Insurance and the sharing economy: How to protect yourself
From cottages and condos to trailers, cars, and driver services, more and more people are entering the sharing economy by renting their property or services to others for a fee. Every rental carries its own set of risks, so it’s important to be properly insured before you dive in.
What is the sharing economy?
The sharing economy (also known as the gig economy or collaborative economy) is an economic model based on the use of goods or services by many people in exchange for compensation. Uber and Airbnb are well-known examples, but the property and services on offer can vary widely, including parking space, swimming pool, and RV rentals.
How does the sharing economy work?
For the most part, individuals use digital platforms to offer their goods or services. The boom in digital technologies has certainly played a role in the skyrocketing of the sharing economy in recent years. Users pay individuals directly through the platform for use of the property or service.
Getting into the sharing economy: A good idea?
The collaborative economy offers attractive possibilities: extra income for those offering rentals and services and unique and affordable options for users. But there are risks too.
Interested in renting out your downtown parking spot during a festival or leasing your cottage for a few weeks in the summer? Make sure you’re well informed, prepared, and above all, properly insured before you get started. Think about what would happen in the event of an accident or if your property was left in poor condition. The golden rule: talk to your insurer first. They can help you figure out whether your idea is realistic and cost-effective.
What kind of insurance do you need to rent out your property?
You need to have the right insurance for what you plan to rent out. Each type of sharing economy activity requires specific coverage, and your property and casualty insurance is probably not enough. We’ve broken down some of the most common rental situations for you.
Renting out your property
Your home insurance covers your property for your use in your private life. But if you rent out your condo, home, or cottage, you’ll need insurance that covers the business side of renting. You’ll also need to check for damage that is not covered. It’s important to anticipate additional costs and take them into account in assessing whether your project is cost-effective. Have all the information on hand before contacting your insurer to request a quote.
Renting out your pool
A pool comes with its shae of risks, from slips and falls to more serious injuries or drowning. Your private use is normally protected by the civil liability coverage included in your home insurance. However, if you don’t spell out your rental activities to your insurer, they could refuse to cover you in the event of a problem.
Renting your RV
RV insurance usually considers the annual mileage. It also considers the driver's profile! So, if you are renting your RV to someone else, call your insurer first to make sure they accept this new use. Let them know that you intend to rent the vehicle and that you want to purchase insurance that is well adapted to your reality.
Offering your services as a driver
Basic car insurance does not cover damage sustained while the vehicle is being used as a taxi or sightseeing vehicle, for example. An insurer may decide to cover these situations with a specific endorsement, but you can expect to pay more for that coverage. To get this coverage, you must first let your insurer know how you intend to use your vehicle and provide them with all the necessary information.
What about the insurance offered by sharing economy platforms and applications?
Not all insurance coverage offered by these apps is created equal, and they each have their own specific features. In some cases, depending on your risk tolerance, the coverage may be suitable for your needs. In other cases, however, it might be woefully inadequate. That’s why it’s so important to look at all the fine print of these insurance offers. Your insurer is the best person to help you find any grey areas and choose the complementary coverage that best meets your needs.
Get advice from Suzanne Michaud, Vice President, Insurance at CAA-Quebec, on Episode 7 of our insurance podcast.