Delawareans urged to do insurance homework before using home-share rental services

Delawareans are increasingly planning their summer vacations through online rental services like Airbnb. The peer-to-peer rental marketplace has grown substantially in recent years as travelers seek alternatives to traditional rental market options, and owners rent out their homes or sometimes just a room in their home, looking to earn some extra income.

“For years, state residents and vacationers from the USA and around the world have enjoyed spending part of their summer at homes in Delaware’s beautiful resort towns,” says Delaware Insurance Commissioner Karen Weldin Stewart. “However, it’s important to make sure you have the proper insurance coverage before you list your home for rent. And if you cause any damage as a traveler renting someone else’s house, you should be aware of the effect that may have on your existing homeowner's policy.”

Stewart wants Delaware consumers to be aware of the following information provided by the National Association of Insurance Commissioners: Thanks to the internet, property owners can now rent a room, or their whole home, directly to a stranger who found their listing through an app or a website. Home-sharing, or peer-to-peer rentals, are sites like Airbnb, Roomorama and HomeAway that connect hosts with guests. Guests find a property and pay for the stay like a hotel. The difference is that the property is not a licensed hotel or bed and breakfast and is often a privately owned apartment, condo or house. Anyone can register as a host or guest.

What's the risk if a guest vandalizes a homeowner's property, condo hallway or even a neighbor's swing set? What if a guest gets injured on the homeowner's property? Both guests and hosts could incur costs if things go astray. As a host, homeowners' or renter's insurance policies are not designed to cover accidents arising from property rental and one's insurance company may deny coverage for any resulting claims.

While operating as an online platform, these types of rentals may fall outside of local zoning or housing laws and regulations, which could result in violating local law or code. Even if a property owner has not violated any law, it might be necessary to hire legal counsel to protect and defend oneself.

As a host, most homeowners' policies provide coverage if a home visitor falls and is injured. However, that is likely not the case if a paying guest falls in someone's home, because coverage may not be intended for commercial use. And without liability insurance protection from the company facilitating the host agreement, a homeowners' or renter's insurance policy might leave the host with no coverage.

Homeowners' policies vary, but usually exclude or provide very limited coverage for homeowners who are running a business in their home. Once a homeowner begins earning income from renting out a home or a room, he would probably be considered a home-based business owner. An insurer could claim the host is essentially running a hotel or bed and breakfast, and deny coverage. However, if the host seldom rents out his home, the insurer might provide coverage. A renter's insurance policy is subject to the same limitations as a homeowners' insurance policy.

It's important for homeowners and guests to find out about their coverage from their insurance agents about their situation and participation in this activity.

Currently, Airbnb provides host protection insurance with coverage up to $1 million if a third party claims bodily injury or property damage against the host. This liability insurance program is automatically applied to every listing in the U.S., and the coverage is secondary. It only applies after the primary insurance policy either settles or denies a claim. Laws regarding P2P companies vary from state to state, even city to city, so it's important to speak with someone who is knowledgeable about the location where one is renting. Home sharing is still a fairly new phenomenon, so users should check with their insurance providers about risks to make sure they are properly covered before listing property for rent.