We live in an age where the sharing economy and the gig economy are becoming more mainstream, as proven by the success of Airbnb and other companies. The most recent entrant in the sharing economy is Swimply, a company that facilitates renting out your pool by the hour. Your Financial Planner will assuredly applaud you for bringing in extra cash for an existing asset, but they will also tell you to check your homeowner’s insurance policy to make sure you are covered in case of accidents.
Swimply does state clearly that they offer insurance to pool listers, but you need to compare that coverage with your homeowner’s and other coverages to make sure you are not taking an outsized risk. From a risk perspective, renting out your seldom-used pool is quite like renting out any other asset you have such as your extra car, tools, or that extra room in your house or above the garage. Let’s review this risk by using the more common practice of renting out a spare room:
Renting out a room in your home can be a great way to make some extra income, but it’s important to be aware of the risks involved. There are several types of insurance coverage you should consider when renting out a room in your house, including homeowner’s insurance, liability insurance, and landlord insurance.
Homeowner’s insurance is designed to protect your home and personal belongings from damage or loss due to covered events such as fire, theft, or natural disasters. However, if you’re renting out a room in your home, your homeowner’s insurance policy may not provide coverage for the rental space or your tenant’s personal belongings.
To ensure that you have the proper coverage, it’s important to inform your insurance company that you’re renting out a room in your home. Depending on the insurance company, you may need to purchase additional coverage or switch to a different policy altogether.
Liability insurance is another type of insurance coverage you should consider when renting out a room in your house. Liability insurance is designed to protect you from financial losses if someone is injured or their property is damaged while on your property.
If you’re renting out a room in your home, you should make sure that you have adequate liability insurance coverage. This type of insurance will protect you from financial losses if your tenant or their guests are injured while on your property.
Landlord insurance is a type of insurance coverage that is specifically designed for rental properties. This type of insurance policy typically provides coverage for the rental space, your personal property, and liability protection.
When selecting a landlord insurance policy, it’s important to carefully review the coverage options and make sure that the policy meets your specific needs. Some policies may provide more comprehensive coverage than others, so it’s important to take the time to compare different policies before making a decision.
In addition to purchasing the appropriate insurance coverage, there are several other steps you can take to minimize the insurance risks when renting out a room in your home. One of the most important steps is to carefully screen potential tenants to ensure that they are responsible and reliable.
You should also make sure that your rental space is up to code and that all necessary safety features, such as smoke detectors and carbon monoxide detectors, are installed and functioning properly.
Depending on the frequency of how often you rent out your asset, be it a pool, room or car, your Financial Planner or tax advisor will advise you if you in fact are operating a business. Based on the particulars, you may have advantageous deductions and of course additional income to report.
The sharing economy is creating new revenue opportunities, but be sure to confer with your advisors to make sure you have the risk side considered as well.
Related: How the Depositors Insurance Fund Provides Additional Insurance to the FDIC