Typical insurance policies won’t cover people participating in the “sharing economy” by renting out their home or using their car for driving services. More and more insurance companies and state insurance regulators have ruled that home owners may find themselves without insurance if there would be a loss when renting out their home or car. So it comes down to this: How much risk are you willing to shoulder of a legal judgment adding to your money woes?
Those services are part of an emerging movement to let people use their homes, car or other resource to create an income stream, usually through an app or website. These new industries emerge and create unique insurance situations. Consumers should be aware that traditional insurance policies may not apply when participating in new kinds of businesses.
Homeowner policies might occasionally cover renting out a room in your house, but likely not making a room or the entire house available regularly for rental. That would be considered a business use.
Most insurance companies have coverage available for landlords. People renting in homes through services like Airbnb, however, are likely covered in the event of damage to belongings. Homeowner or rental insurance policies treat the stay just like one in a hotel.
Airbnb does not cover accidental damage. Moreover, its guarantee is not an actual insurance policy that compensates people for injuries, though that hasn’t stopped at least one confused publication from referring to it as a “liability policy.”
As for a host’s liability, Airbnb is crystal clear on its website, albeit in its terms and conditions where many people won’t read it. There, it states that “Airbnb is not responsible for and disclaims any and all liability related to any and all listings and accommodation.”
Airbnb recommends that hosts provide appropriate insurance for their accommodations.
Renting your primary residence out once in a while – say when you’re on vacation or when the Olympics come to town – is probably acceptable to your insurance company, too. Tell your insurance company about it and see if they want you to pay some extra one-time endorsement.
The gray area is all in the in-between situations, when owners rent out their place several times a year or when they rent a room several times a month to people from out of town.
USAA, the fifth largest insurer in the United States, takes a pretty hard line on all of this. A homeowner’s policy, it says in a statement, “will not generally provide the protection a homeowner needs when renting part or all of a home,” though there may be some limited coverage in certain circumstances.
Allstate, the nation’s second largest home insurer, notes that factors affecting the breadth and depth of coverage should include whether you’re home while renting your place, how often you rent it and how many people you’re hosting. State Farm, the country’s largest insurer, appears to deny all coverage and would usually best be covered by a separate “rental dwelling policy.”
The take-away is that many hosts continue to skip over Airbnb’s terms and conditions and never know the risk they’re taking on and some of those who do read the rules may cross their fingers and hope their insurance companies take pity on them if they should ever be subject to a claim. Or they plan to lie to their insurance companies if worse comes to worse and hope that the claims adjustor doesn’t ask injured parties whether they were paying to stay at the home.
Only you can decide the path you want to take.