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.

Why Landlords Are Pushing Tenants To Take Renters Insurance

The requirement for tenants to have renters insurance is written into most leases. In the past this was often not followed up on because the renter felt it was not really important and the landlord felt that his own insurance would protect him if there was property damage. In recent times landlords have realized that renters insurance has much more to offer them and are now insisting that the requirement be met by the tenant. What are these benefits?

• If there is a fire not caused by the tenant, the landlord’s insurance will not cover damage to the renter’s personal property and / or belongings or expenses incurred while the property is being repaired. Renters insurance will cover the tenant and prevent him from making claims on the landlord.
• If an action of the tenant causes injury or loss to a neighbor, renters insurance will cover the compensation, leaving the landlord untouched. However, if the tenant does not carry a renters insurance, the neighbors may hold the landlord liable for damages.
• The tenant’s personal property is covered while they are away from home so if they suffer any loss they will be compensated and their ability to pay the rent will not be affected.
• The landlord gets peace of mind of knowing that if the tenant suffers any loss due to flood, storm, earthquake or other natural disaster, the renters insurance will cover the tenant and leave him with no reason to make unjustified claims against the landlord. The landlord in turn, will be free to focus on repairing his property, with no worries or distraction of claims for damages from the tenant.
• If the tenant is sued for any alleged illegal activities conducted on the premises, the renters insurance will cover the tenant’s legal costs. This leaves his cash flow unaffected so continuing to pay the rent should not be a problem.
• Because of the lowered financial liability for any loss the tenant may suffer or cause to others, the landlord’s relationship with the tenant remains largely unaffected by such matters and this reduces the strain on it. As all landlordsand tenants know, a good relationship is important to a mutually beneficial association.
• Renters insurance is very cheap, the tenant cannot complain about any unfair demands being placed upon him. For example a policy that covers up to $15,000 in property damage and $100,000 in liability can cost as little as $200 per year. In fact, cross line discounts are often offered with auto insurance which could reduce the cost even more.
• The tenant, also has peace of mind, confident in the knowledge that their possessions are covered against loss or damage and that their liability for any activities that may occur in the rented premises is significantly reduced and will more than compensate the marginal additional outflow that the premiums for the policy may cause.

Whether you are a landlord or a tenant, you need to be aware of the benefits and implications of renters insurance. By protecting the tenant, renters insurance reduces the monetary loss that they may have to face. By doing this the strain on the tenant’s finances is reduced which in turn will enable them to make their rent payments and so not place a financial burden on the landlord. Renters insurance is one of those rare polices where the benefits are shared by two parties. Contact your insurance broker for more information on the need for and benefits of renters insurance.

Renter’s Insurance - Protects Your Assets

It is true that renters too, have a natural tendency to accumulate personal possessions, which have emotional / monetary value. Consequently, it behooves that these assets be protected against damage or theft. The “Renter’s Insurance Policy” provides coverage, protecting your valuable goods against any mishaps and provides you with a means, to replace your damaged or lost property.

What Protection does a Renter’s Policy Provide? 

Homeowner’s policy does not cover your damages

A homeowner’s policy subscribed by your landlord only covers the external structure of the rented space including the walls, beams, columns, doors and windows. It does not provide coverage for your personal possessions or even the equipment provided by your landlord such as refrigerators, stoves, heaters, etc.

Your Prized Possessions

An inventory of your prized possessions will reveal that the total value of the goods, is monetarily more than you thought they could be. Consequently, not insuring your possessions and then having to replace them, in the event of a mishap, could prove to be extremely expensive. Insuring your assets, helps mitigate any unfortunate consequences. 

Renter’s Insurance covers many mishaps

In addition to loss due to theft, renter’s insurance also covers mishaps due to fire, vandalism, electrical short circuit, lightning strike, vehicle crash, heavy wind and hurricanes,  as the latter two, can wreck your belongings and offset your finances for some time. However, earthquakes, floods and landslides are covered by exclusive policies. 

Renter’s Insurance goes beyond just your personal belongings

Renters Insurance is quite broad and covers important situations.

a. Renter’s liability: If there is damage to another renter’s property (or even your landlord’s property) because of your negligence, you are liable to pay for damages to their property. For example, water seeps from your bathroom into the home below, and it damages the walls. You are liable to pay for those damages, which are covered by the Renter’s Insurance.

b. Personal Liability: If somebody incurs bodily harm or property damage due to you or your pet(s), you are liable to pay for their medical expenses. Example: your pet dog bites your landlord, or a visitor slips and falls in your home.

c. Loss of Use: If your rental space is rendered unusable by a mishap such as a fire, you will be forced to look for temporary accommodation, elsewhere In such a scenario, you will be covered for additional living expenses incurred during this period, such as hotel or temporary rental bills, meals, laundry etc.

d. Car Interiors: This covers all those possessions that were inside your car when it was .damaged. This includes books, CDs, stereo or sound systems, onboard computers, etc, which are not covered by typical auto policies. 

Renter’s Insurance is not expensive

By paying a few hundred dollars of premium every year, you can cover all your personal belongings.

What is covered?

• Furniture
• Clothes
• Electronic equipment like desktop and laptop computers, mobile phones, kitchen appliances, sound systems, CD/DVD players, gaming consoles, etc
• Kitchen utensils
• Jewelry and Watches
• Modern and Antique artifacts
• Sports and Fitness Equipment

Policy Types

• Actual Cash Value: The insurer factors depreciation while evaluating damages to your goods and willsettle claims as per the present market value of those goods. Accordingly, premiums are low.
• Total Replacement Value: Depreciation is not factored and the original price of the goods at which they were procured will be settled in case of a claim. Accordingly, premiums are high.

Reach out to an insurance broker or company to help guide you through the complex terms and conditions and the very fine print. Use their guidance to ensure that you have the right coverage.

The Importance of Renters Insurance

If you live in a rented house or apartment, homeowners insurance is not something you need to worry about. But that doesn't mean that you don’t have belongings and assets that you need to protect. Your landlord will have insured the building in which you live, but that does not cover your personal possessions. What if they should be stolen or damaged or destroyed by fire or natural disasters? Most people tend to underestimate the value of their belongings. It’s easy to think that replacing your possessions will cost you a few thousand dollars. When disaster strikes, you may suddenly find that the actual cost runs into tens of thousands of dollars.

Do Not Underestimate the Value of Your Possessions

Whether or not you decide you need renters insurance, it’s a good idea to inventory and value all your belongings. Take a couple of weekends and catalog everything you own. You may think you can do it in a couple of hours, but once you start investigating closets, cabinets, attics, basements and garages you will normally find that you own much more than you ever realized. Sure, a lot of it may be junk. If so, you are now in a position to get rid of it. What remains is what is important and now you can start to put a replacement cost on all that you own. The final figure may come as a huge surprise. Most people do not realize how much they accumulate over the years and how valuable it all is. If you lost it all, could you replace everything? And if you can do it, take a moment to consider the extent of damage that it could cause to your savings and financial stability. One leading insurance company estimates that the average person has over $35,000 worth of possessions that are normally not covered by any policies that a landlord may have.

It’s Not Expensive

A typical renter’s insurance policy should not cost you more than a dollar a day. That’s is an insignificant amount when compared to the peace of mind that comes from knowing that your belongings are protected in case of loss. If you don’t have renters insurance, why not call your insurance agent and talk to him or her about taking out a policy? The advantage of buying the insurance from a company you are already dealing with is that most insurers offer discounts to people who already have other policies with them.

What’s covered and what’s not

Renters insurance covers, but is not limited to:

• Theft
• Fire
• Lightening
• Hail
• Windstorms (hurricanes etc.)
• Damage to the plumbing system due to freezing

The coverage for some types of property / belongings may be subject to dollar limits:

• Gold and Silverware – limitation normally applies to theft only
• Jewelry and furs
• Money, bank notes and coins
• Securities and negotiable instruments
• Watercraft, furnishing and equipment
• Trailers
• Firearms – limitation normally applies to theft only

Renters insurance will not cover:

• Issues related to business pursuits
• The provision or non-provision of business services
• Bodily injury or damage to property that is intended or expected by the insured
• Ownership, use of and maintenance of motor vehicles, aircraft and some types of water craft

Renters Insurance is almost similar to auto insurance and therefore the coverage depends largely on the type of plan that you choose. You can either insure all your belongings or you could be selective in what you wish to insure. You can even decide how much deductible you want on your liability coverage. Renters Insurance also covers any damage that you may have accidentally caused. Before making your decision it would be advisable to shop around for the best coverage you can get.