Home-Sharing for Apartment Buildings and Condominiums

By engaging in home-sharing, property owners and associations expand their risk for loss to property (principally furnishings of rented units) and for bodily injury and property damage incurred by or caused by tenants.

Those types of risks are typically covered under standard property and liability insurance policies but, depending on their scope, insurers may treat temporary rentals as a different class than units owned by occupants or rented on long-term leases. Coverage may be more costly and require more reporting, but any additional premium cost would presumably be offset by rental earnings.

Coverage clarified

Recent changes in the market for residential insurance help clarify the application of coverage for short-term rentals by unit-owners, property owners, property managers, and/or condominium associations.

For decades, homeowners insurance policies, including those for tenants and condominium unit-owners, have provided coverage for damage to a primary residence during an occasional rental, as well as liability coverage for bodily injury or property damage to third parties. (Coverage for damage to personal property in a rented space is generally limited, and insurers have PAG E 2 Home-Sharing for Apartment Buildings and Condominiums Continued some discretion about applying business exclusions to claims arising from rentals.)

That coverage developed when home rentals were informal and infrequent, such as when individuals rented living space to visitors for a major concert or sporting event. With online networks incorporating home-sharing into global enterprises, insurers are taking a new approach by developing policy provisions to explicitly address home-sharing through online services.

Following the example of several major US insurers, the Insurance Services Office (ISO), an organization that develops standard policy provisions used as models by thousands of US insurers, introduced two such endorsements in 2016.

The first, in effect, preserved the traditional homeowners coverage for short-term rentals arranged informally, but defined “home-sharing host activities” through an online network to be a business activity, and thus excluded from homeowners coverage. This policy provision was provided as a “mandatory” endorsement that insurers were expected to add to all ISO-based homeowners policies to clarify the intent and extent of home-sharing coverage.

The second ISO endorsement is entirely optional and extends the property coverage under a homeowners policy to a “host’s” household furnishings and other structures rented or held for rental to home-sharing...

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