People who offer their homes for short-term and holiday letting have been warned they could have no insurance cover if their properties are trashed by paying guests.

The issue came to the fore last month when a Canadian couple returned to their house to discover it had been wrecked in what appeared to be a drug-induced frenzy by visitors who had booked the property via Airbnb.

And while the hugely popular online peer-to-peer letting agency has a $1 million Host Guarantee fund, owners and tenants sub-letting privately or through other agencies could discover that renting out your home for short-term lets could invalidate your home and contents insurance.

Even Airbnb hosts aren’t covered for damage to common property – such as lifts, swimming pools and hallways – caused by holiday let guests.

Australian insurance firm Whitbread warns that any short-term letting has at least three different potential triggers for non-payment of insurance cover.

Whitbread’s general manager for strata, Lia de Sousa, says simply not telling your insurer that you are letting your house or apartment could invalidate any claim if something goes wrong.

“When entering into an insurance contract, you are required to notify the insurer if there is any change to your circumstances,” she says. “A contents policy will generally not cover your possessions when your property is being used for short-term letting.

“Failure to notify your insurer of a change in living conditions could be considered a breach of the contract and, as such, your policy can be voided, leaving you exposed.”

Theft, rather than damage, may also fall foul of the small print in most insurance policies: “For theft of contents to be covered, many policies require clear evidence of break and enter,” Ms de Sousa says, adding that, obviously, there would be no such evidence if you’d given keys to your short-term tenant.

And finally there is the fact that you are making money from the let, another aspect that may not be covered by your insurance.

“The intention of a domestic contents insurance policy is not to cover business activities in your home.”

The Australian insurance industry hasn’t quite caught up with “disruptive” business models like Airbnb, Ms de Sousa says.

Until specific peer-to-peer rental policies are available, she recommends closely reading reviews of prospective tenants, notifying your insurer before listing, getting approval from your insurer in writing and talking to your insurance broker about another policy if your insurer refuses.

Apartment residents should also check their strata building insurance to see if they will be liable for damage to common property.

Airbnb, meanwhile, insists that their Host Guarantee covers all Australian hosts, regardless of whether or not they have insurance or even permission from their landlords to sub-let their homes for short stays.

“Every case is different, and we assess each case individually on its merits,” Sam McDonagh, the general manager of Airbnb Australia, told Domain.

However, according to the terms on the Host Guarantee published online, apartment residents would not be covered for damage to common property by their guests, for theft of money or for personal injury sustained on the property.

The Airbnb website strongly advises prospective hosts to arrange their own insurance and to acquaint themselves with local laws and by-laws.

Airbnb stepped in to help the Canadian couple hit by the home wreckers, using its Hosts Guarantee fund which kicks in when a property isn’t insured or the normal insurance doesn’t cover damage caused by Airbnb guests.

“We have zero tolerance for this kind of behaviour and our team worked quickly to make it right,” Dylan Smith, Airbnb head of communications for Australia and New Zealand, told Domain.

“We banned that guest from Airbnb, and our Trust and Safety team provided its full assistance to law enforcement agencies in dealing with it. We were also in very close contact with these hosts and worked quickly to reimburse them under our $1 Million Host Guarantee, which covers a host’s property in the rare event of damages.

“More than 35 million guests have now stayed with Airbnb and, while incidents like this are incredibly rare, we take them very seriously,” Smith added.