We are currently experiencing what is known as the “sharing economy”. Hundreds, if not thousands, of companies have emerged on the scene to accommodate this phenomenon which is dominating popular culture. From sharing cars to homes, the “collaborative consumption” model is transforming many industries.
A few of the more well-known companies involved in the sharing-economy include:
It’s clear why these types of companies are thriving. Renting and sharing is cost-effective, and for many millennials, cost and access are favored over all of the burdens that come along with ownership.
While these sharing companies provide many benefits, the insurance world has been slow to adapt and there are a number of limitations including:
- Typical homeowner’s policies do not sufficiently cover associated risks for renting out homes through shared-spaced companies such as Airbnb.
- While some of these companies do offer their own insurance coverage, they do not cover every situation such as damage to other properties, medical emergencies, or situations where guests stay on the property till past their check-out date.
- Ride-sharing companies face similar issues in that their insurance policies do not cover drivers during the entire “working” period.
Should you be interested in joining the sharing-economy – or if you have already begun to venture into it – then it is essential that you understand the current underlying issues and the ways by which you can protect yourself.
What You Should Know About Shared-Space Insurance
A typical homeowners’ insurance policy (aka ISO HO3) is designed to provide coverage to a home, personal property and liability of the named insured only. As a general rule the typical policy will cover you, your resident relatives and any other person younger than 21 who is under the custody of the policyholder. This type of policy typically does not provide coverage for guests, renters, rental or vacation property.
For people using sharing companies like Airbnb, an insurer may require the purchase of a landlord or rental home insurance policy known as an ISO Dwelling Fire/DF3. However, this may not always offer adequate protection, as these policies generally only provide coverage for the building itself and not its contents such as jewelry, electronics or other valuables. As a general rule, these policies are also very expensive.
To respond to these coverage gaps, some companies have responded by offering limited coverage. For example, Airbnb now offers a host guarantee that provides $1 million in damages for all hosts.
The insurance industry is still catching up to providing insurance policies that will help owners of home-sharing properties and legislation is still developing across cities and municipalities related to home-sharing activity which will undoubtedly affect what is insurers must and can provide.
As a homeowner who is interested in entering the home-sharing business, you should recognize that your traditional policy likely does not provide the coverage that you need. However, it is possible, that your insurer may provide you with a few customization options.
Some questions to ask yourself prior to obtaining home-sharing coverage include:
- How often are you planning on renting out your property? The number of days can affect the cost of coverage.
- What type of home do you live in? Even as an owner of your own condominium or apartment, you are likely to need to a different type of coverage vs. being the owner of a single-family home.
- Are you planning on generating a substantial amount of income from renting out your home? What other endorsements will you need in your policy in case of damage caused by guests?
- What gaps in coverage will there be between your traditional policy and your home-sharing policy? Will you need additional coverage for potential damage to a neighbor’s property or liability coverage in case a guest is injured? Figured out where there are gaps will be essential to properly insure your property.
The Basics of RideShare Insurance
It’s vital that ride-sharing drivers recognize there are many insurance issues and gaps when it comes to ride-sharing coverage. The same goes for clients who rent out a car through a ride-sharing company, as most insurance companies exclude the renting of a vehicle for a fee.
For on-demand ride-sharing services such as Uber or Lyft – the question is – whose insurance company is responsible? Is there a coverage gap between the driver’s personal automobile insurance policy and the ride-sharing company’s policy? This depends on the applicable policy language.
As a general rule, most personal auto insurance policies do NOT provide coverage while the vehicle is being used as public transportation. It’s also worth noting that your insurer could potentially cancel your personal policy if you do not disclose that you are working as a driver for a ride-sharing business.
Rideshare trips are divided into three stages:
- The period during which a driver connects to the rideshare app and waits for a request.
- Period during which driver is en route to passenger.
- Driver and passenger on their way to destination.
While Uber and Lyft provide limited liability coverage, the policy does not cover drivers during the 1st stage, which is when the drivers are waiting for a client. Their policies come into effect when the driver has picked up the client and while taking them to the desired location. Like shared homes, companies such as Lyft and Uber have adopted the $1 million coverage model for all hosts.
Regardless, it is imperative that users and drivers of shared services not assume they are fully covered by their respective insurance plan and research other options if necessary.
Ride-sharing drivers can also look into purchasing a comprehensive commercial policy but should be aware that these plans cost between 3-10xs more than the average personal policy, and in most cases, are cost prohibitive.
Ultimately, there are few takeaways to consider should you begin employment as a ride-sharing driver:
- Inform your personal auto insurer that you are a driver for a ride-sharing company.
- Research what coverage the ride-sharing company offers and understand what gaps there may be between your personal policy and theirs.
- Consult with your insurer to find out if they offer ride-sharing insurance. These policies are typically more cost-effective than commercial policies.
The current laws that affect businesses in the sharing-economy can be challenging to understand and make it difficult to obtain the insurance coverage you deserve – and have paid for.
If you are dealing with insurers acting in bad faith, personal injuries or losses as the result of share-riding or a shared-space rental, phone Cardone today at 504-522-3333.