“When evaluating coverage for a daily home-share rental, it’s important to know the markets’ restrictions. Details like those are key to providing the insured with a product that puts them at ease.”
-Shaun Carloss, SCU Underwriter – Orlando Personal Lines Practice Group
Homeowners seeking to bring in extra income by renting their homes through sharing services often don’t realize the serious financial risks they’re running. Homeowners assume their insurance will protect them when their home is rented, but the reality is they may be liable for any damages or injuries on their property while renters are staying there. Most homeowners’ policies have property and liability exclusions for business use, including rentals. This includes vandalism and theft of personal property while rented. Home-share sites may offer to repair or replace damage caused by a guest, but those promises aren’t an insurance policy, and homeowners will have to carefully follow the requirements to obtain reimbursement.
A fire while a home-share renter is visiting could lead to hundreds of thousands of dollars in uncovered costs. The costs could go higher if a renter suffers a serious injury on the property or damages property nearby.
There are plenty of cautionary tales. One Texas couple rented out a house they own across the street from their own home and watched as hundreds of college students came to party and caused damages of nearly $20,000.
Home-sharing sites generally offer assurances about reimbursement for damages, but the coverage and conditions may be too limited to really help the homeowner. Reimbursements may be based on the current cash value of an item rather than replacement value. Liability coverage from the home-share site may have insufficient limits to provide meaningful protection.
As the home-share rental market soars, the insurance industry is catching up. Given sufficient notice, some insurers have often been willing to extend coverage for rentals during onetime events, such as a major sports match or political convention. Many carriers allow insureds to add home-sharing coverage for a surcharge as a daily rental for an affordable additional premium. Some carriers offer a specific add-on endorsement. A few carriers have even embraced the emerging peer-to-peer rental industry and provide special endorsements referencing the Airbnb, HomeAway and FlipKey systems, while expanding the special limits of liability on items like jewelry and electronics.
When evaluating coverage for a home-share rental, it’s important to know the market’s restrictions. Some carriers may avoid replacement cost on the contents, while others limit the maximum number of rental days per year. Some require that the homeowner engage the services of a rental agency or property management company. Homeowners should understand whether the coverage includes expensive items such as jewelry. Details like those are key to providing the insured with a product that puts them at ease, while providing a rate that rivals other standard tenant-occupied properties.
BOTTOM LINE
If your clients are renting their houses on home-share sites, they need to know whether their insurance will cover a renter’s visit. Typical homeowners’ policies don’t, but many insurers offer very affordable endorsements for home-share rentals. It’s crucial to understand the policy details to make sure your clients get the coverage that best suits their needs.
Contributors:
Shaun Carloss is an Underwriter in the SCU
Orlando office and a member of the Personal Lines Practice Group.
Allison Talus is the SCU Regional Director – Western States and a member of the Personal Lines Practice Group.
ENDNOTES
- Airbnb host says guest held massive house party,
New York Daily News, March 15, 2018, http://www.nydailynews.com/news/national/airbnb-host-guest-caused-20-000-damages-article-1.3876313 - Fast facts, Airbnb, https://press.airbnb.com/fast-facts/
- U.S. private accommodation market to reach $36.6
billion by 2018, Phocuswright. February 2017,
https://www.phocuswright.com/Travel-Research/Research-Updates/2017/US-Private-Accommodation-Market-to-Reach-36B-by-2018
For additional information contact: Allison Talus, Director, Personal Lines – Western States, 303-334-2211, atalus@scui.com
This article was published in the September 2019 edition of Colorado Insurance News (COIN). To view more articles and read the whole COIN, click here.
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