Why pay a large price tag for something when you can rent it cheaper from a stranger online? That is the principle for a range of new online services that enable people to share cars, their homes, bicycles, and household appliances. Companies such as AirBnB, which lets people rent out their homes or spare rooms, or Uber, which allows individuals to share their own vehicle and operate as a personal taxi service, act as matchmakers, allocate your assets where they are needed and take a small cut in return.

This philosophy isn’t too different from running a bed-and-breakfast, owning a timeshare, or participating in a car pool.  But technology has made the whole process much more convenient and cheaper than ever before, allowing the sharing service to be conducted on a much larger scale. You are now able to read reviews, track shared vehicles with your smart phone GPS, and make simple online payments, providing security for both parties participating in the program.

Insurance concerns with Airbnb

Home insurance policies are intended to protect the home owner themselves, their family, and offer liability coverage for guests. However, once a guest starts paying you for their stay they are considered a renter, and you need to change your insurance policy to allow for such activities. This is no different then renting your basement to a student, some insurance companies will accept this activity, but it is considered a material change in risk, and without notifying your insurer it could jeopardize your policy.

Rentals are transient in nature, a renter is typically not going to provide the same level of care towards the dwelling as the home owner would, this holds especially true with short-term rentals. Insurance companies are concerned about damage caused by the tenant, theft, vandalism, and other risks that may be associated with roomer and boarders using your property.

Airbnb has their own insurance policy

AirBnB is now providing a insurance program called the “Host Guarantee”, which includes $1,000,000 liability insurance for hosts in 15 different countries, including Canada. It is however hard for anyone to analyze the specifics of this program since AirBnB won’t provide extensive details about it. On the companies website they have a statement “The Host Guarantee is not insurance and should not be considered as a replacement or stand-in for homeowners or renters insurance. The Host Guarantee does not protect: cash and securities, pets, personal liability, and shared or common areas.”

It also worth noting that if your claim were to fit into the Host Guarantee’s guidelines it would be subject to an investigation on the part of AirBnB. This would result in a dispute resolution process with the offending guest prior to submitting for damages. As a result, you could be left for a considerable amount of time before this investigation is concluded.

In summary, if you are considering participating as a host for AirBnB please contact a HMS office so we can review your policy and make sure you have adequate coverage. 

Resources:

Economist – The rise of the sharing economy
Economist – All eyes on the sharing economy
AirBnB website
Insurance Business Canada – Brokers dissect AirBnB’s new insurance coverage
Insurance Business Canada – Growing popularity of AirBnB poses insurance pitfalls