Everyone is looking to save money or earn extra money any way they can. It’s understandable that with prices going up everywhere else people are getting creative with how they increase their income. One new way is through using your home as a hotel of sorts. There are a couple new companies that facilitate meetings between hosts, the homeowners, with guests. The guest and the homeowner arrange when the ‘rental’ will occur and for how long. The homeowners leave the home and the guests comes in for however long has been agreed.
The guest saves a little money by not using a full price hotel and gets all the amenities of a home and the homeowner gets to earn extra income. Seems like a perfect match. Unfortunately, like other sharing apps there are issues with regard to property insurance (ie home insurance and condo insurance) and, in some jurisdictions, with municipal or provincial laws. Like other forays into the sharing economy there are some huge gaps in protection.
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Gaps in Your Insurance Can Leave Holes in Your Wallet
Would you drive over bridge with a gap? Of course not. So why would you endanger your home with gaps in insurance.
First, let’s start by what Airbnb provides, according to their website they have a $1 Million policy to protect the damage to a homeowner’s contents and property. This is called the Host Guarantee. That’s a great start, but there are some things you should be aware of regarding this guarantee. As always, it’s in the fine print. If you are unsuccessful in resolving the issue with your guest then you can make a claim to Airbnb. Any payout is based on an Actual Cash Value basis – this means the cost to replace something of equal quality taking into consideration depreciation.
There are exclusions for things that are not covered by the Host Guarantee. While there are a number of them here are some of the more common exclusions:
- Money, currency or notes and securities - excluded
- Fine arts, which cannot be repaired- excluded
- Animals or injuries to animals – excluded
- Damage to neighbouring property - excluded
- Identity theft or identity fraud – excluded
To read more about the Host Guarantee visit Airbnb’s terms and conditions here.
Your Home Insurance is Meant For a Home
You take pride in your home because it’s where you live. It’s your principal residence and so that’s how it is insured. Insurance companies recognize that principal residences have a lot of things to consider and most home insurance policies provide coverage for a wide variety of things, whether as part of the basic home insurance policy or as endorsements and add-ons. There is some coverage for collections, and fine arts, and money as part of the basic comprehensive homeowner’s policy and you have the ability to add special floaters for specific items. You do have coverage for pets and can get an endorsement to help you recover from identity theft or fraud. These things are all excluded from the Airbnb policy. Most homeowners policies also have a replacement cost feature for contents, which means you can replace a tv with a new one, rather than on an Actual Cash Value basis.
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Your homeowners insurance policy provides you with one more very important coverage – liability protection. If someone gets hurt while on your property you have liability coverage in the event of an injury. There is no such coverage with Airbnb and it’s an important omission. You rent your home to someone and they get hurt and sue you for negligence you will find yourself on your own. Currently, property insurance companies will either deny any claim arising out of sharing your home with paying guests, or cancel your coverage and get off risk, or both. This is because your home is insured as a home not as a business. This is not to say that property insurers won’t have a solution in the future, just that right now there is no coverage for those using their home as a hotel.
Government vs. Home Rental Services
What do municipalities and provincial governments think about host rental services like Airbnb? The Quebec government is looking to increase its regulatory oversight of the sharing economy, especially the host rental service. They are looking to enforce hotel rules on hosts, which will mean registering with the government and paying a $250 fee. Those who don’t comply with the rules will face possible fines of up to several thousand dollars.
Learn About Home Sharing Before You Share
Before you launch yourself into renting out your home be sure to do your research. What will your insurance company do? What laws does your city, municipality or province have that impact being a share host? And find out what coverages the sharing company provides. Sometimes making a quick buck can cost you a lot more as evidenced by this Calgary family’s experience.
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Thanks for reading.