Have you considered renting out your guest bedroom or a vacant condo through a popular room-sharing website like Airbnb? If so, have you also considered the risks of having a guest break your smart TV, swipe an heirloom piece of artwork, or even trip on a loose step? Most hosts report having good experiences with their renters; however, some have experienced serious problems in the past and will continue to do so in the future.
Three Major Risks of Renting Through Room-Sharing Sites
Before you rent out any of your property, even a guest bedroom, take a moment to understand the risks and steps you might take to protect yourself. You might consider these three examples first:
1. Your Homeowners Policy Probably Won’t Cover Your Paid Rental
Have you read through your current home policy to see if it includes coverage for paid guests? Most home policies either exclude or limit covered damages when you use your house for business. You might simply decide to upgrade your policy or buy additional coverage. You should always contact your insurer before you make your first rental to make sure you are covered and in compliance with your policy.
These days, some insurers will offer specially tailored policies or riders to your existing coverage that you can get on a month-to-month basis if you plan to rent rooms. Make certain that you understand these policies well, including any coverage for damage claims from third parties because of the actions of your guest. You don’t want to wait to read your policy after you have already had damages or a liability claim.
2. Home-Sharing Might Not be Legal in Your City
While companies like Airbnb operate legally in most U.S. cities, some larger metro areas have enacted strict regulations that limit their use. Cities may enforce these rules because they don’t want to encourage evasion of hotel taxes or make property for long-term residents too scarce.
Some examples of major cities with strict restrictions include New York City, San Francisco, and Santa Monica, all areas with high property values and rental rates. One host in New York City faced a $7,000 fine because he violated city regulations. Naturally, you need to comply with your local laws to stay within the terms of your insurance coverage and to avoid getting slapped with expensive fines.
3. Remain Wary of “Free” Insurance Offered by Rental Websites
Just as you need to understand your homeowner’s insurance, you also need to take the time to study the free coverage that some of the larger home-sharing websites include for guests and owners. For instance, the Airbnb website’s page about their Host Guarantee coverage lists dozens of events that they would exclude from coverage, including intentional acts and damages to common areas.
How to Protect Yourself From Risks When Renting Property Through Room-Sharing Sites
Even though you may only host short-term renters occasionally, you still conduct business when you rent a room or vacant home through one of these new room-sharing portals. As with any business, you should make sure you comply with local laws and have proper insurance coverage in place. If not, you could face expensive damages, liability claims, or even legal penalties that could easily exceed any rent you can collect. An experienced insurance agent at Billy Brown Insurance can help you understand the risks and the right steps that you need to take to protect yourself.