With the rise of online community marketplaces and the popularity of the new sharing economy, more people are turning to renting out rooms or their entire homes to guests for extra income. However, major questions can arise when a home is used for a purpose that’s not included in its insurance coverage.
“Most homeowners policies provide coverage if a visitor falls and is injured. However, that is likely not the case if a paying guest falls in your home, because your typical homeowners’ coverage is not intended for commercial use,” said Insurance Commissioner Jim Donelon. “Speak to your agent or insurance provider about your risks as a host to make sure you are properly protected before you list your property for rent.”
The Louisiana Department of Insurance offers the following FAQs for those considering renting out their property or staying in a home-sharing rental.
What is home sharing?
Home-sharing is when a person rents a room or their home to a person often by using an app or a website. Guests select 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 are the risks to home owners?
Both guests and hosts could incur costs if a guest vandalizes the property or gets injured. As a host, your homeowners, condo or renter's insurance policies are not designed to cover accidents arising from property rental and your insurance company may deny coverage for any resulting claims.
These types of rentals may fall outside of local zoning or housing laws and regulations, which could result in violating local laws or codes. Even if you have not violated any law, you might have to hire legal counsel to protect and defend yourself. Some cities, like New Orleans, have laws in place prohibiting unlicensed rentals under 30 days, and this could also affect whether your insurance company denies your claim.
How can I protect myself as a host?
Homeowners policies vary, but usually exclude or provide very limited coverage for homeowners who rent out a room or their home. If you lease out a room or your entire home for profit, your insurer could claim you're essentially running a hotel or bed and breakfast and deny coverage. A renter's or condo insurance policy is subject to the same limitations as a homeowners’ insurance policy.
Without liability insurance protection from the company facilitating the host agreement, your homeowners, condo or renter's insurance policy might leave you with no coverage. Some companies provide host protection insurance with coverage up to $1 million if a third party claims bodily injury or property damage against you as a host. This liability insurance coverage is secondary and only applies after your primary insurance policy either settles or denies a claim.
If you only occasionally rent a room or your house, your current homeowners’ insurer might be willing to provide an endorsement to protect you. However, if you plan to frequently rent out a room or the whole house, then you may want to consider purchasing a landlord policy (also known as landlord property insurance or rental coverage for landlords). A landlord insurance policy may be an option to cover your home, structures on the property, property contents that you own (such as appliances and furniture), lost rental income due to building damage, legal fees and liability protection. Your agent can provide guidance on the best type of coverage for your needs.
How can I protect myself as a guest?
Your own homeowners, renter's or personal liability insurance policy will generally protect you if you happen to cause damage to a host's property. But understand that under some website agreements, the company that facilitates the host agreement reserves the right to make a claim against your homeowners or renter's policy for any damage or loss you cause to an accommodation.
About the Louisiana Department of Insurance: The Louisiana Department of Insurance works to improve competition in the state’s insurance market while assisting individuals and businesses with the information and resources they need to be informed consumers of insurance. As a regulator, the LDI enforces the laws that provide a fair and stable marketplace and makes certain that insurers comply with the laws in place to protect policyholders. You can contact the LDI by calling 1-800-259-5300 or visiting www.ldi.la.gov.