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What are the liability risks for Airbnb property owners? How can you protect and secure your home, your finances, your livelihood? What can you do to minimize risk and ensure the success of your business? Whether you occasionally rent out a room or have multiple properties to manage, you’ve got risks.
Here’s what to look out for how to protect your business.
Insurance Gaps
While getting in on the sharing economy might be a good way for you to earn a little extra income, it leads to some uncertain risks. What if your home is damaged? What if a renter is hurt? You could be liable for the resulting costs of an accident.
You might think your homeowner’s insurance will cover the bill. But how do you know?
Luckily, Airbnb offers all homeowners secondary liability coverage of up to $1,000,000. However, secondary coverage means homeowners must first file claims through their own insurance company. And as it turns out, many homeowner’s insurance policies won’t cover your home when it’s used as a regular source of income through renting.
Depending on laws in the state you live in and your insurance policy, you could be left high and dry if one of your renters experiences an accident, injury, or death while in your home. So it’s important to thoroughly know your policies, work with a good lawyer, and purchase additional insurance if necessary.
Tax Audits and Local Laws
If you’re renting out more than the occasional weekend, you might consider this a business. You should especially treat this like a business if you own multiple properties that you regularly rent out. With a small business it’s important to keep your business and personal finances separate in order to avoid tax audits or other legal trouble.
You might think it’s unnecessary if you’re just making a little extra income on the side by renting through Airbnb. But if you want to grow your income, avoid an audit, and maybe even add another property to your rentals, you’ll want to keep things separated. It’s simple, here’s how to do it:
>>Set up a bank account and only use it for anything related to your rental.
>>Have a card connected to the account. Again, only use this for rental purposes i.e. repairs, item purchases, etc.
>>Carefully track all income and expenses.
>>Save some of that income and prepare for taxes.
>>Pay yourself a small salary out of the total amount you make through your rentals.
Since Airbnb has taken over the hotel industry like the fast and the furious, some states, cities, and counties have sprung into action with laws and regulations. Because of this, homeowners and business owners are experiencing challenges in their locations. Be sure to research your area before renting out your house on Airbnb.
Damaged or Stolen Items
While Airbnb does a good job of screening guests, there are still horror stories of apartments being trashed, homes damaged, and family heirlooms stolen. This would be devastating, and you want to do everything possible to avoid it.
As mentioned above, Airbnb does offer a host guarantee in the form of secondary liability coverage for up to $1 million. This covers damages to your home after your regular insurance is used. However, it doesn’t cover valuables like:
Jewelry
Artwork
Collectibles
Pets
Cash or other personal items
It is recommended that hosts remove any items like this from the home. Here are a few other things you can do to protect yourself.
Protect your mail. If you don’t have a locking mailbox, ask a neighbor or friend to pick it up every day for you. Or have the post office hold your mail while you’re out. You don’t want bank statements and sensitive information winding up in the wrong hands.
Get a safe. Protect anything you can’t take with you with a safe hidden somewhere your Airbnb guest won’t likely be, like your basement or a closet. You can also get one at your bank, which is recommended.
Lawyer up. Just in case your efforts fall short and your home is damaged, items are stolen, or you’re stuck with a squatter, it’s a good idea to have a lawyer to call when you need them. Better to find one now than wait until it’s needed.
While renting out through Airbnb can be a great way to make extra money or even start your own business, it’s certainly not risk-free. Make sure and protect yourself with insurance, a safe box, and maybe even a family lawyer.
Author –
Brooke Faulkner is a law and math nerd from the pacific northwest. One of her life goals is to bridge the gap between numbers and the public by advancing STEM education in public schools and discussing economic policy at the dinner table.
