Lots of positives have come with the rise of the sharing economy, as ride-sharing companies like Uber have become our Saturday-night rides home and Airbnb has become our go-to for weekend-trip lodgings. People all over the world have juiced their income with supplemental (or even primary) sharing-economy jobs, taking more control of their schedules and their bottom line. Good news, for sure.
But the gig economy has its complexities, and insurance coverage is definitely one of them.
If you’re thinking about putting your home up on Airbnb or VRBO, or joining up with Uber or Lyft as a driver, there’s a lot more to it than just signing up on an app — getting proper insurance coverage is a must. And what you have as an individual isn’t going to do it.
“You’re not sharing, you’re selling”
We may call it the sharing economy, but you’re not sharing, you’re selling, and that’s an important distinction. Airbnb-ing your spare bedroom on weekends, in the eyes of your insurance company, makes your home a commercial space. Combining a few Uber hours with your nighttime commute makes your car a business vehicle. Your coverage needs to reflect those realities.
Home-sharing insurance needs
Let’s take home-sharing as an example. Your homeowners insurance is intended to cover your home, its contents and your liability when used as your residence. When you’re using it as a business, things change — in many/most cases, your policy won’t cover issues that could arise while you’re renting out your space, like damage to the home, or injuries to guests that result in a lawsuit.
Some companies, like Airbnb, offer insurance for hosts to cover damage/liability — in their case, a Host Protection Insurance program covers up to $1 million for eligible claims filed as a result of guest stays. It’s a great benefit, and worth noting, but there are limits to what it covers. Other companies offer supplemental insurance policies for a fee, others don’t have options at all. Some policies won’t cover specific things like cash and jewelry, some have low limits that could quickly leave you in a lurch. The insurance-offering landscape is as colorful and varied as the home-rental options on those sites.
There are all kinds of hiccups that can arise if you rent out your space and don’t have the proper insurance in place, from declined claims to outright cancelled policies. Ultimately, you want and need to be fully aware of where you stand in terms of liability before you take risks with your biggest investment, right?
An across-the-board solution, if this is a route you’re considering, is a business or commercial policy that keeps you protected as what you ultimately are: a business provider renting a commercial space. Sounds funny when you don’t really feel like a commercial enterprise, I know, but as far as your insurance company is concerned, that’s what you are.
Something I often see here in Nashville: Traditional landlords capitalizing on the popularity of the city as a party destination, and converting their rental properties to accommodate bachelor and bachelorette parties. It can be a smart, savvy business choice, but if you’re considering this you need to revisit your insurance. A typical landlord dwelling policy almost never covers short-term rental activity (usually defined as a rental term of less than 30 days), so in the event of a claim, you’ll most likely be looking at a denial and/or cancellation. It doesn’t seem fair, but the insurance companies just don’t see the risk as the same. You’ll definitely need to get a commercial or specialty policy that covers short-term rental activity, specifically.
If you were unsure, no, you won’t need multiple policies if you’re living in and renting part of your home; the business policy will have your mix of needs covered. Some traditional homeowners policies allow an endorsement for this, too (but not many); some view this somewhat similarly to a bed and breakfast, so they’ve seen it before. It’s a fuzzy area of insurance, to say the least.
If you’re not sure about your situation, give me a call, and let’s talk about what companies you’re planning on working with, and where your home-sharing coverage gaps might be. I work with multiple carriers that provide solutions for home-sharing and short-term rental properties. The cost for these policies is usually a little higher, but certainly not prohibitive. The key is to just make sure you’re properly covered.
Car-sharing insurance needs
When you start driving with a ride-sharing company, you’re up against the same situation — your personal car insurance policy generally won’t cover issues that arise while you’re using your vehicle for “drive for hire” purposes.
It might seem arbitrary — you’re driving your car either way, right? But from an insurance company’s standpoint, the risks are inherently different when you’re using your car as a ride-sharing provider and when you’re Average Commuter Smith stopping at Trader Joe’s on the way home from work. It’s all about data — the effect of more miles, different areas, different times. The numbers add up to increased risk, and in order to effectively account for that risk, your policy looks different.
As with home-sharing above, different companies may offer some kind of supplemental insurance, and, as above, you don’t need multiple policies — getting appropriate insurance coverage for your ride-sharing situation will take care of your personal and Uber/Lyft use for that particular vehicle. One more: Not having the proper insurance, again, can mean you’re on the hook for claims, and/or on the receiving end of a cancelled policy.
For ride-sharing-appropriate coverage, you have some options. A commercial auto policy would keep you protected, and a number of insurance companies now offer specific ride-sharing insurance or endorsements to bridge the gap, too. I’d be happy to share some info with you and help you weigh out the possibilities.
This may not apply now, but it could down the line
Right now, the number of folks this affects is proportionately small — a report from the Insurance Information Institute noted that providers in the sharing economy account for about 7 percent of the U.S. population. But it’s growing fast — in that same report, it said “51 percent of those familiar with the (sharing-economy) concept could see themselves as providers within the next two years.”
I definitely see the growth here, especially as Nashville keeps breaking tourism records. It feels like I meet someone every month who tells me they’re considering dipping their toes into the sharing-economy waters, so I’m making a point of directing people to properly protecting their assets. I figure it’s a professional imperative, and the neighborly thing to do.
If you could use some guidance and/or examples of what coverage for your home or car might look like as an Airbnb host or Lyft driver, call or email Tucker Coverage, and I’ll be glad to help.
Do you have any other questions related to insurance that you’d like to see me tackle on our blog? Please let me know — I’m always eager for feedback.
And if you’re already ready to explore some policy options, here’s an easy way: Get a quote online for everything from home insurance and renters insurance to auto insurance, life insurance and beyond.