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The Russell Agency, LLC Blog

All You Ever Wanted to Know About Insurance

Check Your Homeowner's Insurance Before You Become a Home-Share Host

Are you offering your home on a home-sharing service? Most home-sharing and host services make renting out your house easy. They even offer $1 million in insurance coverage as part of their service. Like most people, you might ask yourself why you’d need more than $1 million for insurance.

It’s not the coverage amount as much as what that $1 million truly covers.

What could go wrong?

While making some extra cash sounds exciting, the liability that goes with it could cost you more than it’s worth. As with most home-sharing and host apps, you control the pricing, hours and rules of engagement. But for everything you can control, there’s a lot you can’t.

The home-sharing guests who became unwanted tenants

Imagine you’ve signed a deal for a four-week family vacation. The credit check comes back clean, the prepayment clears and the texts you’ve exchanged are nothing short of a pleasure. They’re looking for privacy and quiet. And you’re savoring the profit margins that offset your annual mortgage cost by 40%.

But your dream guests refuse to leave and won’t pay. After week four, the family vacation turns into an overstay-cation.

Your perfect guests become a long-term nightmare

You seek assistance from the home-sharing service, but the most they can do is allow you to charge extra for the unauthorized days. You go to the police. Because your guests have resided in your home for over 30 days, the police tell you they may have tenant rights and can’t remove them from the premises. You’ll have to evict them in court.

Evictions and other profit-depleting liabilities

After you evict the guests and gain access to your property, you discover damage to the walls. Since they weren’t authorized guests, your $1 million in coverage might not respond to the damage they caused. The exclusions on your $1 million host policy and homeowners insurance make a lawsuit win unlikely. In the interim, you have to pay out of pocket.

You turn to your homeowners insurance, but they deny the claim because home-sharing is a business operation.

While extreme, this example is based on a true story.

Insurance options for home-sharing liabilities

Insurance policy

What it covers

Home-sharing insurance

Theft and damage of your personal property (check the limits on each rental period)

Property owner insurance

Theft of and damage to your personal property

Special event insurance

Single events like a wedding

Host liquor liability insurance

If you’re sued for overserving someone at a party you host (verify guest coverage options, if any)

Auto liability insurance

Damage and injury due to use of a vehicle on your premises (even if it’s not part of the rental, you may need added liability coverage)

Watercraft liability insurance

Damage and injury due to use of a watercraft on your premises (even if it’s not part of the rental, you may need liability coverage)

Building ordinance or law insurance

If you have to rebuild your home in accordance with current building codes after a covered catastrophe

Personal umbrella insurance

Extends liability coverage over both your home and auto insurance at the same time

Business owners insurance

Combines property and liability insurance into one policy and sometimes include business interruption and advertising injury (You might consider this type of policy if you’re renting a second home on a full-time basis.)

Data breach or cyber liability insurance

Hacks, data theft, ransomware and other cyberattacks

Sewer backup insuranceSewage and water that backs up into your home through pipes or drains
Flood insuranceDamage from floodwaters or mudslides that flow into your home (usually due to flash melts or rains)

Ask your insurance agent to review what’s covered under your homeowners policy before you open the door to a home-share guest.

Know your insurance exclusions

Some home-sharing services advertise a no-worries approach to homeowners, but you should worry.

Here are some examples from a home-sharing policy of things that are not covered:

  • Animals, livestock and pets
  • Standing timber and crops
  • Watercraft, drones, aircraft and satellites
  • Property owned by someone other than you
  • Weapons
  • Security cameras and other recording devices
  • Losses that happen after the original booking period ends
  • Losses or damages that exceed the policy’s limit
  • Loss of or damage to fine arts (You may only get actual cash value, not agreed value.)
  • Extreme weather events and acts of nature
  • Excessive use of utilities
  • Interruption to your business (even if it was due to guest damages)
  • Deterioration due to delay
  • Compliance with local ordinance or law repairs
  • Identity theft and identity fraud
  • Acts of war, terrorism, insurrection and rebellion
  • Actual or threatened malicious use of poisonous biological or chemical materials
  • Nuclear reactions, radiation and radioactive contamination
  • Seizures and destruction under quarantine
  • Contraband and illegal trade
  • Damage caused by insects, animals and vermin
  • Losses directly or indirectly arising out of or relating to mold, mildew, funguses, spores, viruses, bacteria and other microorganisms

Denied coverage twice? It’s possible

If the home-sharing company denies your claim, you could be unprotected. Your homeowners policy might also deny your otherwise legitimate claim because you didn’t tell them about your home-sharing.

Don’t leave your home protection to chance.

  • Contact your agent about your home-sharing plans.
  • Confirm your homeowners coverage.
  • Purchase home-sharing or property owners insurance.
  • Investigate the tenants’ rights laws in your town.
  • Invest in a home monitoring system (but be clear on laws about consent and filming guests).
  • Consult a personal injury and liability lawyer so you’ll know your options in a lawsuit.
  • Verify that home-sharing is legal in your municipality (illegal home-sharing could void your homeowners policy).

Protect your home and assets

Before you take a trip down liability lane all alone, make sure you enlist the help of your insurance agent. They can advise you on how to proceed. So when it’s time to stake your claim in the home-share marketplace, think of the thousands you could make in profit and savor the millions you’ll save in liability.