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It’s Holiday Travel Time!

November 29, 2014

Holiday travel season is now in full swing and there is new trend in the lodging industry that is likely already in your community or a community near you that is taking the lodging industry to a new level.  The concept is pretty simple, rent a room from a homeowner in a city that you are visiting or rent a room out in your home for a visitor to your community. These are short term rentals that are designed to take the place of a booking a hotel room.  There are companies on the web that connect homeowners to potential short term renters. They earn a fee from the homeowner for their services.

If you are a homeowner thinking about this as a way to earn a few extra dollars, there are some important things to consider from an insurance perspective. The downside may far outweigh the extra income. Before getting into the insurance issues, it is also important to consider your town’s zoning laws prior to offering a room for a night or two. Many towns do not allow a room to be rented for less than thirty days. Some towns don’t allow it at all. There are also local hotel taxes and permits to consider.

On top of these issues, most home insurance companies will strongly frown on the business of short term rentals. A home insurance policy isn’t designed to cover this type of business out of the home and many companies will cancel the policy if this type of business is conducted.

Well-known companies such as Airbnb offer a “host guarantee” that is designed to cover the person renting out their home through their website even offering a “one million dollar guarantee.” While Airbnb is clear about what they do and do not cover with their guarantee, there are significant gaps that leave a homeowner exposed.

Although Airbnb lists the items that are not covered, some are significant. The “Million Dollar Guarantee” does not cover DSC_0605the homeowner’s liability! This is very significant. Should an individual renting a room from you take any type of legal action against you as the homeowner you are on your own. Things like dog bites, one of the largest causes of homeowner liability, are excluded. Another example that comes to mind is “slip and falls.” If a person renting a room from you should happen to fall inside the home or on the property, steps, or walkway, there is no coverage from Airbnb. Your own home insurer may cover you, however it will likely lead to a cancellation of your insurance for running a business inside your home.  The bottom line is that there are many potential liability losses that are not covered by the service.

If you are a person that utilizes the service to find a room, the lack of liability coverage should also be a concern.  Reputable hotels and motels carry coverage that is specific to their industry. That may not be the case here.

It should be pointed out that a service like Airbnb may do business in several countries around the globe so each country will have its own set of regulations. It is an exciting time for internet-based businesses and I commend Airbnb for pushing the boundaries of the lodging industry.

If you are thinking about using a short term rental service,  I    encourage you to contact your insurance agent, your town’s zoning office and/or your homeowner’s association  to find out where you stand prior to jumping in with both feet. A little time up front could save you a lot of aggrevation AND money in the long run.

Have a great day!

Chris Garlasco

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