Sharing platforms like Uber and Airbnb have brought a new level of convenience and affordability to many of life’s transactions. With the click of a button, you can find a cheap place to stay in a foreign city, rent an unused room in a home, or get a driver to pick you up in the rain. For providers, sharing services offer an easy way to earn extra money.
One of the reasons on-demand platforms are so cost-effective is because they operate largely outside existing insurance and regulatory frame-works. “Every one of these activities gives rise to an entire family of potential liabilities,” says Bob Hartwig, professor of risk management and insurance at the University of South Carolina. Insurance experts agree on one thing: People who provide services in the sharing economy often lack adequate protection.
Here’s how to minimize your risk:
KNOW THE PLATFORM’S LIMITS
Big players like Airbnb, Uber, and Lyft all include some basic insurance as part of the platform. Uber provides drivers with $1 million in liability coverage, while Airbnb includes $1 million, plus a “host guarantee” that covers some property damage. That say it pays to look at the fine print. While both Uber and Lyft offer collision coverage, they require drivers to have personal collision and comprehensive insurance – and file a claim – before the platforms’ coverage takes effect. They also have high deductibles (typically $1,000 or more), so drivers have to dig deep into their pockets before the platforms’ coverage kicks in. Similarly, Airbnb’s host guarantee provides up to $1 million in coverage if a guest ruins your stuff – but only after you’ve failed to resolve the issue with the guest and exhausted options with your own insurer.
DON’T EXPECT YOUR REGULAR INSURANCE TO COVER THE GAPS
One common mistake drivers and hosts make is assuming that a typical auto or homeowners policy will cover any excluded damages after a car accident, kitchen fire, or other calamity. Once money changes hands, insurers consider that commercial activity, which carries a higher risk and requires a different (and more expensive) type of policy.
BE UPFRONT WITH YOUR INSURANCE AGENCY
A common refrain that circulates in online forums for service providers, especially drivers, is that what your insurance company doesn’t know won’t hurt them. In fact, what your insurance company doesn’t know could very well hurt you. If you file a claim after a car accident or other incident and your insurer discovers that you were providing sharing services, your claim could be denied. Better to be upfront and ask your insurer if the coverage you have is appropriate for the added risk you’re assuming. Some homeowner’s policies, for example, permit “occasional” rentals.
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For additional information on limiting your exposure in a sharing economy, please contact us today! We welcome your questions and look forward to providing you with answers.
Source: Martha C. White, Money.com, March 2021