Tuesday, September 15, 2015

Homesharing Rentals: What they don’t want you to know

Between jobs, and strapped for cash? Inundated with credit card bills that are piling up? Feeling desperate? Want to rent out your spare room to a guest, and make a quick dollar? Isn’t that what your friend Joe did recently through AirBnb?

If this is what you are thinking, think again!

AirBnb is one of those new age, ‘sharing economy’ companies. Their business operating techniques are similar to Uber’s or Lyft’s modus operandi. The comparison doesn’t end there. Like these ride-sharing companies, home-sharing companies like AirBnb do not protect the interests of the car-owner/home-owner and consequently leave them open to risks from liabilities and lawsuits.

AirBnb is all about connecting people, who have a spare room or some spare space, to strangers who want to hire them for the weekend, a few days, or a week at the most. Their website lists all such properties, and the timeframe in which they are available for hire. People seeking to hire them respond to the posting, make the necessary payments and hire the space at the desired time. The space may be anywhere: on a boat, in a tent, an igloo, a caravan, or a home. Even motels and hotels whose businesses are not doing too well, are in the fray.

AirBnb and such peer-to-peer business facilitators must show rapid growth to ensure better valuation, and this typically comes from having thousands or millions of users for their services around the world. This is how most venture-capital funded businesses work. One way of enlisting more users is by keeping the costs low.

So what? Isn’t it what every business does? 

Not really. Hang on, there is more to this than meets the eye...

1. Choice of properties: Most of these properties are old, are not in good condition which is why the owner has been having a problem finding renters. When contacted by customers and regulators, AirBnb refused to share information on its customers’ properties that have had fire tragedies, accidents, break-ins, thefts, injuries to guests, and other mishaps.  

2. Lack of regulation: Since the homesharing rental business does not work like a typical hotel or motel, there are no regulations around fire safety or cleanliness. Which means: if the previous renter was ailing from an infectious condition, and the room has not been cleaned or fumigated thoroughly, chances are you may get infected too. There are hundreds of stories around the world of AirBnb hosts/homeowners getting mugged, looted, rooms being permanently damaged, or rented out by drug addicts, criminals, hookers, etc.

Don’t believe us? Check out: http://www.therichest.com/rich-list/10-of-the-most-horrifying-airbnb-experiences

Not a problem. I have a homeowner’s Insurance policy!

Is that what you are saying?Well, your homeowner’s policy does not provide cover as your spare room is being used for commercial purposes, to generate income for you.

Well, what about the policy provided by AirBnb?

The AirBnb policy does not provide primary coverage to you, as the host/homeowner. The free $1 million liability coverage that they advertise covers tens of thousands of properties, and is not specifically aimed at your property. They only allow for ‘secondary coverage’ which means, you can cover yourself against claims from your renter through your primary homeowner’s insurance. However, that does not work, as we mentioned in the previous paragraph.

Essentially this means, you do not have any cover for your rented-out space. Guests could damage them, or sue you for injury they incurred during their stay, and you would have to pay that from your pocket. AirBnb will not pay you a cent!

This looks like a scam to me. Aren’t the authorities watching?

Well…the shared economy brings in money to hundreds of jobless or low-income American families. This takes the burden of providing jobs and boosting the economy, away from the Government. They are happy to look the other way. At-least for now...

Does this mean I should not rent out my spare room, ever, without being at risk?

Not really. A proper Homesharing Rental Insurance policy offered by mainstream Insurance companies like Allied Brokers, provides exclusive cover for such an arrangement,together withcomprehensive protection that covers different kinds of situations.

Remember, in a shared economy, only the rewards are shared. The risk still remains with the owner. Whereas, a proper Homesharing Rental Insurance policy lets you enjoy the rewards without facing any kind of risk. Isn’t that what you are looking for?

Call us and we’ll help you out.

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