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A peer-to-peer home rental (sometimes called AirBnB, HomeAway, Flipkey and VRBO) is an online marketplace for vacation and business rentals that links owners (“hosts”) who have unused lodgings or bedrooms to rent with users (“guests”) seeking to rent the space, typically on a short-term (i.e., less than 30 days) basis.

Visiting friends and relatives are often referred to as “guests.” However, unless otherwise stated, “guests” refers to the individuals or families that pay to rent residential space from a “host.”

Insurers and municipalities typically consider home hosting a business. Yet, the host’s insurer is too often unaware of these business-related activities. Thus, asking more questions on their homeowners’ applications regarding this expanding loss exposure.

Advantages for hosting:

• Renting unused space results in extra income. The average AirBnB host earns $924 per month, and 26 percent of hosts make more than $1,000 per month.

• There is often no charge just to list the property. A fee is applied only if a successful booking is made.

• Some rental marketplaces will send a professional photographer to the home at no cost to assist in marketing the space.

• Most marketplaces also provide strong customer support, verification regarding the identity of potential guests, and numerous payment options.

• The online system is typically quite flexible. For example, hosts can set seasonal pricing and weekday/weekend pricing as they see fit.

• Many people simply enjoy being a host and love to meet travelers from all corners of the globe.

• A host can rent his or her entire house, condominium unit, or apartment, or just one room within the dwelling.

Disadvantages for hosting:

• Hosts may naively believe that they are simply part of the sharing economy and not involved in a business activity; however, this peer-to-peer sharing certainly involves a commercial transaction. Insurers and more municipalities view home hosting as a business, resulting in regulatory restrictions and property and liability coverage gaps.

• Short-term rentals might violate local zoning, homeowners’ or condominium association bylaws, lease agreements, or housing laws.

• Some cities require that the host obtain a permit or obtain a business license before the property can be listed.

• Some state and local laws may apply rental income or hotel taxes to any booking.

• Federal income taxes also apply to booking revenue. Damage to the rental property or an injury to a guest is an important loss exposure to consider. For example, a host may be found legally liable for an injury on the premises. Without the proper insurance, financial burdens for the host may arise.

• Some hosts have difficulty navigating the home-hosting website.

Advantages for guests:

• Cost savings—it can be less expensive to stay in an apartment or home rented via an online marketplace.

• Many homes will give the guest access to a kitchen.

• An excellent host can be a great resource for learning about a local culture and its customs.

• Extensive photos, online reviews, and host/home ratings can help ensure that the guest gets his or her desired space with minimal fuss.

Disadvantages for guests:

• The short-term rental may not comply with local laws and restrictions, some of which might be safety related.

• Online ads may be misleading, incorrect, or even fraudulent.

• The rental property might not be as secure as a hotel room.

• Reviews may not always reflect both sides of the rental property.

• It can be time consuming to find the right rental property.

• The level of service or expected amenities people are accustomed to receiving at a hotel are often lacking in home sharing.

• There may be hidden fees that are hard to spot online.

• It is often difficult or even impossible to cancel a home-sharing agreement than it is to cancel a hotel reservation.

• Guests might wonder whether their own insurance or the host’s insurance adequately protects any property or liability exposures they face with a short-term rental.

There are many advantages and disadvantages for both hosts and guests. To learn more, call Thorp & Trainer where, “Your Security Is Our Concern”.