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Innovation and your personal insurance policy

It is a well known fact that the technology age has paved the way for many exciting innovations, fundamentally altering the manner in which goods and services are consumed. Good examples are platforms like iTunes, Uber, Snapscan and Airbnb (online renting out of premises).

What probably is less well known and appreciated, is the impact such innovations have on your personal short term insurance contract.

The purpose of this article is to highlight some of the risks associated with renting out of properties and specifically Airbnb, posed to you and your short term insurer.

DISCLOSURE: HOUSE CONTENTS AND BUILDING RISK

Disclosure is a key insurance principle which governs all short term insurance contracts. In short, your insurer requires you to disclose all facts which you (or any other reasonable person) think the insurer should know about your risk. When in doubt, the golden rule is always to disclose.

Is the fact that you intend using an insured residence for Airbnb or for rent, something that should be disclosed to your insurer? The answer is an unequivocal yes.

Personal insurance policies are essentially designed to only cover non income generating assets. In the case of Airbnb/renting, you would be earning an income from the transaction and the residence would be occupied by someone other than yourself, which means that you would have to disclose this fact to your building and house contents insurer for their consideration. If insurers agree to cover the risk, it is common for them to exclude Malicious Damage by the tenant and limit House Contents theft cover to “forcible and violent entry/exit”. They would also require the tenant to observe all your policy terms and conditions e.g. the setting of alarms etc.
It is very likely that your insurer will reject a claim relating to any Airbnb/renting activity, if this activity was not disclosed and accepted by your insurer beforehand.

DISCLOSURE: LIABILITY RISKS

You have a duty in law to the public, as the owner of the building and the contents, to ensure these assets are well maintained and do not present preventable risks of injury or property damage to third parties (e.g. tenants, visitors to the premises etc.). Most Personal insurance policies automatically include liability sections to cover your legal liability (negligence) emanating from the insured residence, should you fail in your civil duties to the public.

Airbnb/renting transactions would increase your risk to third parties and as such would need to be disclosed to your insurer for consideration.
It is crucial that you check that your insurer agrees that all liability cover offered by the policy remains in full force, before using Airbnb or renting your premises.

Until next time.

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June 15, 2016

Posted In: Newsletters

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