A homeowners insurance policy is designed to cover damage incurred on a property and the residents of that specific home. However, the traditional dynamic of owning a home has changed to a certain extent in the past few years. Thus, the viability of your home insurance is affected as well.
Recent trends of home sharing and home renting have altered the landscape of ownership. By using platforms such as Airbnb, the relationship between host and guest has changed. Rather than inviting over a friend or family member for a night or two, some homeowners are opting to open up their home to complete strangers and charge them a fee.
Home sharing companies rely on cheaper rates than traditional hotels or bed and breakfasts. This gives travelers the opportunity to find a place to stay at a much more reasonable price. In some cases, a guest only reserves a bed, or even a couch, and nothing else. This creates a more personalized and modified experience for each traveler.
The homeowners who use these services are able to rent out a portion of their home, which can help pay bills, including their mortgage. The problem with insurance arises because it isn't quite clear what is allowed and what isn't. If you rent out your home to someone for a short time, then is your home a residence or a business?
The question of insurance
Airbnb now has 300,000 listings on its site, according to the company. That means 300,000 instances of potential problems with insurance. Under a standard homeowners policy, coverage would not apply to damage during the time of a guest's stay because you are being paid by the renter. If you are making a profit, then you are turning your home into a business, which would mean you would need a different type of insurance plan.
Some homeowners do not notify their insurance company that they are renting out their home, which might save you money in the short term, but it will end up costing you if there is an accident. The length of stay is a large factor in determining whether or not your insurance is applicable. If it is for a few nights, then your insurance company might still cover damage under your original plan, however an extended period of stay requires additional insurance.
Short-term policies are available if you have arranged for a guest to stay at your home. If you have repeat guests or have a specific set of time set aside for renters, then you will also need additional coverage, according to the Insurance Information Institute. Renting your home out for months would require purchasing a landlord policy, which is more expensive than home insurance. For guests, renters insurance would need to be purchased as well.
While it may seem like an easy, cheap alternative to a hotel, home sharing has its insurance risks. Each insurance company has a different set of standards that apply. Some states also have restrictions and insurance requirements that will affect how you rent out your home.