Renting Out Your Home? You Need Insurance Coverage for Home-Sharing Rentals
From Airbnb to HomeAway, more people are renting out rooms or their entire homes for extra income. However, if an insurer expects a person to be using the home in one way—as a single family residence—but the home is being used as a rental property, it can impact your policy.
TOP CONSIDERATIONS
Home-sharing vs. hotel. Home-sharing or peer-to-peer rentals (P2P) include sites like Airbnb, Roomorama and HomeAway. Guests, using a website or app, find a property or room in a property and pay for the stay like a hotel. The property is not a licensed hotel and is often a privately-owned apartment, condo, or house. Anyone can register as a host or guest.
Risks of home-sharing. Most homeowners or dwelling insurance policies are not designed to cover accidents arising from short-term rentals. Even if specific home-sharing or rental exclusions are not included in the policy, insurance companies may deny coverage. This can leave you unprotected.
Homeowners policies might not cover paying guests. If a person trips and falls on your property, most homeowners policies provide coverage. But if the person is a paying guest on a property offered as a rental, they might be excluded. Homeowners policies vary, but usually exclude or provide limited coverage for homeowners running a business in the home. If the property is listed with any frequency, there is a good chance the activity will be defined in the policy as a home-based business.
Some home-sharing companies might provide coverage. Some peer-to-peer rental companies offer insurance to hosts. Others recommend that hosts contact their agents to purchase additional coverage. It’s important to understand the coverage, what it includes and what it excludes.
HOW TO PROTECT YOURSELF
Hosts, talk to your agent or insurer about home-sharing. Adding coverage beyond your homeowners policy could protect you from additional risk. One option may be purchasing a landlord policy which will cover your home, structures on the property, property contents (such as appliances and furniture), lost rental income due to damage, legal fees and liability claims.
Consider only renting to guests who have proof of homeowners, renters or personal liability insurance. Guests may have coverage under their own policies. Homeowners policies often provide minimal liability coverage (e.g. up to $1,000) for damage to property of others.
Consider adding coverage to your existing homeowners policy or adding on-demand coverage if available in your state. Check with your insurance agent to determine if coverage options are available for home-sharing. Contact your state department of insurance to find out what additional companies offer home-sharing coverage or if on-demand coverage is available in your state. On-demand coverage could be turned off/on depending on nights when the property is being rented allowing you to only pay for the additional coverage when you need it.
Be aware of local laws and association bylaws. Several states and municipalities have regulations restricting land or building use and requiring collection of visitor tax. Homeowners associations (HOAs) also have rules that can limit your ability to participate in home-sharing. Understand the terms and conditions of your HOA agreement to determine if you can host legally.
For guests, review insurance policies. Review your homeowners or renters insurance policy to determine if you are liable for damages to the rental property or the host’s personal items. Also check with the home-sharing company to ensure there is sufficient liability coverage in place on the property if a loss occurs. Keep in mind that equipment such as bikes or kayaks available for use while renting the property may not be inspected for safety on a regular basis, and liability coverage for such items may be limited or nonexistent.
TOP FOUR THINGS TO REMEMBER
-
Before listing your property for rent, review your homeowners policy and the insurance coverage of the home-sharing company to determine what is covered. Talk to your insurer about additional coverage options.
-
If coverage is not offered either as a stand-alone policy or endorsement to your existing coverage for homeowners insurance, contact the home-sharing company for suggestions or contact your state department of insurance.
-
Be aware of local laws and your homeowners association (HOA) bylaws to determine if you are legally allowed to rent your property.
-
Before booking a rental through a home-sharing company, review your homeowners or renters policy to determine what you are liable for if you accidentally damage the property. Also check with the home-sharing company to determine if any coverage or guaranteed protection is available for guests.
About the National Association of Insurance Commissioners
As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.