For decades people have purchased investment homes to rent out to create a stable income or potentially sell it once renovations increase the house's volume. Services such as Airbnb and VRBO have also given them the chance to increase their home values further, turning them into sources of income eclipsing their rent. However, unlike traditional renting, where insurance companies and management companies help navigate the choppy waters of potential disasters, home sharing lacks the safety and depth of understanding.
Tim Attia, CEO of Slice, a company that will soon provide insurance policies for customers sharing their homes, put it bluntly. "Homeowners insurance policies have many restrictions and conditions regarding use of the home for a business. Short-term rental of the residence is generally not covered by homeowners policies." He cited his company's blog post, "You're Not Covered," which discusses in detail how many different ride-hailing, ridesharing and home sharing workers sharing their homes or driving customers don't have the necessary coverage.
In laymen's terms, your insurance policy likely doesn't cover short-term lets (the entire structure for a home sharing platform), and this would require an incredibly expensive commercial insurance policy. In the event you've used Airbnb, for example, to create short-term lets on your apartment, reporting a claim that suggests it caused by a short-term renter may get you pointed toward their fraud department. Some companies offer a limit of liability, totally in their hands (not the same as an insurance plan) and, considering that a fire consuming a home in San Francisco will definitely cost over $1 million. To Attia, the problems are clear:
"Homeshare platforms have a commercial insurance policy provided to the Platform. However, it is not the best protection option for the Hosts:
Other thought leaders are increasingly discussing this. Galen Hayes of PropertyCasualty360 recently discussed the Scary Insurance Reality for Airbnb Hosts, specifically calling out, among other specifics, that it only covers property damage and that the host must try and solve the damage with the guest. Hayes also posits a confusing element of the terms and conditions; "The coverage is limited to an actual stay, not a booking. No show--no coverage. Overstay or early arrival? No coverage." If you're kind enough to let someone come in before their agreed-upon check-in time, you may have issues with getting money back during a legitimate stay. "Vacation rental websites like Airbnb are doing their best to protect themselves by offering what looks like insurance to their hosts. But hosts are shouldering a lot of risks with limited protection" said Hayes, president of El Sobrante, A California-based insurance company focusing on, appropriately, hard to place risks.
Attia's Slice reports to remove a great deal of this confusion and cost with a platform that will allow hosts to apply quickly and easily for an insurance policy for each stay. The company will provide a smartphone-based app solution that will acquire a policy on a pay-per-use basis, billed directly to the host (and later Uber and Lyft driver's) credit card. Slice is doing this by making partnerships with leading insurance companies, combining their own licensed InsurTech company with leading companies like global AM Best A+ rated Munich Re. Ironically, the solution to the easily accessed income found by renting one's house or becoming a driver on demand will inevitably be solved by creating an on demand platform to protect them.