Thinking about renting out a room in your home for a little extra cash? According to AirBNB, you could make up to $455 monthly by renting out one room in your home.  That may seem like a nice addition to your income, but there are some factors to consider before making a final decision.  Did you know that it might affect your future plans to refinance your home or take out a line of credit?  It may also impact your homeowners insurance, which is where the agents at Kasmann Insurance Agency come in.  We would like to educate you on the ins and outs of putting your home up on an online marketplace such as AirBNB, HomeAway,  or VRBO and how it affects your insurance coverages and exposures.

Hosting In Your Home

The process to list a space for rent online is as simple as choosing a price, setting up a schedule, listing some rules about the space, and voila, you’re done!   Of course, there are other requirements for safety, such as listing emergency contacts, having a first aid kit on hand, smoke alarms installed, etc.  Potential hosts are encouraged to notify homeowner’s associations or landlords for permission, check with the local municipality for taxes, licenses, permits, zoning, and other regulations.  (Currently, the city of Columbia does not impose regulations on these specific rentals, but is still looking to pass a hotel tax through more meetings this April.)  Hosts are also encouraged to review their homeowners or renters insurance policy to make sure adequate coverage is in place.

While online listing sites may treat insurance as an afterthought, your agents at Kasmann Insurance know better. Your homeowners policies are not designed to incorporate business exposures, such as renting your home. There are separate property insurance policies designed to handle a rental exposure, and even more specifically for short-term, vacation rentals.  When you change the way you operate within your home, you are also changing the way your insurance covers your liability and assets.

Insurance Offered Through The Online Marketplace

Some major short-term rental companies offer $1 million in liability protection, and AirBNB also offers $1 million property damage protection under their “Host Guarantee” program, at no additional cost.  If you desire property damage protection with HomeAway or VRBO, they offer plans starting at $59 for $1500 coverage.  While $1 million liability seems like an adequate coverage amount, remember that it is only for bodily injury and property damage to guests, or others, and only for losses arising out of a guest’s stay at your home.   Even if you use AirBNB, which offers property damage coverage to the host’s home and possessions; or purchase coverage through other agencies, there are still exclusions.  These exclusions include:  shared or common areas of the building (that are not part of the listing), cash and securities, jewelry, collectibles, artwork, or damage caused by pets.  There also seems to be some confusion as to whether the coverage these companies offer is primary, or if they will only respond to a loss after it is denied by the primary homeowner’s carrier.

Your Homeowners Policy

Homeowners insurance policies specifically exclude business exposures and limit liability, other structures, and theft coverages if the home is being rented.  We have reached out to our major homeowners insurers to determine what their take is on these short-term rental risks.  The most liberal guideline offered by our carriers is through Progressive’s home insurer American Strategic Insurance. They will allow a short-term rental risk under their homeowners program for week-long rentals only.  Auto-Owners and Travelers have agreed to look at these risks on a case-by-case basis.  Auto-Owners will only accommodate the risk if only one room of the home is being rented out, less than 180 days per year, and the insured must occupy the rest of the home while renters are present.  Travelers, on the other hand, has a 14-question supplement that must be submitted to Underwriting for consideration.   It asks questions relating to the portion of home being used, frequency, restrictions placed on guests, if the activity is permitted by local ordinances and Homeowners associations, other incidental services such as meals, laundry, vehicle use, use of a boat, ATV, golf cart, tools, etc.

It took the insurance industry a little time to get on board with ride-sharing and to release an endorsement offering coverage under the personal auto policy.  We assume the industry will follow suit regarding home-sharing.  We may very well see a specific “Home-Sharing” endorsement that will provide additional liability and property damage coverage resulting from short-term guests.  In the meantime, hotel/motel classified commercial coverage may be required in lieu of a homeowner’s policy, or to coincide with one.

Insure With the People You Trust

The Kasmann Insurance Agency is in business to serve and educate our customers and community.   We do not want anyone to risk having their homeowners coverage cancelled, or a claim denied because they were unaware of coverages exclusions.  Insurance is never an “it’s better to ask for forgiveness than permission” situation.  If you want to rent to offer up your home, or a designated area of your home for short-term rentals, please contact us immediately to let us know.  We will help you fill in the gaps in your home insurance coverage so you are protected, no matter which online marketplace you decide to list with.

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