Short-Term & Vacation Rental Discussions

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Justin Golden
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Airbnb Arbitrage Insurance

Justin Golden
Posted Sep 21 2022, 10:29

Hi BP. I am under contract on a duplex with my fiancé in the greater Philadelphia area. We are moving into one unit and inheriting a tenant in the second unit. The tenant has a sublet agreement with the current owner of the property and lists the unit on Airbnb. I am looking for insurance recommendations for my situation. I am unsure if the tenant has a rental insurance policy. I know airbnb provides aircover for hosts however I am not a host so feel like I would not be covered. Any insight is greatly appreciated!

Justin

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Jason Bott
  • Insurance Agent
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Jason Bott
  • Insurance Agent
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Replied Sep 21 2022, 11:58

@Justin Golden given you are living in the property, you need to insure the building with a Homeowners policy that has a STR endorsement for the other unit.

The tenant should carry a commercial policy covering the unit as a STR and should add you as an Additional Insured. With this set up, any claim that comes through form the Airbnb operation would be tendered to the commercial policy and not your Homeowners policy.

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Sheryl Sitman
  • Rental Property Investor
  • Philadelphia, PA
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Sheryl Sitman
  • Rental Property Investor
  • Philadelphia, PA
Replied Sep 22 2022, 13:25

Aircover is not insurance and while may or may not cover a claim made by the host of the property, it doe not provide you with actual insurance or provide you with risk coverage. In fact, if your standard renters insurance company would determine that you are running a business (STR) from the property, every claim you make would more than likely be denied.

In my opinion as an investor and from my research into this subject (I am not an agent, attorney) you should not be counting on your tenant to have insurance that protects you as the owner. You need your own policy.  @Justin Golden rightly suggests the STR endorsement which if you live in the property maybe you can get - but my recent search led me to find that in our region (Philadelphia), underwriters from the conventional insurance companies are not allowing such an endorsement. What you really need is an insurance agent who can understand the situation and advise you. It is not a straightforward situation.

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Paul Sandhu
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Paul Sandhu
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Replied Sep 22 2022, 13:34
I keep a pipe wrench by the front door and a fire extinguisher in the kitchen of my STRs.  That's my insurance.  I just hope the tenants know how to use the 2 items.  The pipe wrench is to be used as a blunt weapon (as opposed to an edged weapon).

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Replied Sep 22 2022, 13:41

I am the owner of a property and am allowing a "tenant" to arbitrage my property and rent it as an STR. I have my normal landlord home owners insurance policy then an additional STR liability policy and I make my "tenant" carry their own additional STR liability policy as well.

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Aaron Porter
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Aaron Porter
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Replied Sep 22 2022, 16:08
Quote from @Ashley Kinnaird:

I am the owner of a property and am allowing a "tenant" to arbitrage my property and rent it as an STR. I have my normal landlord home owners insurance policy then an additional STR liability policy and I make my "tenant" carry their own additional STR liability policy as well.


 there is some weird legality issues that come up here becuase technically renting a property on airbnb is an active business.  
More and more cities like Austin, Santa Barbara, New Orleans, Nashville, and Chicago are now requiring short-term rental owners to carry a business license and carry $1,000,000 in commercial liability. Communities are also putting in requirements for occupancy tax collection, like a hotel. None of these requirements exist for a long-term lease rental.

what this also means is that technically a standard landlord agreement for you is not the proper coverage as your tenant is operating a business from the property.  You should technically carry a commercial policy and require your tenant to carry the other needed coverage to conform to your local requirements.

so for the OP this is also going to be a similar situation. As an insurance provider I strive to do 2 things, 1 make sure that my clients are properly covered in what the client deems as their "risk tolerance" and 2 make sure that the client is covered so that if they have a claim it doesn't get denied and then the client sues me...  Call me a self preservationist... I don't want to have that stain on my record so I am going to make sure that you "Mr./Mrs. Client" are covered.
and yes Sheryl is right Aircover is not insurance.

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Replied Oct 25 2022, 18:22
Quote from @Justin Golden:

Hi BP. I am under contract on a duplex with my fiancé in the greater Philadelphia area. We are moving into one unit and inheriting a tenant in the second unit. The tenant has a sublet agreement with the current owner of the property and lists the unit on Airbnb. I am looking for insurance recommendations for my situation. I am unsure if the tenant has a rental insurance policy. I know airbnb provides aircover for hosts however I am not a host so feel like I would not be covered. Any insight is greatly appreciated!

Justin


Hey Justin, I have a contact that specializes in STR insurance. He's located in CA but I believe he can service multiple states. Let me know if you like his contact and I'll be happy to provide it so you can talk to him and find out if what he offers is what you're looking for.

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Replied Nov 15 2022, 11:26
Quote from @Aaron Porter:
Quote from @Ashley Kinnaird:

I am the owner of a property and am allowing a "tenant" to arbitrage my property and rent it as an STR. I have my normal landlord home owners insurance policy then an additional STR liability policy and I make my "tenant" carry their own additional STR liability policy as well.


 there is some weird legality issues that come up here becuase technically renting a property on airbnb is an active business.  
More and more cities like Austin, Santa Barbara, New Orleans, Nashville, and Chicago are now requiring short-term rental owners to carry a business license and carry $1,000,000 in commercial liability. Communities are also putting in requirements for occupancy tax collection, like a hotel. None of these requirements exist for a long-term lease rental.

what this also means is that technically a standard landlord agreement for you is not the proper coverage as your tenant is operating a business from the property.  You should technically carry a commercial policy and require your tenant to carry the other needed coverage to conform to your local requirements.

so for the OP this is also going to be a similar situation. As an insurance provider I strive to do 2 things, 1 make sure that my clients are properly covered in what the client deems as their "risk tolerance" and 2 make sure that the client is covered so that if they have a claim it doesn't get denied and then the client sues me...  Call me a self preservationist... I don't want to have that stain on my record so I am going to make sure that you "Mr./Mrs. Client" are covered.
and yes Sheryl is right Aircover is not insurance.


Aaron, so in Ashley's scenario (which I'm considering the same scenario) there isn't a "all-in-one" policy that would protect me as the homeowner, and my lessee, who is conducting the STR? To confirm, I would have to get myself a commercial STR policy and my lessee would have to get another STR policy? What policy would lessee need and be able to obtain if they are not the owner? Thanks!

Doug 

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Tom O.
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Tom O.
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Replied Nov 15 2022, 12:14

My insurance told me no AirBnB. 

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Paul Sandhu
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Paul Sandhu
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Replied Nov 15 2022, 12:24

Dave Chapelle explained it quite well on SNL on 11/12/22.  There are 2 words you cannot use together.  "The" & "Jews".

You cannot use "Arbitrage" & "Insurance" together either.