Is Home Sharing Covered by Homeowners Insurance?
Published: May 2014
If you live in an area where a major sporting event is slated to take place, you might be considering renting out your home for the big event. Or, maybe you live in a college town and plan to rent out your place for graduation.
With the advent of sites like HomeAway and AirBnB, it's easier than ever to enter into the "home sharing" market, where you rent out part of your home to short-term paying guests.
But before you agree to let any paying guest stay in your home, you should give some thought to the risks associated with these types of situations (for example, if a renter damages your property or if someone gets hurt during the stay).
Your first step should be to check in with your insurance agent to understand the implications and to better understand the impact of home sharing on your homeowners policy. Here are some other things to consider:
Q: Am I covered by my homeowners insurance if I rent out my home for a one-time event?
A: You may be covered if you're renting your property for a single, special occasion, according to the Insurance Information Institute (III), but different insurers have different requirements. For example, some may require advance notice, while others might insist you purchase an "endorsement" (an add-on to your homeowners policy) to provide broader coverage for the renter, the III says.
Q: What about if I'd like to rent out my home multiple times?
A: If you're planning to rent your place for short periods but on an ongoing basis, some insurers may consider that a "business" and require you to purchase business insurance, according to the III; other insurers may consider any rental of your property a business. If you're planning to rent your home for a longer period of time, say six months, you will likely need a special policy like a landlord policy, says the III. Call your agent ahead of time to ask.
Q: Is the personal property of a paying guest covered by my homeowners insurance policy?
A: Likely not. The property of a paying guest would not be covered by a typical homeowners policy. If something, such as a fire, occurs while a paying guest is staying at your home, the paying guest would need to look to their own renters or homeowners policy for the loss of their own property.
Q: What if a paying guest steals my property during their stay?
A: You likely won't be covered by your homeowners insurance. There are typically exceptions on a homeowners policy for theft when the theft takes place in the part of a residence that is being rented to a paying guest.
Q: What if my guest injures somebody or causes damage to a neighbor's property? Does my homeowners insurance cover that?
A: Likely not. The liability coverage of your homeowners policy, which typically protects you from financial loss if you're legally obligated to pay for another person's injuries or for damage you do to their property, will typically not extend to a guest. So, if a paying guest was responsible for another person's injury or property damage, the paying guest would need to look to their own renters or homeowners policy for liability coverage.
Q: What if my guest damages my own property?
A: Your policy most likely won't cover these types of damages, either. For example, if the paying guest knocks over and breaks a lamp while staying at your home, your homeowners insurance likely won't consider that a "covered peril." Additionally, because most homeowners and renters policies exclude property damage to a rental property, the paying guest may not have coverage through their own homeowners or renters insurance if they damage your property. You would want to make sure your paying guests have the capacity to pay for any damage they may cause to your property.
Q: What precautions can I take to make the home sharing process run as safely and smoothly as possible?
A: First, talk with your insurance provider to understand what your existing homeowners policy may or may not cover. Ask what exclusions might apply. Do a thorough interview of anyone before you give them access to your home. Most home sharing sites offer a screening service that gives you an overview of a candidate's background, but you likely want to go further, asking for identification, doing reference checks, asking for deposits (much like you would do when taking on a rental tenant as a landlord). You might also require any paying guests to have their own homeowners or renters insurance policy; check to see what their policy covers (liability, for instance) and consider whether their insurance is extensive enough to help you avoid any undue risk.
Home sharing can be a unique way to make extra money, but, before you enter into an agreement, be sure to do your research and take steps to protect yourself against the unexpected.