Why do home insurers make it hard to become a part-time Airbnb host?

As the cost of living crisis drags on for many families, more people are turning to renting out some or all of their home as a way of raising some extra income. My family started renting our house on Airbnb in the school holidays about a year ago and, as I’ve written before, it’s provided a welcome boost to the household finances.

But one headache that we’ve yet to totally iron out is the issue of home insurance. Most home insurers take a fairly dim view of you renting out your home – and won’t cover you. If you call up and let your insurer know that you’re planning on renting out your house for a short period, they will mostly tell you that it will invalidate your policy. And if you scout around the internet for specialist policies, they can be very expensive. One broker I spoke to quoted me ￡3,000 – compared to the ￡300-￡400 that I have been typically paying for a standard policy.

Specialists with no flexibility?

Frontier and Home Protect are two mainstream brands that do offer cover for homeowners renting out their house. But the total price is almost double what you might pay to buy a standard policy from them.

There are some innovative insurers in the market trying to tackle this – such as Pikl. Their product – which picks up the insurance for your house during the period it is rented out – is designed to work in conjunction with your standard home insurance policy. Unfortunately, most home insurers take the view that renting out your house will invalidate your standard policy. So buying a Pikl policy may leave you covered while your guests are in, with no cover at all for the rest of the year.

Admiral has been one of the notable exceptions. I moved my insurance to them last summer, as they seemed to be one of the few insurers who were ok with the idea of me renting out my home. Unfortunately, at renewal, my quote this year is up 53% - so I’ve back out in the market looking for other options and the pickings are slim.

While insurers like Frontier and Home Protect are happy to sell you all in one products that will protect you if you occasionally rent out your home, they are not willing to sell you a standard product and let you transfer the risk to a third party like Pikl when your house is rented.

?Blissful ignorance

My guess is that the vast majority of people who are renting their home out are doing it in contravention of their home insurance policies – and are blissfully ignorant that they have possibly invalidated their entire policy.

My experience over the last few weeks speaks to the inflexibility of the insurance market when it comes to anything that is not standard. And when it comes to the lack of consumer understanding around coverage for renting out your home, insurers are partially complicit. The standard home insurance journey often does not specifically ask you about renting out your home. It may ask you about whether your home is used for business – but most people would not think that occasionally renting their home would meet this definition.

?In a consumer duty world, insurers may find themselves on the wrong side of Ombudsman rulings if they take a hard line on customers who fail to disclose their side hustle as part time Airbnb hosts.?

For my part, I’ve ended trading down to a slightly less glossy – and more affordable - Admiral product, who continue to take a very pragmatic approach to Airbnbers.

For most of the rest of the market, the computer says no approach prevails.