The sharing economy is on the rise, with many pointing out that this kind of growing use of underutilized assets, like homes (with AirBnB or VRBO) or vehicles (with Uber or Lyft). The “sharing economy” is generated by peer-to-peer businesses, like when you rent out a room in your house or entire home (or second home) through an app-based company like AirBnB. You can make some money using something you own, but aren’t fully utilizing, like when you have a spare room or aren’t living in one location 100% of the time.
It’s a growing trend, for sure, but one with already impressive numbers. AirBnB boasts 4 million listings worldwide. VRBO is only for whole-house rentals, and reports 2 million rentals worldwide. That’s a lot of beds!
While renting out your home used to be complex (think lengthy meetings with a broker or service in-person and lots of weekends spent fixing issues with a bad septic pipe, etc.), with new app-based programs, you can sign up to share a part of your home in just minutes. But just because it’s easy to do doesn’t mean it’s a simple situation.
At PayneWest, we make sure that all of our clients understand the risks they could be taking with a home or room rental, and work to keep them protected against any potential problems that could arise.
First thing, if you’re thinking of renting out your home, it’s important to contact your insurance agent, said Scott Sherbourne, Sales Director at PayneWest.
“People might be wary to talk to their agent about a policy change,” he said. “They think that talking to an agent just leads to a policy cost increase, but it’s so very important to take care of yourself as a homeowner and avoid any lapses in coverage.”
“Lots of people don’t realize that the homeowners’ policy was written for an owner-occupied home. It comes with lots of coverages, but when you have a part-time tenant, like if you’re renting through AirBnB or VRBO, it’s a completely different situation,” he added.
A general homeowners’ policy will only cover the named insured and resident relatives. It doesn’t cover a guest that’s paying for a room. Any liability exposure from the tiniest (like a infestation of bedbugs) to the big ones (like fires or slip and fall incidents) or even somewhere in between (like getting sick from food supplied) are not covered under a standard policy.
Things you need to make sure are covered for your home rental, depending on what you’re offering in terms of an “experience” might include:
- Off-premises liability — if you’re providing things like bikes or even a canoe, you won’t be covered once your guests are away from the home.
- Rural properties — have different needs than in-town homes or apartments. There are a lot of variables to consider, from the age of the home to its use. Before you rent out that nice cabin, make sure it’s sufficiently covered.
- Occupancy numbers — Sherbourne said that different insurance carriers might set different maximum occupancy rates on rentals, as well as a maximum number of days that the home is rented.
- Local and state laws — You will always want to consult an attorney who is knowledgeable in home rental laws. Some cities have put new laws on the books that make it easier (or harder) to legally rent out part of your home if you’re not a licensed hotel or B&B.
Most important, Sherbourne said, is to get outside of the “base” agreements and really drill down into your specific needs. While sharing economy companies like AirBnB and VRBO offer a “master agreement” that seems to cover a lot, reviewing that with an actual insurance agent will always be in your best interest to ensure adequate coverage.
“Drill down and find the right fit,” Sherbourne said. “Talk to your agent and have that conversation. That’s what we’re here for.”