Insurance and the 'side hustle'
Over the past decade, “side hustle” businesses like Uber, Lyft, DoorDash, and AirBNB got started and really blossomed during the COVID years.
Connection with these companies have supplemented particpants’ incomes or sometimes even replaced income lost when a primary job was shuttered.
And while side hustles like these can be lucrative, not knowing how insurance works – or doesn’t work – while doing them can put participants in a financially challenging spot.
In their contracts, companies like Uber, Lyft, and DoorDash do provide some liability protections for participants. Even AirBNB provides liability coverage to those individuals who do short-term renting of their homes to others. However, those liability protections have defined start and end points, and users’ personal insurance policies may not always provide coverage when its needed.
Uber, Lyft, and DoorDash are transportation network companies. When a driver is logged into the company system, with or without a fare or dash contract, the company provides liability coverage for losses caused by the driver. That is, if the contracted Uber driver hits another vehicle while logged in, Uber can provide some benefit to other driver for bodily injury and/or physical damages.
In some cases, that Uber driver can also receive physical damage coverage for losses sustained to his or her own vehicle in the accident. However, the deductible for that coverage can go as high as $2,500.
A personal auto policy for the vehicle excludes all liability and physical damage coverages for a loss sustained when the driver is logged into a transportation network. That contractual exclusion can be waived via a policy endorsement, which puts some coverage in place under certain conditions.
An individual may choose to lease out his or her primary home, or even a vacation home, on a series of short-term contracts administered by companies like AirBNB or VRBO. Those companies do offer some insurance protection, but those coverages do not necessarily help the property owner.
The short-term rental contracts provide coverage for guests’ personal injuries, damage or theft of their personal property, and damages caused to “common” areas of the rented structure. However, there is no coverage for damages or injuries caused intentionally by guests, nor to any losses caused by guests to the host house or property.
This means that if a wall-mounted television accidently falls on a guest, that person’s injuries are covered by the rental contract. If a guest decides to rip the TV off the wall, damaging it and the wall itself, there is no coverage at all for the property owner.
Here’s where the misconception about homeowners insurance coverage comes in.
A typical homeowners insurance policy is designed to cover losses incurred by the property owner, because the home is, by its very nature, an owner-occupied property. Renting out the home and its contents on even a short-term basis contradicts the usage agreement between the homeowner and the insurance company. Damages to the property and contents caused by rental guests or their visitors would not be covered.
Because of the popularity of home-sharing businesses, more insurance companies are introducing policy endorsements to add that coverage back. The riders will also protect property owners from liability losses caused by their guests. Generally, the endorsement premium is very low, less than $100 a year.
There can be restrictions on the endorsement, such as limits on the number of days a home can be rented out or the number of separate reservations. If a home may be rented out more often or to more people, homeowners are encouraged to use dwelling protection policies such as the kind used for long-term rental arrangements. This policy protects the owners’ liability and the home from damage.
Vehicle and property owners who are considering the “side hustle” business should always consult their insurance agents to make sure the correct coverages are in place.
Alan T. Girton is a veteran agent with Indiana Farm Bureau Insurance. To learn more, visit https://www.infarmbureau.com/agents/Alan-Girton-Howard-Kokomo-IN