The insurance pitfalls of the sharing economy

Your client needs more than a basic home insurance policy.

Sharing economy

To reiterate the dangers of the potential insurance shortfalls when renting out property through sharing economy platforms, such as Airbnb, Houseswop, and a local company, Wheretostay, strongly advise your client to consider a a commercial bed and breakfast policy.

Most property owners are however blissfully unaware that they could open themselves to significant liability and damage risks if their insurance covers are not correctly scoped, says Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa.

Aon points out a few things to consider:

  • If there are no signs of forcible or violent entry, the loss of stolen or damaged goods is generally not covered.
  • If you have a clause in your insurance policy that requires an alarm system to be activated, you could be at risk if your paying guests did not set the alarm before leaving the house.
  • As soon as you bring paying guests into your home, you become liable for any personal injury-related claims, such as slipping and falling around the pool.
  • If there is an incident of a criminal nature, the personal belongings of your paying guests will not be covered.

While many letting platforms such as Airbnb offer limited insurance cover for its property owners, it’s highly advisable to declare the changed risk to your insurance broker to avoid an instance where a claim is repudiated on the grounds of non-disclosure, she explains.

Some insurance providers are also able to offer cover to bed and breakfasts (B&B) through a personal lines policy, under conditions and set limits pertaining to:

  • The number of rooms that are used for paying guests.
  • Loss or damage of personal effects of paying guests.
  • Trauma compensation for paying guests of the B&B.
  • Loss or damage to external signs, blinds and canopies.
  • Loss or damage due to cleaning and dry-cleaning of guests’ property.