it may be. 

Verify Your Insurance is the Proper Choice for Short-Term Renting 

Proper Insurance is the only Airbnb insurance provider exclusively endorsed by Vrbo. Our coverage for Airbnb hosts isn’t homeowners insurance and it isn’t landlord insurance – it’s a one-of-a-kind commercial homeowners insurance policy designed for the unique and myriad risks faced by hosts of short-term rentals.

With special coverage for unfortunate results of guest damage, liability, loss of income, and bedbugs, Proper’s policy for Airbnb hosts ensures your entry into short-term vacation rentals has maximum rewards and minimum risks.