Like a modern version of a boarding house or bed and breakfast, home sharing allows guests to rent a couch, a bedroom, part of a home or an entire private residence on a short-term basis through online platforms such as Airbnb, HomeAway and VRBO.
The risks range from damage to property and personal property to theft of homeowners' belongings to bodily injury to guests. While standard homeowners insurance policies in some cases will cover property damage, people who rent out their property open themselves up to potential lawsuits from their guests. And, in most cases, their insurance policies will not cover them for liability.
"The personal liability part of most homeowners policies excludes business activities," said Kenneth Porter, principal at Porter & Curtis insurance brokerage in Media, Pa. "Typically, the property part of a homeowners policy does not contain a similar exclusion. Therefore, unless specifically excluded by endorsement, a homeowners policy with 'all risk' protection will cover damage to a host's property."
The major home-sharing platforms offer some level of protection. However, these programs typically are an inadequate substitute for traditional insurance products, experts say. There aren't a whole lot of insurance options available for home-sharing hosts.
"It's still a bit of a retrofit of existing products into this segment," said Michael Costonis, senior managing director in Accenture's financial services practice. "There are very few de novo products that have really hit this on the head."
Home-sharing insurance solutions vary. For example, Allstate debuted its HostAdvantage program, which is an endorsement, in six states last year. Slice Labs, an on-demand insurance platform, has launched a pay-per-day product, which is in private beta in three states. And Peers, a marketplace for sharing-economy workers, offers home-sharing liability coverage on a monthly basis.
"There's definitely not a lack of people trying to enter this space," said Kunal Malhotra, vice president of global specialty innovation for Assurant, which launched its vacation rental coverage a year and a half ago.
Insurers have responded to the trend by creating gap protection.
"They're broadening the coverage if you have this kind of usage," Costonis said. "They're incrementally adding services to make it more specific and more attractive to people who are looking to do more home sharing."
Allstate's HostAdvantage endorsement is one such example. It adds a layer of coverage to the homeowners policy to protect a home-sharing host's belongings. It does not, however, provide liability protection.
Airbnb has a Host Guarantee program that provides up to $1 million reimbursement for property damage and a Host Protection Insurance program that provides primary liability coverage for up to $1 million per occurrence in the event of a third-party claim of bodily injury or property damage related to an Airbnb stay.
While that may sound like adequate coverage, experts point out that the policies are not in the host's name and eligibility for payment is at the discretion of the home-sharing platform.
Assurant entered the home-sharing space with a short-term accommodations protection program that offers up to $1 million in liability coverage and up to $10,000 in contents coverage. Over the past 18 months, Assurant's coverage has evolved from a product with few options to one that is customizable.
Slice has taken a different tack. The insurance technology startup bills itself as an on-demand insurer for the on-demand economy. It is a fully digital, cloud-based company that distributes its product through a smartphone.
Backed by Munich Re, it offers $2 million in liability and full property replacement for home-sharing hosts. The product, which is in beta in Iowa, Colorado and Maryland, can be purchased with the click of a button.
(This information is excerpted from a longer article, "Room for Improvement" by Kate Smith, senior associate editor, Best's Review)