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Great piece on short-term rental accommodation maket in Australia and the impacts of Covid-19, by Mitchell Sweeney! @shareosaurusrex

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Airbnb Host Guarantee & insurance - peace of mind or empty promises?

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Sharing economy platforms are great on a good day, and continue to throw-up interesting possibilities. More generally, the sharing economy provokes us to think about different forms of resource-use and social organisation. Travelling, and hosting, differently - myself, family and friends have been hosted by wonderful people around the world on Airbnb - is just one example. But when it comes to the question of risk, liability and livelihoods in this context, platform guarantees and liability insurance offering ‘free peace of mind’ raise some troubling questions that I want to tackle head on.

The ‘guarantees’ & liability insurance provided by some sharing economy platforms, like Airbnb, have received mixed reviews. The purpose of this piece is to cut through the noise. And to present findings which show that free Platform Guarantees, and Platform Liability Insurance, may be inadequate forms of protection for you and your home.

Why does it matter?

According to Airbnb research, a huge percentage of people use Airbnb to help pay off their mortgage and 85% of Airbnb users rent their primary residence. Damages, liability and loss threaten host’s homes, and livelihoods.

Furthermore, through a steady stream of news articles, insurance peak body submissions, and forum posts from frustrated users, it’s become apparent that standard home and contents insurance won’t cover you for paid guest’s stays. And nor will most landlord insurance - since guest stays are often deemed too short, and you can’t get cover if you live in your property whilst renting.

Platform Guarantees appeared to bridge this cover-gap. But their ‘worry-free’ veneer hides imperfections that may cost you dearly. In fact, they’ve cost many hosts - who’ve taken to relabelling the so-called ‘peace of mind’ associated with such guarantees as (among other things): 'false sense of security', ‘false promise’, and ‘piece of your wallet’. Many have found the hard way that the worst time to learn of a Platform Guarantee’s limits are when it’s failed you, and you end up on the hook - be it for $700 or $10,000.

What are Platform Guarantees?

Platform Guarantees promise to reimburse eligible hosts for damages up to a certain amount. Most Platform Guarantees are free. A well-known example of a Platform Guarantee is Airbnb’s Airbnb's ‘Host Guarantee’.

Platform Liability Insurance is ‘actual insurance’, offering cover for some cases of liability for injury and property damage. Examples of platform liability insurance include HomeAway's ‘$1M Liability Insurance Policy', Airbnb's ‘Host Protection Insurance' and the VRBO (US) ‘$1M Liability Insurance'.

Many platforms - such as Stayz and TripAdvisor Rentals in Australia, and Vacasa, Innclusive, Kid & Coe, Aura Travel, and Housli in the US - offer no property guarantee or liability insurance at all. Many allow hosts to set security deposits, and others, like HomeAway (US) promote a Book with Confidence Guarantee (payment security) - but despite claiming to offer ‘peace of mind’ these features do not protect you for any property damage or personal liability. To its credit HomeAway does direct its hosts to buy an insurance product tailored to short-term renting needs, albeit from the supplier of their choice (CBIZ).

Three things Platform Guarantees are Not

Problems emerge once you consider the mix of provisos, exclusions, conditions, and other bits of fine print that constitute Platform Guarantees and how they work in practice. I’ve found they are inadequate in three crucial ways: legality, cover, and claims.

1. Platform Guarantees are Not Insurance

The Airbnb Host Guarantee, for instance, “is not an insurance policy”. That’s taken straight from the Terms and Conditions.

Why does this matter?

Under Platform Guarantees you have no policy rights and no recourse. Because you don’t pay for the policy, and you’re not named as an insured on the policy, the platform’s word is final. If they decide not to provide compensation and close the case, there’s very little you can do about it. Furthermore, if you can’t resolve a dispute with Airbnb, you’re unable to take legal action against them, and there is a gagging clause in their terms that means you’re prevented from discussing details of your case elsewhere.

As such, it’s also explicit that such Platform Guarantees are not the same as homeowners & renters, or landlords insurance, and shouldn’t be considered a replacement or stand-in for them. Furthermore, hosting through a share economy platform may well simultaneously invalidate your homeowners insurance, meaning you will personally have to cover any gaps left by the guarantee.

2. Platform Guarantees are Not Comprehensive

So-called Airbnb ‘horror stories’ - drug-fuelled orgies, a much publicised death of a man in Texas, and NYE disasters around the globe - make the headlines. But what’s often left-out of these sensational reports are the stories of regular hosts, hosting regular guests, who aren’t covered for more modest damages or instances of liability, which are far more common.

Platform Guarantees generally don’t cover:

Shared or common areas (or any strata property damage)

Airbnb's Host Guarantee for example, only covers your listed space (for example, the private room or apartment you’re renting), and won’t cover damage outside that (for example to any common areas or shared property & infrastructure, such as a plumbing or electrical system that is linked to other residences). Further, the guarantee only covers “direct physical loss”, meaning that if a guest causes a fire which not only destroys the host’s apartment, but also damages or destroys a good part of the apartment building, the host wouldn’t be covered under the guarantee for the damage to the building.

Bottom line - if you live in an apartment building, you’re probably not covered!

Pets - be that any pet you own, or any pets your guests bring with them

If for example an incident occurred where your treasured dog or cat was injured while you had guests staying, your pet wouldn’t be covered! Furthermore, if guests bring pets with them and incur damages - whether you have a ‘No Pets’ policy or not - as happened to one unfortunate host whose guests brought three dogs and caused significant damages - you as a host are not covered!

Cash and Securities

If you use cash, or have a laptop, or any other belongings that are valuable to you (just might apply to quite a few of us), you probably aren’t covered!

Vehicles

If you have a car, boat, or other kind of ‘mobile’, you probably aren’t covered!

Any type of malicious damage (including assault)

Sadly this one isn’t an ‘if’ - violent acts do happen, both to property and people - and you probably aren’t covered!

Theft (including identification theft)

Again, sadly this one isn’t an ‘if’ - theft happens all the time, including identity theft. And with a platform guarantee you probably aren’t covered!

Platform Guarantees also tend to only provide limited coverage for things like jewellery, collectibles, and artworks.

Platform Liability Insurances also have important omissions, limitations, and grey-areas, for instance those of Airbnb's ‘Host Protection Insurance’:

Doesn’t cover:

slander or libel (which fall under the ‘Personal & Advertising Injury’ exclusion)

any of the personal property of the host

any collisions involving vehicles

anything intentional - including arson, and acts against hosts (or guests) such as assault and battery, and sexual abuse or molestation

loss of rental earnings

For what it does cover, the maximum insured is $1,000,000:

This is a relatively low-rate of liability cover. In instances of liability claims where loss-of-life or serious injury occurs, and hospital, legal and other reparations fees have to be taken into account, the sums required are large, especially if you haves more than one guest staying. Most dedicated short-term rental insurance products offer at least $10,000,00 in public liability cover.

Finally it’s  - not easy to get a copy of the actual policy or terms and conditions:

You have to request one from Airbnb. And by now you should know that you can’t be sure what your rights and responsibilities are under any coverage without having read through (all) the T&Cs.

3. Platform Guarantees are Not Easy To Claim

Even if your loss is covered under a Platform Guarantee’s terms, protection is far from assured.

The primary reason for this - as in the case of any attempt made by a host to win a claim under Airbnb’s Host Guarantee, for example - is the conflict between host and guest that is engendered by the claims process. Despite doing everything in your power as a host - providing documentation and following all correspondence procedures - you still need the your guest to admit to causing the (full value of) damages (as the only way, short of installing cameras inside your home, to prove that incurred losses were caused by an Airbnb guest). If the guest declines, chances are there’ll be no reimbursement.

Extensive evidence exists to suggest Host Guarantee claims processes often involve hosts being played off against guests, forcing a part-resolution between the two parties in order to deny a claim, and leaving hosts stranded if a guest denies damaging the property.

To return to the hypothetical of a fire in your apartment building as discussed above, you have to ask yourself - how many guests would admit responsibility for causing such damage, knowing that they would be personally liable? Denying seems like a pretty rational, and perhaps necessary, response. The problem is that under a Platform Guarantee, the host could be on the hook instead.

Claiming a Platform Guarantee appears to be so tricky that people have gone to the trouble of creating step-by-step walkthroughs for how to navigate process. Here I’ll only summarise the key shortcomings of the Airbnb Host Guarantee claims process:

1. You must attempt, before anything else, and using your own time and financial resources (to the extent that the platform deems satisfactory!), to resolve the loss or damage directly with the guest. And if Airbnb deems you have done everything possible and this fails, you must then seek reimbursement through your homeowner’s insurance

If at all, the guarantee is only accessible after appeals to the guest, your security deposit and existing homeowners insurance have been exhausted. The fact that you must, on your own time and dollar, exhaust a whole range of other avenues before a platform will even consider paying your claim, lends credence to the idea that such guarantees are a last-resort, and should not be depended upon. And while Airbnb have made verbal assurances that they frequently provide compensation under the Host Guarantee, anecdotal stories from frustrated Airbnb hosts and the opinions of insurance professionals, suggest otherwise.

2. You are constrained by the rigid, technical & time-pressured procedures

For instance, if you fail to (correctly) report the damage before your next guest arrives - even if they arrive that same day - or within 14 days, whichever is earlier, the Guarantee is void. Is it feasible, or even possible, to have a tradesman come in and provide an estimated cost of repair or obtain a police report before your next guest check-in, which may be in 4 hours? And what about delays that are beyond your control - such as awaiting replies from your guest or home & contents insurer (both of whom you have to correspond with in order to be eligible for any compensation under a guarantee), or from the platform themselves (as has frequently happened to claimants)? So, it’s not just the deadline for claim submission, and the extensive (and often irretrievable) documentation required, but mini-deadlines within the process - another being the expectation that you respond within 48 hours every single time you receive correspondence from Airbnb, lest your case be closed.

3. You must have informed your guest explicitly, in-writing, that they are responsible for the losses covered by the Host Guarantee in order to be eligible to claim.

4. If (luckily) you are covered for an instance of damage, and by a small miracle your claim is approved, the property loss will be valued at 'actual cash value’, rather than replacement cost value. This means it’s likely you won’t actually be able to replace damaged or lost property, particularly if it wasn’t produced super-recently. Meaning claim payouts are often unsatisfactory.

5. If you change your property ‘materially’ at any time you may not be guaranteed for anything at all. This is the Airbnb Host Guarantee’s exoneration clause - it means that if they deem your property has ‘changed materially’, grounds exist for them to not reward any claims.

6. Problems claiming through the Trust and Safety department, and issues with communications falling between or disappearing among other service teams, can lead to frustrating delays and uncertainty.

Zacharias from Las Vegas writes in a discussion about security deposits on Airbnb’s own Community Forum that “Airbnb seems to fight tooth and nail not to pay a host out”. This echoes the feelings of other frustrated users towards the Host Guarantee. But I can’t help feeling this isn’t just a matter of Airbnb being unfair on a case-by-case basis, but that it reflects a fundamental commercial problem with the ‘free peace of mind’ cover on offer. I think that host and Quora user Ryan is pointing in the right direction when he says “You get what you pay for, which is basically nothing”.

The fact is, providing quality, primary coverage for the burgeoning universe of Airbnb hosts - there are over 115,000 listings in Australia alone, and 4 million+ worldwide - just may not be feasible without a premiums pool to play claims from, which Airbnb’s free ‘peace of mind’ arrangement doesn’t provide. Unless, of course, they’re able to sustain the pretence of coverage by putting the onus on guests to reimburse, having notoriously low payout rates, and a minimalist approach towards resourcing claims. This analysis would go a long way toward explaining how it is Airbnb are able to ‘give’, freely, both the Host Guarantee and Host Protection Insurance. Dennis Schaal of tnooz writes, “The financial burden wouldn’t be great if claims are rarely paid out, goes the thinking”.

The history of platform guarantee claim outcomes supports this line of thinking - one thing is clear from users’ feedback - things consistently aren't getting covered. The vast majority of unpaid damages are ‘small’ - $118 for bedding, $299 (from a Superhost mind you), or $700 for cleaning and countertop repairs (I’m stretching the definition of ‘small’ in this case). But the fact is that most incidents are relatively ‘small’ - breakages, thefts - so when these aren’t getting covered en-masse, that’s important. And it certainly matters to individual hosts caught in these sticky (often literally) situations. And of course there are instances where worse things happen - Kristen had $3,000 worth of her belongings stolen (and was reimbursed only $300), and Amanda who had to foot a $US10,000 bill after a guest misused her toilet and caused damage to other apartments in her complex (she was reimbursed just $US78 - the plumber’s fee). Hosts themselves are consistently footing bill where Platform Guarantees & Liability Insurance fall short.

And this issue is by no means exclusive to Airbnb - similar insurance issues exist with other short-term property and room rental sites. A common learning from all these stories is the need to understand the fine print. In fact that’s the purpose of this piece - to make it clear what the fine print actually means when it comes to platform guarantees. And for most reasonable people, they’ve found it certainly doesn’t mean ‘peace of mind’.

And the fact is, there’s much more detail that could be gone into - other cases, clauses, conditions, standards, expectations - and that’s kind of the problem. Free Platform Guarantees & Liability Insurance just aren’t worth the risk. Well, they’re technically worth nothing at all - but that’s besides the point.

So what can you do, now, as a host? Three Options

1. Keep doing what you’re doing

Keep doing what you’re doing but be really, really careful.

Follow host safety tips - like “interact smartly”...

Create a security deposit to improve your chances of reimbursement for the small things - but it’s worth noting that Airbnb hold your property damage security deposit themselves, making reimbursement subject to their approval and begging the question of whether it can really be called a security deposit at all. Further, a guest posting on AirHostsForum relayed an instance where he received $80 from his $320 claim, despite having a security deposit for $200. Airbnb said that since the claim was beyond the value of the security deposit, his cover was automatically moved under the Host Guarantee, leading him to suggest increasing one’s security deposit and never bothering to claim more than that that (“unless you want to get shafted”).

Outcome: remain exposed to the same risks for which you do not have cover.

2. Don’t rent your place on a short-term basis through a sharing economy platform

Outcome: remove the risks associated with renting short-term, but also forfeit the income you could gain from doing so.

3. Don’t assume that a platform guarantee will provide you with any protection.

Also take Campbell Fuller's advice, as spokesperson for the Insurance Council of Australia: "Don't assume that your home and contents policies will cover you”. And he adds, "You may need to consider a more appropriate form of policy".

If you want protection for shared or common areas in your building, for your cash and belongings, for your pets, for malicious damage done to you or your home, or for theft. If you want protection from personal liability claims resulting from intentional acts or that reach over $1,000,000. If you want cover from loss of rental income. And if you want protection from a consistently slow, painful and poor-yielding claims process.

Then one available solution is short-term rental insurance, which is more likely to pay off on a rainy day. To be fair, Airbnb and other platforms with guarantees even recommend it themselves! Airbnb even explicitly state of their Host Guarantee - “you should avail yourself of other cover options before trying to use this product.” This echoes the advice of lawyer George Newhouse, who urged Australian hosts not to rely on the host guarantee, as it is not a substitute for insurance cover.

Short-term rental insurers are popping up all over the globe. Internationally, to name but a few, you have Home Protect (UK), CoverBuilder Host Insurance (UK), Inlet (UK) & Slice (US). People have already compiled lists of short-term rental insurers in Australia, but I’ve mentioned some key players below with a couple of key features mentioned:

Rentcover by EBM - will only cover if host does not live on premises

ShareCover by IAG - host can live on premises, pay per night

Hostrite by Ceneta - host can live on premises

Holiday Rentals Insurance by BJS - host can live on premises, doesn’t cover rent loss

Outcome: a little peace of mind, maybe.

This post has also been published on:

Quora - "Airbnb Host Guarantee & insurance - peace of mind or empty promises?"

Medium - "Airbnb Host Guarantee & insurance - peace of mind or empty promises?"

LinkedIn - “Airbnb Host Guarantee & insurance - peace of mind or empty promises?”

Disclaimer: This post does not constitute financial, legal or insurance advice. Dollar figures reference both US and Australian dollars