Homesharing has been a “thing” for years and its use is growing along with internet applications that facilitate transactions involving making a residence available for short-term rentals. Standard homeowner policies have long been issued under the assumption that a covered residence is usually occupied by the named insured and that person’s family on a full-time basis.

While insurance policies issued for homes, condos, and apartments do contemplate some situations involving other persons staying in a residence, those situations are allowable when they don’t involve financial transactions. Renting for income alters a residential situation into a business. Business activity creates a coverage problem which could result in policies being canceled or claims being denied. Renting all our part of a residence also results in types of losses that are uncovered because they haven’t been contemplated as insurable, residential activities.

Policy wording may exclude coverage for losses when they are directly related to a business. So, protection may be lost for the residence, residential property as well as for liability for damage or injury to others and their property.

Basic HO policies, if they don’t outright exclude losses involve compensated rentals, severely restrict other coverage. However, due to the rising popularity of homesharing, the insurance market is responding with options to provide more protection. A basic policy may be amended to extend protection which does the following:

• Extend eligibility of a rented residence to continue to qualify for all policy protection
• Add protection for household contents that might be damaged or destroyed during rentals
• Extend medical payments coverage to insureds who may be injured by renters
• Loss of income specific to homesharing activity
• Add liability coverage for injury to third parties that occur during rentals

However, this additional protection may still fall short of what is needed. The insurance market is now making broader coverage available that handles less common exposures such as ID theft resulting from homesharing, pest infestation caused by renters, liquor liability coverage arising from alcohol served during rentals, extra cost caused by excessive use of utilities, or personal and advertising liability.

Even with special coverage for homesharing, property owners should also be aware of consequences and cost of resolving issues such as breaking local zoning laws, violating residential association bylaws or legal costs of dealing with squatting situations. Homesharing is a popular component of the sharing economy, but participants need to be careful to get proper protection.

 

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