On the surface, home sharing looks like a simple idea. You, the homeowner, offer accommodations to a guest--a home sharer--in exchange for an agreed-upon fee and, in some cases, help with household tasks.
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.”
Is Your Home Sharing Done For Profit? Watch Out for These Traps!
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
Traps and Gaps
- A guest is injured or dies, resulting in a personal injury lawsuit
- A guest files a property damage lawsuit against you
- You lose income because of significant damage to your home by one of your guests
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.
Landlord policies may not be the answer
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.
Policies that address the needs of the host are available
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.
Don't Risk It - Contact Us About Your Homeowners Insurance
Before you commit to becoming a host, check with American Insuring Group to understand what your existing homeowner’s policy covers and what exclusions might apply. Then you can purchase a policy that closes all of the gaps.
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.