SO-CALLED micro-entrepreneurs risk sleep-walking into an insurance disaster if they have capitalised on Edinburgh‘s festival season to rent out properties and spare rooms through home-sharing sites such as Airbnb.
More than 6,200 listings have appeared on Airbnb during the festival period – but heritage campaigners and housing experts have warned the trend is having deleterious effects on the local property market and on communities.
Now, users also face the possibility of bills running into the thousands should accidents occur in the properties when they are being let.
Although Airbnb offers a guarantee for damages said to be worth up to Pounds 650,000, its terms and conditions say this “does not constitute insurance or a contract to insure”, and it recommends hosts set up separate insurance cover.
Among the guarantee’s exclusions are cash, pets, personal liability, shared or common areas, artwork and reasonable wear and tear.
Yet nine out of 10 users of home-sharing services do not even know if they are properly insured, according to a survey by fintech insurer Guardhog.
According to Humphrey Bowles, co-founder of Guardhog, users are under the “false illusion” that the guarantee covers all eventualities.
“This is 100 per cent not the case and there needs to be far more awareness over what the guarantee does, and does not, cover,” he said.
Mr Bowles, who has worked in the home-sharing market since 2011, and describes himself as “an active Airbnb Superhost and fan” said purchasing proper home-sharing insurance can be tough.
“It’s because of this difficulty that Airbnb should be congratulated for doing something to help,” he said. “There is a big ‘but’ though, and this is that real hosts put their real homes at risk when paying guests come and stay.”
In one high-profile incident last year, Airbnb denied any liability after four people suffered serious injuries at a Brighton flat rented through the site, when the first-floor balcony collapsed.
Mr Bowles said: “Maybe the biggest risk is if a guest has an accident in or around your home. If you’re found negligent, you could be on the hook for that person’s care.”
Debbie Wosskow, former chairwoman of trade body Sharing Economy UK, said users of sharing services need to feel protected too.
“Insurance plays a fundamental part in the sharing economy as it can help consumers to feel safe and protected when using relatively new services and businesses,” she said. But, as Mr Bowles pointed out, even basic damage to your property can be costly to rectify.
“For example, if you had a number of guests staying over the summer, but only noticed damage at the end of the summer, then you would not be able to withhold the deposit let alone make a ‘claim’ on the guarantee,” he said.
“The worst part is that when things go wrong, normally it is unclear whether it was the guest or not, as most things are a combination of bad luck and bad timing. This can leave hosts in a position where neither the guarantee nor their insurance is going to cover them.”
Traditional home insurance cover cannot be relied on when you have paying guests, as insurers view it as a commercial activity covered by residential policies. As a result, covers such as accidental or malicious damage and theft may be removed from your policy.
If you are thinking of joining the short-term letting boom, tell your insurer. It may be possible to increase the cover on a short-term basis and you will either be charged a one-off fee or your premium will be increased.
Or check out the rising band of “insurtech” challengers such as Guardhog, which offers comprehensive cover for all eventualities, just for the period you need it, typically at Pounds 2 to Pounds 3 a day.
All homeowners would do well to review their insurance anyway, as its cost has almost certainly risen.
The average quote for an annual combined buildings and contents policy increased by 1.8 per cent in central Scotland over the three months ending June 30, taking the bill to Pounds 157.59.
According to the AA the recent rises are “wholly attributable” to the doubling of insurance premium tax in less than two years, from six per cent in October 2015 to 12 per cent from June this year.
If you are shopping around for a new policy, check exclusions for specific items or types of activity and make sure you do not pay more for cover you already have, such as on your smartphone.
Also look out for add-on fees for policy changes and try to pay upfront if you can: insurers have hit headlines for charging interest rates of up to 45 per cent for those who pay in monthly instalments.
Originally published in the Herald on 19th August 2017.