The new “sharing economy” is changing the landscape of small business in the US and Vermont. Opportunities to rent everything from rides to rooms, golf clubs to cameras, are popping up everywhere and while you may be tempted to take advantage of these money-making innovations, make sure you know what your insurance policy covers. The Vermont Department of Financial Regulation urges consumers to check insurance policies before sharing rides and rooms.
Transportation networking companies (TNCs) such as Uber, Lyft and Sidecar and house sharing arrangements like Airbnb are household terms, but entrepreneurs are also lending vehicles, office space, parking spots, boats, bicycles, cameras and more. Although a smaller segment of the “sharing economy,” personal items like power tools, clothing, household items camping equipment, furniture, and even pets are being “shared” with complete strangers.
The “share-conomics” business models use technology – typically a website and/or smartphone application – to connect consumers with individuals interested in providing lodging, transportation or goods and services.
While joining this "collaborative consumption" revolution may sound like an easy way to make extra money from renting your home, car or other personal possessions, it is important to fully understand the insurance implications and liability considerations of such transactions for all participants.
The Vermont Department of Financial Regulation has issued some tips that may help keep Vermonters from making expensive and harmful mistakes.
Ride Sharing
If you are considering ride sharing, whether you are a passenger or the driver, there are several things you should think about before you go.
Protect Yourself as a Driver
When it comes to insurance, TNC’s generally do not operate like traditional licensed taxi or limousine services where drivers are required to have a certain level of insurance. TNC drivers should be aware of a possible gap in insurance coverage between their own personal automobile insurance policy and the TNC’s insurance policy (if one exists). The major TNCs have policies covering their drivers, but these may not offer the full spectrum of protection that drivers or passengers may assume or expect.
Many standard personal auto insurance policies list exclusions if you use your personal vehicle to transport passengers for a fee. Some policies may even go further and list exclusions in the event that a driver is available for hire. Other policies may be silent concerning coverage during the period when the driver has engaged the app and is looking for passengers, but has not picked up a passenger. Drivers should not assume the lack of a specific exclusion means they have coverage.
Protect Yourself as a Passenger
Passengers should be aware that the insurance gaps that may exist for ridesharing drivers can also have an impact on a passenger’s ability to be reimbursed for injury claims resulting from an incident during a shared ride.
House Sharing
House sharing has become quite popular and provides accommodations that are generally less expensive than hotels. It offers added income for those who rent out all or part of their home and is an affordable means of travel for people who are looking to save money. One of the most well-known house-sharing enterprises is Airbnb.
Airbnb allows people to rent out and/or host lodging in private homes. In some cases, whole houses are available while others choose to rent only a bedroom in their home. According to Airbnb’s website, there are more than 1,000 listings in Vermont and 800,000 listings in more than 190 countries worldwide. While the company has announced that it will begin offering liability coverage for U.S. hosts, the coverage is “secondary,” which means that Airbnb will require any claims to be processed through the host’s insurance policy first. Anyone interested in hosting a house sharing arrangement like Airbnb should understand their homeowner’s or renter’s insurance policy and what coverage, if any, would be provided if a guest has a claim against them such as theft, property damage or injury.
Be Informed
Commissioner Susan L. Donegan said as this trend of the “sharing economy” becomes more popular, DFR expects to see the insurance market adapt quickly to clarify and deal with the insurance gaps.
“Read and understand your policies to make sure insurance coverage is adequate and if you have any concerns that there may be inadequate insurance coverage for these types of sharing arrangements, talk to your insurance agent or insurance company,” she said.
Donegan urged Vermonters to remember that the bottom line is as a driver, passenger, homeowner or person looking for a place to stay while traveling, be aware of possible insurance consequences.
“Be aware before you share” tips:
- For insurance purposes, once you begin earning income from renting out personal property, you may be considered a home-based business. Make sure you understand all relevant legal and regulatory requirements.
- Before sharing a vehicle or residence, make sure auto and homeowners' insurance policies provide the protection you need.
- When lending goods and services, be sure to set a security deposit that is sufficient to cover losses. Take photos and other information about your property in a home inventory. Be mindful that for some items, you may not be able to locate an exact replacement.
- Contact your insurance agent or your insurance company if you have any questions.
Source: VT DFR 3.5.2015