If you have homeowners and renters clients who occasionally rent out their homes to guests through home-sharing services like Airbnb, HomeAway or FlipKey, you know they face unique exposures that traditional personal lines policies don’t cover.
While most homeowners policies allow insureds to rent part of their home occasionally, they usually don’t provide coverage for theft and only offer limited coverage for furnishings. And when a homeowner rents space to two or more boarders—or rents their entire home—coverage becomes a serious problem.
To respond, insurance companies are developing a variety of unique coverage solutions for your home-sharing clients. As peak vacation season continues this month, here are a few ways to help them find the coverage they need.
Homeowners Endorsements
Companies like Allstate and Lexington have responded to home-sharing exposures by developing endorsements for their clients to add on to their existing homeowners policies. Allstate’s HostAdvantage—available in six states mid-August—and Lexington’s LexShare HOME Rental Coverage are both designed to fill the gaps the sharing economy creates for homeowners and renters.
HostAdvantage helps protect homeowners from sudden out-of-pocket expenses related to home sharing, such as if a renter destroys furniture or steals electronics—“things that would be an unexpected gap that a current homeowner might not understand wasn’t covered,” explains Laurie Pellouchoud, vice president, Allstate property line management. “The endorsement provides that extra protection for your personal property.”
Coverage highlights of LexShare HOME, available as an add-on to the standard LexElite homeowners policy, include a broad definition of “residence premises” that not only eliminates coverage grey areas between primary and secondary rental properties, but also expressly extends coverage to “other structures” on the premises, such as a converted garage apartment.
The endorsement increases coverage for damage to furnishings, including appliances, carpeting and more, and offers express coverage for theft of personal property and tenant-caused damage to landscaping, as well as $100,000 liability coverage for small watercraft such as jet skis, canoes and kayaks.
“Coverage is extended by this endorsement to apply while the residence premises is rented or held for rental to others at any time by any means, including but not limited to online rental marketplaces,” explains Herbert Decuers, underwriter at Insure Response, LLC, which underwrites coverage for LexShare HOME. “This is an extremely broad coverage endorsement.”
Coverage Replacement
For homeowners who rent out free-standing secondary residences through home-sharing services, HomeAway has partnered with CBIZ Insurance to develop HomeAway Assure: a home-sharing insurance policy that completely replaces an insured’s current homeowners policy.
“We understand it is the first of its kind out there,” says Bill Furlong, HomeAway’s head of North America. “We’ve been in business for a decade and we’ve grown from having some 50,000 listings to 1.2 million over those 10 years, so we really see this as something you need to put in place for homeowners to protect themselves.”
In fact, when a host lists their property on HomeAway, adequate insurance is one of the terms and conditions to which they must agree, Furlong notes. “We make sure people recognize they have an insurance obligation, do the leg work and understand what the limits are of their current insurance coverage,” he explains.
According to Jim Sattler, president of programs at CBIZ Insurance, HomeAway Assure enables insureds to cancel their primary homeowners or renters insurance policies by taking on coverage for property, liability, business personal property or contents, as well as loss of income. The policy covers pools, docks, small boats, hot tubs, spas and more—“all these things that are found on many recreational-type properties,” he explains. “Most premise liability policies will not extend to that.”
Similarly, traditional policies don’t usually cover alcohol liability or loss of business income. “When a claim occurs—a broken pipe, a fire, damage to the property—you’ve lost income because it’s no longer available to be rented,” Sattler points out. “Our policy includes that coverage.”
HomeAway Assure also extends coverage to property managers as additional insureds and can offer additional excess coverages that extend the $1 million liability limit. And because CBIZ is an independent insurance broker, Sattler says the company offers the coverage through other insurance agents and property managers in addition to HomeAway, and also sells direct to individuals.
Now that insurance options exist for home-sharing clients, expect to field more questions about related coverages—and be prepared to offer suggestions about the best fit for their needs.
“Even with all the growth we’ve seen in the vacation rental market, we have still really just scratched the surface of the potential supply of second homes that could be rented out,” Furlong says. “One of the things that helps do that is to put in place a framework that makes sure homeowners understand there are products out there that make sure you aren’t putting one of your most valuable assets or your entire net worth at risk.”
Jacquelyn Connelly is IA senior editor.
