You’ve been hearing a lot about the new sharing economy. Companies like Airbnb and Uber have changed the way people work, travel and vacation. Now you want in on the action. But before you decide to hop on the sharing economy bandwagon and rent out your Texas house, there are a few things you need to know about local laws and insurance requirements.
The Rise and Regulation of Airbnb
Started in 2008, Airbnb is an online platform that lets individuals make their homes available for short-term rentals. It has competition, including Tripping and VRBO. These companies give vacationers an alternative to hotels, and they give homeowners an extra source of income. It seems like a win-win, and the idea has become very popular.
Not all regulators are on board, though. In the past few years, some states and cities have changed their laws regarding short-term rentals in response to the Airbnb craze. Galveston established some basic requirements, along with a $50 registration fee. Austin has passed much stricter laws, including a $443 fee and a block on the licenses required for people who want to rent out secondary homes.
Homeowners Insurance Issues
Assuming you’ve checked local laws and obtained the necessary licenses, your next big concern should be insurance.
Do not assume that your regular Texas homeowners insurance will cover any damages resulting from short-term rentals. Your homeowners insurance policy is intended for personal coverage. When you rent out your home, you’re acting as a business. You need commercial coverage.
And you really do need it. A lot can go wrong during a short-term rental. Your guests could hurt themselves on your property. They could damage your house or belongings, either intentionally or accidentally. A tree could fall on the roof, damaging your property and injuring your guests. You need to be protected against liability and property damages.
Airbnb has recently started offering Host Protection Insurance. This is liability coverage for up to $1 million. However, not everything is covered through this insurance, and Airbnb competitors may not offer similar coverage.
When reviewing your Texas insurance for short-term rentals, here are some questions you should ask:
- Are you covered for commercial use of your home?
- Do you have liability coverage in case you are sued by the guest, your landlord, your homeowners association or another party?
- Do you have property coverage to protect both your house and your belongings?
- Are the limits high enough to provide adequate coverage?
- Are there any exclusions?