Home-sharing continues to grow in popularity as owners use their homes for income generation, and travelers look for unique experiences.
If fact, experts are predicting vacation home rentals will increase 25% this year — up from a 19% jump last year – and it’s expected this growth trend will continue for some time. Although this relatively new sector has the potential to be an important line of business for many insurers, key to its success will be educating homeowners about their policies and the various exclusions that could jeopardize their protection in the event of damage or injury.
There’s been a general sense that most owners don’t really know whether their home-sharing activities are covered by their current home insurance if something goes wrong during a rental, and a recent survey by global risk solutions provider Assurant provides specific evidence that this is certainly the case.
According to the survey, nearly two-thirds (63%) of the 1,000 homeowners polled said they were not sure whether their homeowners’ insurance policy would cover vacation renters. Additionally, 55% indicated they have no idea who is responsible or liable if a guest is injured. These statistics are a clear sign that owners involved in the home-sharing movement require educating, and that the insurance industry must work harder with home-sharing providers to clarify misunderstandings and misconceptions about home-sharing risks and protections.
|Key areas for education
The biggest areas of misunderstanding when it comes to home-sharing protection are the commercial-use exclusion clause and gaps in coverage.
First and foremost, homeowners must understand that most insurance companies will deny claims related to home-sharing based on the commercial-use exclusion clause in the homeowners’ policy. But different companies approach the exclusions in different ways. For example, some policies indicate that “occasional home-sharing” is allowed without really defining what that means. As the home-sharing movement continues to grow, it’s imperative that insurers and their home-sharing partners develop a consistent and clear definition of this term so homeowners completely understand whether and how they’re covered when renting out their properties.
Just as important is helping owners understand that although many home-sharing platforms offer built-in insurance policies, it’s highly likely that there may still be gaps in coverage including:
- Damage to a neighbor’s property,
- Property theft including jewelry, electronics and other valuables,
- Identity theft from stolen passports, birth certificates or laptops, and
- Liability for personal injury to guests.
The industry must also be proactive in communicating to owners the various regulations and laws being enacted by cities and municipalities related to home-sharing activities including those related to requiring insurance. Indeed, as these laws become common place, more owners will need to show proof of damage and liability protection if they want to list their properties on home-sharing platforms.
|Policy customization
For insurers looking to enter the home-sharing market, it’s important to understand that the one-size-fits-all approach generally does not work. In other words, the key to providing the right protection is the ability to customize products that best fit individual needs. For example:
- If an owner is only renting out a home seven nights a month, then only seven nights of coverage is needed.
- Coverage for condominium residents should look different than coverage for someone living in a single family home.
- For those using home-sharing for meaningful revenue generation, having a policy that will reimburse lost revenue due to guest damage is imperative.
The home-sharing movement can continue to create important opportunities for the insurance industry. However, success will in part be driven by a proactive outreach focused on educating those involved. To that end, the insurance industry, including agents and brokers, must take the lead in helping homeowners understand the risks that they can be exposed to without the right protection, and — just as importantly — continue to build and evolve options that will mitigate those risks.
Kunal Malhotra is vice president for innovation and leads shared-economy insurance solutions at Assurant.
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