Home Sharing - The Risks

Home sharing platforms like Airbnb have created a new business opportunity and source of income for homeowners and tenants across the country.  However, there are risks for the occupant. The horror stories about assaults, condos being held hostage, theft and property damage are well known. What is often overlooked is the risk for the property owner.  If you are a building owner, you need to be aware of the following issues.

Who Is Staying There?

If you own a building and the tenants are on Airbnb, you could be exposed to serious risks. Unlike a traditional rental which requires a detailed application process, extensive information collection and verification about the tenant, home sharing allows free access to your property. Legally speaking, you have no contract with the Airbnb tenant and so you have little or no leverage if an incident should occur. Also, the rights, duties and liability limitation of the building owner in regard to a home sharing tenant are still a grey area.  That only increases your risk.

What about Renter’s Insurance?

Your tenants may assume that their renter’s insurance will cover them for any loss or damage caused by the home sharing guest they take in. It may do so, but it also may not. There is no guarantee on this and the protection available will depend on the specifics of each renter’s insurance policy.

What You Can Do To Protect Yourself

There are a few things a building owner can do to protect his interests. Key among them are:

• Prohibit home sharing.This is the most comprehensive option. Have your lease agreements drafted to include the clause that the tenant is prohibited from using Airbnb or other home sharing services. In addition, it is a good idea to have an addendum to the lease agreement which clearly states the owner’s position in regard to home sharing and details the risk for the owners, the tenants and others in the building. The tenant must accept and sign the document.
• Monitor Home Sharing Platforms. There could be some tenants who sign a lease that prohibits home sharing, but think that they can bypass it and share their homes on the quiet. It is easy to claim they have large families and relations keep visiting them. The best way to control this is to monitor Airbnb and other platforms to look for any listingsof the properties you own.
• Consult Your Insurance Broker. Insurance is a complicated issue, especially when multiple coverages are involved. Where does the property owner’s coverage end and the tenant’s begin? Who is liable for what damage or loss caused by a home sharing guest? Only a professional will be able to clearly define where you stand and advise you on what additional coverage, if any, you need to protect yourself from loss or liability caused by home sharing.

Remember, home sharing allows people whom you, the property owner, know nothing about to occupy the premises you own. There are legal, financial and ethical issues involved and you need to protect yourself.

What You Need To Know About Rental Car Insurance

Despite the growing popularity of ride sharing, renting a car is often the only option in some circumstances. For example, if you are travelling or need a temporary replacement while your car is being repaired, sharing a ride, will not give you the mobility and flexibility you require. When using a rental, you need to be sure that you have the insurance coverage you need. Check your car insurance policy’s coverage to know where you stand.

Transportation Expense Coverage

An auto insurance policy is typically in two parts. Collision coverage kicks in when your car is damaged in an accident. Comprehensive coverage covers non-accident related damage or loss such a theft, fire, vandalism, etc. If you have collision coverage, the policy will pay for car rental after an accident. If you have comprehensive coverage, rental will be paid for if the vehicle is unusable due to issues covered by that coverage. If you have both, then you are protected under both circumstances.

How Much Reimbursement Will You Get?

Whether you get enough reimbursement will depend on the specific terms of the policy. For example, if you drive a luxury sedan, it does not automatically follow that you will be entitled to an equivalent rental car. The reimbursement could be only for a compact. Check the policy terms. It is not just a matter of driving a big car. If you normally drive with a car full of passengers, how will they fit into a compact vehicle? The difference between the reimbursement for a compact car and the rental of a larger vehicle which you need could burn a big hole in your pocket. If the transportation expense coverage is not enough, you can modify the policy to have the reimbursement increased. Ask you insurance broker for details.

Coverage While Travelling

Whether your car insurance policy covers you while you are travelling, either on work or vacation, depends on two factors -What coverages are in the policy and where you are travelling to. Check your collision coverage to see if you are protected. As for where you are travelling, in general car insurance policy cover travel and car rental anywhere in the U.S, its territories, Puerto Rico and Canada. The coverage will also depend on your deductible. If you have more than one vehicle on your car insurance policy, the lower deductible is what usually applies.

Do You Need The Collision Damage The Rental Company Offers?

You will normally be offered a Collision Damage Waiver at the rental counter. If you are already covered, you may not need it. However, if damage should occur, the rental company could require that payment for the damage be made when the vehicle is returned. You will get reimbursement from your insurance company, but that may take some time. And you need to have the money available to make the payment when returning the car. So, keep both issues in mind when deciding.

This is a complicated issue with a lot depending on the fine print of your auto insurance policy. If you are unsure of what coverage you have or want to know if it will be enough to cover a rental car you may use, talk to your insurance agent to get a clear picture of where you stand. You can then decide on increasing the coverage, if it is required.

Would you want to Share Your Home with a Burglar?

According to the police, there is a new trend in Bay Area crime – theft by home sharing “guests.” A case in point is that of a man who recently rented a Mountain View home on a home sharing site. He canceled just before he was due to occupy the premises. The premises was burglarized shortly afterwards. A few days later the homeowner called the police to say that someone had opened a credit account in his name and was due to pick up an expensive mobile phone. The police caught the man at the store and arrested him. A large number of items stolen from the home were found in his car.

Consequently, if you intend renting your home to vacation renters, please be cautious. Use the tips given below to keep your property safe.

How To Minimize The Risk:

• A mention in a posting that a room or closet will remain locked is an indication that items of value may be in the home. If this is to be done, do not mention it in the post but discuss it with the renters one-on-one before renting the premises.
• Do not leave valuables or important documents in the home, while it is being rented out. If taking them with you is not possible, lock them in a safe that is secured to the floor.
• If possible try to meet the renters in person. This allows you to evaluate the kind of people they are. Meet them in a coffee shop or other place where their faces will be captured on surveillance video. If the renters cannot meet you in person and do not have a convincing reason for not doing so, that could be a sign that they have something to hide and are not the kind of people you want in your home.
• If they do meet you in person but their statements are vague or inconsistent, they may not be people you can trust. Also, ask for identification and take a photo of the document.
• If your premises is too large for the number of people who the renters say will be staying there, it could be an indication of an ulterior motive.
• Thieves shy away from surveillance cameras. If you have cameras in your home and the renters object to it, they may have something to hide.
• Be careful of last minute urgent rentals. This is a ploy of robbers who hope that in the rush the homeowners will overlook the precautions they should take.
• Be suspicious of last minute cancellation, as in the story at the beginning of this blog.
• Trust your instincts. If you feel that a renter is not to be trusted, do not give your home to him.

If you are planning on renting out your house or apartment on a home sharing site, following the advice given by the police is not enough. You need to be adequately insured to protect you from any loss that may occur. Contact your insurance agent to discuss the coverage options available to you. There is a lot that can be done, often at a reasonable cost, to provide you with the protection you need.

Home Sharing – The Insurance Gaps

The 2 leading home sharing apps today cover over 3 million rental listings in almost 200 countries. This is a far larger number of rooms than even the largest of hotel chains has. The growth is projected to increase over the coming years. While the homeowners benefit from the income, many of them do not think about the insurance, tax and regulatory issues involved in engaging in this kind of commercial activity. Insurance is the trickiest of these.

Homeowners Insurance Is Not Enough

In general, home insurance offers a fairly broad coverage. However, when a part of the home is being rented out to generate income, it becomes a commercial activity and this may not be covered by the policy. When a business operates from a home, the insurance company can refuse to accept a claim and may also suspend liability and property coverage either at the time of renewal or even during the policy period itself.

If that happens, there will be no protection if a guest steals from the home. Even worse, there will be no coverage if the guest causes major damage to the property or if the guest is injured while staying in the home. The homeowner will be unprotected.

There Is Coverage Available

A Landlord Policy is one option. But that is really meant for those who rent out the complete premises full time and do not themselves live there. The scope of the coverage and the cost makes this an unattractive option for those who share their homes.

Insurers are aware of the need for new types of coverage to serve the growing home sharing market. That is why many of the major insurance companies are developing policies and / or endorsements that are aimed specifically for those involved in the home sharing business. The coverage includes issues such as:

• Expenses related to furniture damage or theft by a guest
• Other structures on the premises like a converted garage apartment
• Theft of personal property
• Damage to landscaping caused by a guest
• Liability coverage for small watercraft like canoes, kayaks, jet skis etc.
• Alcohol liability
• Loss of business income – broken pipes or property damage that may make the premises un-rentable
• And more

In some cases a home sharing insurance policy can replace a normal homeowner’s policy. The issues is such a serious one that one of the major home sharing apps requires that homeowners must have adequate insurance coverage before signing up.

If you are involved in home sharing or plan to do so, it is critical that you have insurance that will give you the protection you need. Contact your insurance broker to discuss the nature of your home sharing activities and the coverage options available to you. He will be able to guide you to the right type of coverage that is cost effective while also providing you with the protection you and your home need.

Injury at Work – The Risk and Cost

Insuring your business and the people who work for you is just common sense. Besides, the obligation you have towards your employees, claims for compensation for sickness or injuries in the workplace, can be huge. But your employees may not be the only ones who work in your business premises. What about contractors and their subcontractors?

It Could Happen To You

Compensation to employees of contractors and their sub-contractors who are injured while working at site is a complicated and often contentious issue. The contractor may claim that all the required coverages are in place, but if an accident occurs and they are not, the liability could fall on you, and the primary employer. That is what happened recently at the new Tesla electric vehicle plant. A worker of a subcontractor working on the expansion of the factory was injured while on the job. It soon emerged that the subcontractor was in violation of employment laws and in breach of regulations regarding wages, overtime and workers comp.

Tesla had no knowledge of this, but when the facts came to light, they were dragged to court along with the subcontractor. The end result? The injured employee was awarded a $550,000 settlement.

Tesla is a huge organization with a vast amount of financial muscle. They will be able to absorb the monetary shock of the settlement. But what if something similar happened to you? The courts do not award settlement based on the ability of the employer to pay. It is on the basis of the amount of injury and the liability for it. In the Tesla case, the worker had fractured legs and ribs and a concussion. These are major injuries but, sadly, not uncommon in such cases. Would you be able to absorb a half million dollar payout? Or would that ruin you?

Get the Protection You Need

The vast number of insurance products available can be confusing to anyone who is not an insurance professional. Many business owners think they have the coverage they need when they do not. Part of the reason is the confusion that exists about coverage types. For example a person may read about employment practices liability insurance (EPLI) coverage and presume that since he has liability coverage, he is already protected. Not so. Liability coverage and EPLI are different and both are critical to protecting your business.

Remember that insurance is not a gamble, a luxury or just an expense. It is the shield that will protect you when you are faced with liabilities that could ruin you and your business.

When business imperatives demand that contractors need to be employed, the amount of paper work involved can be voluminous. Issues like workers compensation can easily fall through the cracks.Therefore, you as the principle employer must ensure that the contractors provide proof of their insurance coverage and that they add you as an additional insured party on the policy so that you are not in the firing line if things go wrong. In addition talk to your insurance agent to understand your possible liability and the claims that could be raised against you and get the insurance coverage you need to protect yourself and your business. If you do not have workers comp, liability coverages and EPLI you are leaving yourself dangerously exposed.

Include Home Protection in Your Remodeling Plans

There is more to home remodeling than giving the house a makeover and adding new features together with creature comforts. These are the main considerations, of course, but overlooking the protection of your renovated home could be a big mistake, one that may lead to massive financial loss. You have your home insurance policy, but that will not cover all your expenses if your home is damaged or destroyed. And then there are the hassles of repairing or rebuilding it, which are too many to list. That is why building in protection as part of the remodel is so important. Here are some factors to keep in mind when doing the planning.

Fire Protection

• Wherever possible, install a full residential sprinkler system with a water flow alarm. Ensure that the system is checked annually to keep it in working condition.
• Replace existing smoke or heat detectors with multi-criteria systems that detect combustible gases, carbon monoxide, smoke and heat. This will significantly increase the level of protection.
• Install centrally monitored fire detection units in areas where the fire risk is the greatest – attics, garages, kitchens, laundry rooms and other similar places.
• Where water based latex paint, stains, and polyurethane / acrylic coatings have been used, use fire retardant additives to reduce the fire risk.
• A whole house surge protection system will protect electronic equipment from damage if there is power fluctuation or surging.

Protection from Water Damage

• To prevent major water damage install a whole house automatic shutoff system which will detect and turn off water if the flow is excessive or if water is collecting in the wrong places.
• Water leaks commonly occur below HVAC units, skylights, terrace doors, washers, sinks and wherever, other such appliances, are installed. Installing moisture detection devices at these points will provide an immediate alert of a leak, when it is detected.
• Replace rubber hoses at water supply points for washing machines, dishwashers, sinks, toilets and so on with steel braided hoses which are less prone to damage, leaks and failure. All hoses should be replaced every 5 years or as advised by the manufacturer.
• Install floor drains in the laundry room and other places where there are water connections to carry away water in case of pipe or tank failure.
• Protect yourself from equipment damage by installing point-of-use water shutoff systems at the water supply points for HVAC units and similar devices.
• Install the washing machine at the lowest level to minimize damage if a major leak occurs.
• Install a sump pump of the right size, to remove water that may enter the basement after heavy rains.
• An automatic backup generator will ensure that all protection devices and equipment will function, in the event of a power outage.

Factoring in these changes as a part of remodeling your home may increase the cost, but the peace of mind that follows, makes it worthwhile. Talk to your remodeling contractor about the many options available. In addition, it is possible that having theseproactive measures in place, could result in a reduction on your insurance premiums. To know more about how safety features can reduce your insurance costs, contact your insurance broker.

Home Insurance: What is Covered and What is Not (Part -1)

Many people who have insured their homes tend to become complacent and think that they are covered, no matter what happens to the house. That is the biggest misconception. There are thousands of different types of home insurance and policy options. You should not take the nature and extent of your coverage for granted. Study your policy carefully and do not hesitate to ask your insurance agent for clarifications if you are not sure of anything. You can then modify the policy or take additional coverage to give you the protection you need.

Here are some of the coverages found on most policies and what you should know about them.

The Dwelling

The word Dwelling refers to the house itself and any structures, like a garage, that may be attached to it. The Amount of Insurance (Or Dwelling Limit) as stated on the policy document will show the maximum amount that the insurance company will pay if your home is destroyed by causes or actions covered by the policy. Check to see id f the amount is enough to get you a new home. If not, you need to increase your coverage.

Other Structures

Other structures, as referred to in the policy, will mean a structure not attached to the house. This covers, sheds / barns, pool houses, standalone garages etc. The cover limit for these is separate from that of the Dwelling and is usually much lower – often around 20% of the Dwelling coverage. Check to see if the coverage you have is adequate. You can buy additional coverage if required.

Personal Property

The term personal property on the insurance policy refers to all your belongings in the house – furniture, clothes, appliances, electronic items and so on. Here too there will be a specific coverage limit which is typically about 75% of the Dwelling limit. You can increase the coverage by paying more. There is an important issue to note here. There are two types of protection – “actual cash vale” and “replacement cost.” If the protection is for actual cash value, depreciation will be calculated and what you get for a 5 year old refrigerator that has been destroyed will be less than the cost of buying a new one.  If you are covered for replacement cost, the coverage will be for the cost of buying a new refrigerator at current prices.

Loss of Use

Where will you stay, till your home is repaired or till you find a new one? You are going to have to pay rent while continuing to pay your mortgage. The Loss of Use coverage will pay your rental expenses. There are two types of protection available.There is a payment limit that is the amount that the insurance company will pay, irrespective of how long you need to pay rent. Otherwise, if it is time based, all expenses will be paid, regardless of the amount. But the coverage is only for a specified time after which it will stop and you will not be paid anything.

In the next blog we will look at what is typically not covered by a home insurance policy.