The "on-demand economy" and how to protect your assets
The on-demand economy, also called the sharing economy or collaborative economy, is essentially an economic model where goods and services are used by many people in exchange for compensation. If you own something, the on-demand economy allows you to rent it out to a user for money, whether it's a car, a trailer, a cottage, a condo, a house, and so on. Airbnb and Uber are excellent examples of the on-demand economy, but there are many others in this area that are simply not as well-known, including the rental and use of swimming pools, parking spaces, and so forth.
That sounds like a great deal, doesn't it? You have a car—and you could always use it to earn a little extra income. Or maybe you have an RV that you only use a few times a year, and you could recoup some of your investment by letting it out for a spin now and then for a fee. Most participants in the gig economy will use digital platforms where they offer their services. The rise of digital technology has contributed so much to the expansion of the gig economy in recent years. Users can pay directly on online platforms for goods and services, and hosts or owners can list their assets in no time.
Panda7 is here to present the situation as it is and give you some insights on how to protect your assets.
What's wrong with the on-demand economy?
Overall, the gig economy is a great way to earn extra income and it costs very little to participate. Unfortunately, there are also risks.
Indeed, you're renting out your house, cottage, or even a vehicle you use to a complete stranger. Even if this stranger has the best reviews in the world, accidents can happen. Whether you're renting out a parking space for a few days or your summer residence for a few weeks, it's a good idea to be prepared, informed, and properly insured. Not all standard insurance policies cover damage caused by tenants, which means you could be left high and dry in the event of a loss.
Does my insurance cover rental damages or losses?
The on-demand economy presents a significant risk to its participants: uninsured loss or damage to the owner's or host's property, or a liability claim filed against them due to injuries or property damage occurring during the rental. Very few standard insurance policies will automatically cover loss or damage while your assets are being used for rentals. This is because when you start renting out your vehicle, your property, or anything else, it becomes a business asset and violates the terms of your contract with your insurance company. Consequently, your average property and casualty insurance is likely insufficient to cover the full rental situation you are entering into.
Let's examine some examples of rentals in the on-demand economy and how to protect yourself in each of them.
If you rent out your house…
Home insurance will cover your property for personal use. As soon as you start renting it out, or even just a portion of it, to short-term rentals, you'll need to purchase insurance that covers the commercial side of the rental. Furthermore, your commercial policy may have exclusions, so you'll want to consider these potential additional costs and determine if your rental venture is worthwhile. Some insurance companies offer shared home insurance as an add-on, but this isn't available from all providers. You might even need to switch providers to get this coverage.
If you rent out your vehicle or offer driving services…
What if you rent out your trailer or offer driver services?
Well, in both cases, the word "use" is used to calculate premiums and determine coverage, so in both cases, you'll need to call your insurer to discuss the new use of your vehicle. Make sure your insurer accepts this new use, otherwise you risk having your coverage canceled. You may need to purchase an additional commercial vehicle insurance policy to ensure your protection.
If you rent a swimming pool or a parking space…
Your swimming pool and parking space are usually covered by your home insurance. Swimming pools, in particular, present a range of risks, such as serious injury or drowning, and renters may be more inclined to drink, party, or use the pool in a "dangerous" way. The same applies to your parking space—you never know who might misuse it, park illegally and disturb your neighbors, or even have an accident while exiting the parking space. You'll want to be clear about your intentions regarding rental activities with your insurer before renting out either of these properties; otherwise, they may refuse to cover you if you need to make a claim.
What about the insurance offered by companies on demand?
Some sharing services and platforms offer their own insurance, but it's important to note that not all insurance coverage is created equal, and this coverage may sometimes be insufficient. It may be automatically included, as with Airbnb's insurance, but this doesn't always mean it's adequate. Depending on your risk tolerance, it may be wise to review the limitations of the coverage offered by the platform and make decisions accordingly to determine if it's sufficient to protect you and your assets. In any case, it's always important to contact your personal insurer to explain the situation, in case the sharing platform's insurance is insufficient and you need to seek alternative coverage to cover the remaining costs.
The bottom line? It's your property, so it's up to you to protect it in the way you deem best! You wouldn't want to lose your hard-earned possessions simply because a tenant wasn't careful. Make your own decisions, but make them wisely—and keep your insurer informed!