The internet and the rise of peer-to-peer transaction platforms have created a lot of opportunity for those looking to make a few extra dollars. Have a clean driving record and a clean, well-maintained car? Drive With Lyft or Uber. Want help with some errands? Check out TaskRabbit. There are even platforms that make it easy for individuals to issue microloans to small businesses and complete strangers.
The most popular platform, Airbnb, connects travelers with places to stay in private homes, condos, and guest rooms. AirBnB’s popularity has given rise to competitors, including HomeAway, Vacasa, and TripAdvisor’s FlipKey.
The market for peer-to-peer vacation rentals is so strong, niche companies are on the rise. Innclusive and NoirBnB, according to Curbed, appeal to gender and racial minorities who felt discriminated against by AirBnB property owners. Kid and Coe brands itself as an online marketplace for family-friendly private lodging. Even procrastinators and those traveling without the opportunity to plan ahead can find last-minute refuge through Overnight’s platform.
Overall, vacation rentals in the United States are big business, bringing in just under $18 million in 2017 in the United States with a projected growth of 6.6% between 2018 and 2022.
Do you want to grab a piece of the pie? Before you list that vintage Airstream you’ve been restoring for years, or try to fund a European tour with revenue generated by renting out your empty home, you need to start thinking of your personal property as a commercial asset…with all the liabilities of a corporate-owned hotel chain.
Your Homeowner’s Policy Isn’t Enough
Homeowner’s policies specifically exclude any business activity conducted on the insured property, and the exchange of money for use of a short-term rental is, of course, a business transaction. Landlords renting their homes to long-term tenants can protect their assets when they require tenants to purchase renter’s insurance and name the property owner among the beneficiaries of any claims.
Finding the right insurance to cover short-term rentals isn’t always so easy. Few insurance carriers offer products designed for peer-to-peer vacation rentals, though that number should rise now that the concept is catching on among the mainstream market. AirBnB offers a Host Protection Insurance program, and they “hold” security deposits paid by guests, but their coverage is limited to $1m and many users—both hosts and guests—have reported a variety of issues in receiving compensation from the platform for property damage and liability claims. The program’s terms and conditions have exclusions that leave property owners vulnerable.
While the premier peer-to-peer rental platform heavily promotes its dedication to protecting hosts and travelers, it strongly encourages property owners to take out their own, separate business insurance policies, and to look into incorporating their rental business. This is common sense. YOUR insurance policy protects you.
While traditional homeowners policies may not be sufficient, a new startup called Slice has started offering on-demand insurance for rideshare drivers and homeshare hosts. And yes, of course they have an app through which you can purchase on-demand homeshare insurance.
Don’t Forget to Check Local Laws
Before you settle on a policy to cover your short-term rental side business, make sure you’re in compliance with your city, county and state laws, and ordinances. Your Homeowner’s Association, for example, might prohibit any commercial activity altogether, including short-term rentals.
Given the popularity of peer-to-peer short-term rentals, “big business” is joining in, purchasing condos, apartments, and single-family dwellings. This pressure on housing availability for traditional rental units, as well as the market share hit suffered by local, established hoteliers, has compelled local governments to impose laws and zoning regulations that effectively ban short-term rentals.
Most local governments don’t take such extreme measures, but many do require homeowners to obtain business licenses and commercial insurance with liability minimums.
Make Informed Decisions
Before you decide to rent out your property to overnight or multi-week guests, do some research into several peer-to-peer platforms. Seek out independent, online forums for platform reviews, renting advice, and recommended resources, and be sure to find the right commercial liability product for your specific needs.