Peer-To-Peer Rentals: What To Know From An Insurance Standpoint

With the end of the year almost here, you may already be thinking of ways to increase revenue and get that Christmas debt paid off. If so the peer-to-peer home rental option may be one that you wish to pursue. This is an excellent way of picking up a few extra dollars without doing much or any work for it. However, before you go all-in with peer-to-peer, there are some things that you should be aware of so not to get caught off-guard.

One: Your Homeowners Or Renters Policy Will Only Cover You To A Certain Point.

First of all, make sure there is nothing in your neighborhood covenant or rental agreement that prevents you from subletting. After you’ve done so, determine the length of time that you plan to rent. Many insurance companies extend the rights of coverage from your homeowners or renters policy if a guest is only staying with you for a little while, provided that you inform the insurer ahead of time. However, if you’ve worked out a long-term arrangement — like an extended months lease, for example — then you are officially running a business, and the standard policy will not cover you, notes the Insurance Information Institute (I.I.I.). In this event, you should consider a business insurance policy.

Two: Consider The Types Of Business Insurance Suited For The Purpose Of Peer-To-Peer

There are several different types of business insurance policies, according to the Small Business Administration (SBA). One of the most common types to consider for peer-to-peer rentals is that of home-based business insurance.

According to SBA: “Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses. Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage. However, homeowners’ policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.”

Perhaps the most popular for peer-to-peer rentals, however, is that of commercial property insurance. This business insurance type guards against “everything related to the loss and damage of company property due to a wide-variety of events such as fire, smoke, wind and hail storms, civil disobedience and vandalism,” SBA states, adding that the definition of “property” is broad, and can include lost income, business interruption, buildings, computers, company papers, and money.

Three: Discuss The Issue With An Insurance Professional.

Insurance policies are thorough and they can be difficult for the layman to understand without the assistance of a qualified professional. To avoid getting caught off-guard, the best thing that you can do is schedule a time to sit with your agent and inform him of your plans. Have an idea of the duration of the rental agreement between you and a renter before the meeting takes place. Be specific about the space that you plan to rent, the duration of the rental agreement, and how long you plan to continue beyond the lease. An agent’s job is to match you with the policies that offer the most protection specific to your needs, and by discussing the plan face-to-face or over the phone, you’ll have a clear understanding of how protected you truly are.

In Summary

In light of holiday spending and a stubborn economy, you should definitely consider peer-to-peer rentals as a possible revenue stream. It can add hundreds of dollar per month (and sometimes more) to your household budget without demanding too much effort on your part. But also keep in mind that it opens you up to new liabilities that you will need to prepare for as you move forward.

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