By Dan Patrico, Personal Insurance Advisor
The American Dream has always been: graduate college, get a job, get married, and buy a house with a white picket fence and a big back yard for the future kids. As times change, renting is becoming increasingly popular. Many young adults also want to travel and see the world become settling down.
With this change in the market, insurance companies are forced to catch up and take a closer look at coverages pertaining to renting and owning rental properties. Companies like airbnb are popping up and starting to make serious money.
Airbnb is a company that will allow you to post rental opportunities online. If you have a home and you aren’t using all of your bedroom or living space, airbnb enables you to post your space online for short term rental periods. People from all over the country can come and rent a room in your home or cabin for a day, a week, or even a few weeks. If you are the homeowner, you can post specific qualifications that you require from your prospective tenants.
As people start to utilize this avenue to make extra income, insurance companies are stuck scrambling to patch up the holes in coverage that your basic homeowner’s policy does not cover. We see issues such as high liability risks and holes in medical coverage. As the homeowner, you are simply allowing strangers to rent your home or cottage on a day to day basis. This differs from a landlord’s policy. Landlord’s policies are written for dwelling locations that are being rented for primary use. A landlord’s policy is not used for your primary home location, your secondary home location or even a seasonal location such as a cabin.
As of right now, standard insurance companies are divided on the subject. Some companies such as Cincinnati Insurance Co. and Citizens Hanover Insurance Co., will not cover this specific rental risk on your homeowner’s policy.
Underwriters from these companies are stating, “If you post your home or cabin online for any type of rental use, your coverage becomes ineligible. If your temporary tenants cause a fire, flood, vandalism, or theft there will be no coverage. If your tenants hurt themselves on your property and take legal action against you, we will not provide any coverage for legal expenses.” Again, this is on a company to company basis. Some insurance companies such as CHUBB offer a temporary rental endorsement that can be added to your homeowner’s policy.
So, if you are interested in making some extra cash renting out unneeded space, you need to call your insurance advisor first. Make sure they offer an endorsement to cover this rental risk. If your company does not cover this type of risk, utilize this opportunity to shop other insurance companies. Contact Brown & Brown of Detroit to schedule an appointment with an insurance advisor. Protect yourself, protect your family, and protect your assets.