There are even companies—Airbnb and HomeAway to name just two—that will list and advertise your home to potential renters. Each of these firms claims over one million listings, attesting to the growing popularity of home sharing.
But have you considered whether your house insurance policy covers the additional risks associated with sharing your home? Is your current homeowner's insurance sufficient?
Before you log on to one of these websites and join the ranks of home sharers who cover about 190 countries, you need to ensure that you are not exposing yourself to unnecessary financial risk with insufficient homeowner’s insurance coverage. HomeAway’s Bill Furlong warns that most hosts “probably don’t think through the fact that they’re beginning to engage in a commercial venture (and) they have to think about the tax part of the equation and they have to make sure the insurance is covered.”
As with most homeowners, your insurance offers broad coverage for your property. The problem arises when you rent out your home since these policies almost always exclude a business pursuit. If you’re renting out your property for income, that is a commercial transaction. And there may be traps and gaps in your coverage that could be devastating
Your standard homeowner’s policy does not cover these home-sharing activities. You have now changed your exposure from that of a residential homeowner to a business vacation rental. And as soon as you create a business exposure in your home, your carrier can refuse coverage for a claim and, in some cases, discontinue liability and property coverages—sometimes at renewal, maybe in mid-term.
Up until recently, those who rented out their houses, or just a few rooms, had the option to buy a landlord’s policy to cover the home, structures, liability, and lost rental income. The problem with these policies is that they are designed for people who rent out their property full time. These landlords live elsewhere and have tenants who have signed contracts to live in the rental property for a longer term.
Home sharing presents a unique exposure that demands more options in coverage. Retired couples who bought a second home at the beach or the mountains are now discovering that they are not spending as much time there as they thought they would. Renting out these properties for short periods (perhaps 6-8 weeks each year) helps to offset set some of the expenses of ownership. The same goes for those who wish to have guests while they take a vacation or an extended business trip. They need a policy that offers risk protection for these shorter terms.
Some insurers are responding to this new market with insurance that can be added to an existing policy. These add-ons provide extra protection in cases where, for instance, your guest steals or damages your expensive flat-screen TV. Some home-sharing companies like Airbnb and HomeAway advertise coverage options for their hosts. Keep in mind, however, that these plans also have gaps—like not paying for intentional damages to your property.
To learn more about homeowner’s insurance and the available add-ons, contact American Insuring Group online or call us at (800) 947-1270 or (610) 775-3848.