You probably never thought about whether your homeowners’ insurance would cover property damage or liability claims caused by a renter. Why would you do that? After all, most consumers aren’t concerned with how an insurance policy will respond to an unknown future loss.
Home-sharing platforms such as Airbnb and HomeAway have transformed many ordinary homeowners into part-time innkeepers. According to the Pew Research Center, 11% of American people have utilised home-sharing services. Airbnb alone claims to have more than 3 million listings worldwide.
As a result, an increasing number of you will need to investigate whether claims involving renters are covered by your homeowners’ insurance. Unfortunately, the excitement and potential provided by new business models make it all too easy to overlook the disadvantages.
However, there is always a disadvantage. For example, host homeowners are more vulnerable to:
Damage or loss of individual and underlying property
Theft, theft, and vandalism are all examples of criminal behaviour.
Guests are liable for any property damage or personal injury that occurs on the grounds.
Third-party liability for property damage or bodily injury caused by guests.
This returns us to our initial question. Are renters’ damage and liabilities covered by a normal homeowners’ insurance policy?
It should come as no surprise that ordinary homeowner’s policies do not specifically address home-sharing. After all, the sharing economy did not exist at the time most of these regulations were drafted.
However, several customary terms in standard policies may limit or prohibit coverage for the host homeowner.
Eligibility. Standard policies normally apply only to dwellings used only for private residential reasons.
Damage to property. Personal goods stolen from spaces rented to guests by a homeowner is often not covered under a regular policy. Theft of a guest’s personal belongings is also not acceptable.
Standard insurance may also exclude coverage for large-ticket items located in rental areas, such as appliances, flooring, and household furnishings.
Coverage for Liability.
Home-sharing hosts may not consider it a business, but insurance companies may disagree. This can be a concern because ordinary insurance often does not cover liability for home-based businesses.
Losses experienced by host homeowners may be covered by their normal insurance despite not being expressly listed or excluded. When old-school insurance meets new-school behaviour, coverage gaps are widespread. These gaps can be financially catastrophic as well.
Until the insurance sector catches up to the Übers and Airbnbs of the world, home-sharing hosts are likely to face severe coverage gaps.
Meanwhile, if you are a host homeowner or want to become one, you should carefully analyse your current policies to detect any potential coverage gaps. If you are unsure, consult with an experienced insurance agent.