With services like Airbnb taking the vacation industry by storm, sharing your home for a fee might sound like a good way to make some extra money, particularly if you live in an area where short-term rentals or travel accommodations are in high demand. But, before you dive in, make sure you know your insurance risks and take appropriate action to protect yourself, your financial future, and the structure of your home from the various hazards your paying guests could present.
While some insurance policies may provide you with limited coverage for sharing your home during one-time events, like the Olympic Games or the Super Bowl, once you start renting out your home in order to generate income, you’ve crossed the line into a business venture. Your regular homeowners policy stops covering you and additional coverage is needed.
The Liability Conundrum
If someone is visiting your home and is injured while on your property, chances are that the liability coverage on your homeowner’s insurance policy will cover that. However, if a paying guest, is injured during his or her stay, the odds are high that your general liability portion of your homeowner’s insurance policy does not cover this situation.
In fact, the National Association of Insurance Commissioners went so far as to warn consumers that most policies specifically exclude liability coverage for property damage and bodily injuries related to business activities, such as renting your home to others.
This means you could be on your own for legal fees, damages, and more if one of your guests is injured while staying in your home. You could also find yourself responsible for damage that paying guests cause to neighboring properties. The bottom line: know your policy and whether separate coverage is necessary before renting any part of your home or any building on your property.
Covering Property Damage
If damage is caused to your property under a variety of circumstances, such as tornadoes, fire or theft, your home policy kicks in to help you cover the damages. If renters cause harm to your property or home while renting the premises, you’re likely to find yourself out of luck when trying to collect from your insurer.
That means you’re on your own to cover these expenses or the costs involved in suing your short-term tenants for the damages they’ve created. You’ll also find that a standard homeowners policy isn’t likely to cover damage that your guests cause to neighboring properties, leaving you to foot the bill for these expenses as well.
These are just a few of the reasons why it is so important for you to talk to an independent insurance agent, discuss your plans, and explore your policy options before you decide to rent your home through a service like Airbnb.