Can my insurance be cancelled by the insurer?

[Mike43]

My insurer told me they would cancel my home owners insurance if I rented rooms through Airbnb, since it was in violation of my contract. So I'm dropping out of Airbnb for the short term while  I review insurance alternatives. 

This made me wonder how many hosts are vulnerable to a pretty nasty surprise should they ever need to make an insurance claim. Suppose my house had caught fire, for example. The insurance company, had they uncovered evidence of me renting through Airbnb, could have denied my claim, regardless if it was a result of my renters or faulty wiring. If the fire had nothing to do with the renters, it seems unlikely Airbnb insurance would cover it either. 

Is this correct? Seems like a major risk many hosts are unaware of if it is true. 

As interesting side note, the insurer said Airbnb basically turns the house into a hotel. However, renting out a room on my own to two or less people is fine, regardless of whether it is long or short term. It is Airbnb that is the main issue for the insurance underwriter. 

[Robyn351]

This is a good lesson with insurance in general - always inform them of anything you are doing with your property that may affect risk, because in the end if you don't (for fear of an increased premiums, for example) they will simply deny your claim for failing to advise them of a material risk. You will have paid all of your premiums for nothing.

I like Square One insurance, and would recommend any host to ensure they have third-party liability insurance above and beyond what AirBnB provides.