Marrickville Airbnb host Scott* earns $30,000 per annum from renting out his home to short-term visitors. With some hosts earning even more, it’s no surprise Airbnb has become one of the most popular home sharing sites in Australia.

But significant financial risks for these hosts were made apparent this week with news of a father’s death in an Airbnb rental home in Texas, revealing that in unregulated homes, safety isn’t always guaranteed.

While in Texas the home insurance provider paid compensation to the family, in Australia the majority of insurance providers do not cover Airbnb hosts and their tenants.

Luckily, Scott has basic landlord’s insurance for his Sydney rental property and he has told his insurer that he operates as an Airbnb. He has public liability insurance, which he considers the most important line of defence against claims from tenants.

Yet he is in the minority of unregulated share home owners who are covered by their policies – some of whom are earning almost $80,000 per annum for a single property, according to Airdna statistics of Sydney’s top Airbnb homes.

In fact, of 200 surveyed share home hosts, 54 per cent incorrectly believed, or were unsure, of how their share home activities were covered by their insurers, consumer research from insurance provider IAG Labs revealed.

Some hosts may be relying on Airbnb’s $1 million host guarantee that offers some protection against damages – it isn’t offered by any other share site. But it should “not be considered as a replacement or stand-in for homeowners or renters insurance,” official information says.

Despite this, a spokeswoman for AAMI pointed to Airbnb’s guarantee fund, stating “AAMI landlord insurance does not cover any short term accommodation”.

And landlord’s insurance provider Terri Scheer Insurance distribution manager Belinda Butler said there were so many variables with Airbnb, that every host should check with their insurance provider on an individual basis. Short-term stays where the host lives in the house would usually not be covered.

Typical landlord’s insurance will only insure stays longer than 90 days and often require copies of residential tenancy agreements.

Others may be relying on their standard home insurance policies. In some circumstances, being an Airbnb host could make an existing insurance policy void, Ms Butler warned.

This has left some hosts vulnerable for years. Airbnb opened their first office in Sydney in 2012 and yet it was only in September that specific share home insurance became available for the first time in Australia.

The new policy, IAG Lab’s ShareCover, is designed as an extension to existing home insurance policies to include malicious damage and personal liability, a safety net “if property is damaged or someone is hurt in the home”, said group general manager of venturing Ron Arnold.

The personal liability insurance extends up to $10 million should an owner be held legally liable for injury or damage during a guest’s visit.

Yet having public liability insurance is the “ambulance at the bottom of the cliff approach”, warned Carol Giuseppi,​ chief executive of Tourism Accommodation Australia.

Instead, there needs to be legislation to stop the incident from happening in the first place, regardless of the platform the unregulated short-term rentals are advertised through.

She said hotels often have $20 million or more of public liability insurance, but they are also held to comprehensive standards from fire extinguishers, secure locks on windows and doors, evacuation procedures, emergency lighting, hard-wired smoke detectors and other security requirements.

“It’s not an adequate substitute to safety guidelines before someone gets injured,” Ms Giuseppi said.

“[Airbnb and other unregulated hosts] are now responsible for a third party on their premises and there needs to be clearer guidelines on the basic safety standards,” she said.

An Airbnb spokesman confirmed they had developed a 250-person Trust and Safety Team available to hosts and guests, with the company recently bringing in introduced expanded liability insurance and were giving out 25,000 free smoke and carbon monoxide detectors, as well as making them available for purchase.