Are Your Clients' Home-Share Rentals Covered? - CRC Group

Are Your Clients’ Home-Share Rentals
Covered?
Rapid spread of the coronavirus required social distancing and caused temporary closure of popular tourist sites
around the world. As destinations reopen and some rescheduled travel plans, home-sharing is once again a viable
option for resuming travel while staying outside crowded areas. According to a recent Pew Research study, there are
currently more than 660,000 Airbnb listings in the United States, and nearly a quarter of Americans with an average
household income of $75k or more have used home-sharing platforms.3 However, many homeowners seeking to bring in
extra income by renting their homes don’t consider the serious financial risks they’re taking. Many often assume their
homeowners’ insurance policy provides protection for short-term rentals. In reality, they may be liable for property
damage or injuries sustained on their property when occupied by renters. Most homeowners’ policies contain property
and liability exclusions around using homes for business purposes, including property rental. This includes exclusions
for vandalism and theft of personal property while rented. Home-share sites may offer to repair damage caused by a
guest, but such promises aren’t an actual insurance policy, and homeowners must carefully adhere to the stated
requirements in order to obtain reimbursement from a home-sharing site.

                                                                                                                              The sharing economy shows no signs of
                                                                                                                              slowing down. Travelers who would have
                                                                                                                              previously been limited to staying in hotels,
                                                                                                                              now have many attractive options. More than
                                                                                                                              2 million people stay in an Airbnb rental each
                                                                                                                              night, according to the company, which offers
                                                                                                                              more than 7 million listings in 220 countries
                                                                                                                              and regions around the world.2 In addition,
                                                                                                                              home rentals are offered by several other
                                                                                                                              well-known home share sites including FlipKey,
                                                                                                                              HomeAway, and VRBO.

                                                                                                                              The total number of vacation rental users is
                                                                                                                              expected to amount to $57M and revenue of
                                                                                                                              $18B by 2023.5

©2020 CRC Insurance Services, Inc., CRC of California Insurance Services, CA Lic No 0778135. No claim to any government works or material copyrighted by third parties. Nothing on this website constitutes an offer, inducement, or contract of
insurance. Financial strength and size ratings can change and should be reevaluated before coverage is bound. This material is intended for licensed insurance agency use only. This is not intended for business owner or insured use. If you are
not a licensed agent please disregard this communication.
                                                                                                                                                                                                                                 08122020-1046

Research indicates that 11%
            of U.S. adults have used a
          home-sharing network to stay
             in a private residence.3

There are plenty of scenarios that should make any homeowner stop and count the potential cost of home-sharing gone
wrong. A fire that occurs while a home share renter is on premises could lead to hundreds of thousands of dollars in
uncovered costs. Those costs could be elevated further if a renter suffers serious injury or if the fire damages nearby
property. One Texas couple rented out a house they owned, right across the street from their own residence, and
watched as hundreds of college students came to party, causing nearly $20,000 in damage.1 Similarly, an Austin, Texas,
home was wrecked by home-share guests to the tune of $40,000. Further West, a Sonoma, California home destroyed
by an accidental fire cost an estimated $1.8 million to rebuild. In general, homeowners insurance does not provide
coverage for personal accidents/property damage, lost income, or damage resulting from criminal activity while a
property is rented, unless specifically included in policy language.4

Home-sharing sites generally offer assurances about reimbursement for damages, but the coverage and conditions
may be too limited to actually help the homeowner. For example, reimbursements may be based on the current cash
value of an item rather than replacement value, and liability coverage may have insufficient limits to provide meaningful
protection. It’s also easy for homeowners to confuse share site host guarantees with insurance; however, guarantees
often require that you first attempt to recover damages from the guest before filing any claim with the home-share site.

As the home-share rental market continues to grow, the insurance industry is working hard to keep pace. Given
sufficient notice, some insurers have often been willing to extend coverage for rentals for one-time events, such as
major sporting events or political conventions. Many carriers allow insureds to add home-sharing coverage for an
affordable additional premium and others offer a specific add-on endorsement. A few carriers have even embraced the
emerging peer-to-peer rental industry and provide special endorsements referencing the Airbnb, HomeAway and FlipKey
systems, while expanding the special limits of liability on items like jewelry and electronics.

              Many home-sharing sites
          offer damage reimbursement.
           Airbnb offers up to $1 million
         in coverage per rental, but that
           may not cover all losses and
          filing a claim can be complex.3

When evaluating coverage for a home-share rental, it’s important to know the insurance market’s restrictions. Some
carriers may avoid replacement cost on the contents, while others limit the maximum number of rental days per year.
Some carriers also require that the homeowner engage the services of a rental agency or property management
company. When inquiring about coverage for home-share rentals, homeowners should also be able to provide
information about how often the property is rented, if a home-sharing network or site is used, how many days the
property is rented each year, the duration of the typical stay, and how much income is generated by the rental. Providing
this information can help carriers accurately assess your needs and recommend the right product for each situation.3

BOTTOM LINE
Home-sharing is part of the tourism economy that is here to stay. As travel resumes, clients offering rental properties
on home share sites need to confirm if their homeowners policy covers home-share or short-term rentals. If not, many
insurers offer very affordable endorsements to cover such rentals. It’s crucial that those venturing into the home-share
marketplace understand their insurance policy details and needs in order to obtain the best possible coverage at
the right price. Contact your CRC Group producer today to discuss how we can meet your clients’ home-share rental
coverage needs.

Contributors
 	Shaun Carloss is the Florida Homeowners Underwriting Manager in the CRC Orlando office and a member of the
   personal lines practice advisory group.
 	Allison Talus is the Director of Personal Lines – Western States located in the CRC Denver office and a member of
   the personal lines practice advisory group.

ENDNOTES
1.	Airbnb host says guest held massive house party, New York Daily News, March 15, 2018, http://www.nydailynews.
    com/news/national/airbnb-host-guest-caused-20-000-damages-article-1.3876313

2.	Fast facts, Airbnb, https://press.airbnb.com/fast-facts/

3.	How to Get Affordable Airbnb or Home-Sharing Host Insurance, The Balance, March 5, 2020.
    https://www.thebalance.com/finding-airbnb-home-sharing-insurance-4140684

4.	Hosts With The Most Need Home-Sharing Insurance, Forbes, June 19, 2020. https://www.forbes.com/advisor/
    homeowners-insurance/home-sharing-insurance/

5.	Statista Vacation Rentals https://www.statista.com/outlook/268/109/vacation-rentals/united-states