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Financial Risks of the Sharing Economy in Canada

The sharing economy has grown exponentially in the last ten years from a niche area serving only a fraction of citizens to becoming a major component of the national economy. Many Canadians participate in the sharing economy, either as a customer or as a host or driver.

The sharing economy includes:

  • Home-sharing platforms like AirBnb and VRBO allow you to rent out a portion or the entirety of a home.
  • Car-sharing platforms like Turo allow you to rent out your car when you’re not using it.
  • Ride-sharing platforms like Uber and Lyft where drivers use their vehicles to offer taxi services.
  • RV-sharing platforms like Outdoorsy and RVezy allow you to rent out your RV when you’re not using it.

These services offer convenience and experiences that people might not otherwise be able to afford. It gives hosts the ability to make a side income or even a primary income. However, it is crucial to understand the financial risks of the sharing economy.

Current legal and liability regulations are based on exclusive ownership practices and cannot easily accommodate shared ownership. Insurance policies for private citizens do not usually include coverage for any commercial usage – including participating in the sharing economy.

Who is responsible in the sharing economy?

What happens if someone’s home is damaged by a guest? Or if there’s an accident while transporting a passenger? Who covers the damage, medical expenses and legal costs?

This is still being worked out in the sharing economy. However, there are a few things to know:

  • Platforms may offer some coverage to participants, but the extent of protection varies.
  • Your personal insurance will not cover any claim related to commercial use (unless you have notified your insurer and have the proper endorsement or policy in place).
  • You may need a commercial insurance policy to adequately protect your property and liability.

In some cases, platforms have pushed costs onto the provider/host or even customers. However, as the sharing economy has been around for a few years, more and more insurers are offering coverage for this area, whether you’re participating full-time or part-time.

New insurance products for the sharing economy.

Commercial use on a personal insurance policy is not covered. However, various insurance companies now offer endorsements or separate policies for participants in the sharing economy.

Not all insurance companies offer protection for all areas of the sharing economy. Steve Kee of the Insurance Bureau of Canada advises that hosts need to “check with your insurance representative to find out what you’re covered for and what some of the risks may be.” Coverage will vary from policy to policy as well as from company to company. Discussing your options with an independent insurance broker can help you find the best option for you.

One insurance company Aviva has rolled out specific home-sharing insurance endorsement. Made available on February 1, 2017, across Canada, this coverage includes the following:

  • Fair rental value (compensation for loss of rental income)
  • Loss or damage to personal belongings or the buildings
  • Up to $1500 of a guest’s lost or damaged property
  • Liability arising with a short-term rental
  • Intentional acts criminal acts or failure to act by a guest

You can choose from three options for how frequently you rent out your home via a home-sharing platform:

  1. Rent your entire home up to 90 days each year.
  2. Rent your entire home up to 180 days each year.
  3. Rent a portion of your home any amount of time each year.
  4. Rent an income property any amount of time each year (this is a separate, standalone home insurance policy, not an endorsement).

Other insurers are beginning to offer standalone rental income insurance policies designed for home-sharing or are offering endorsements to existing home insurance policies.

Regardless, if you list your home or a portion of your home on a home-sharing platform, you must inform your home insurance provider. Failure to do so could void your policy and lead to a denied claim.

Before you jump in head first…

If you are considering participating, here are a few things to do first:

  • Check your personal insurance to understand your coverage if you participate. You will likely need to purchase an endorsement or a commercial insurance policy to adequately protect your property and liability.
  • Read the fine print of the platform’s user agreement and participant insurance. Don’t rely on them to take care of you and be sure you understand what protection you can get.
  • Choose your guests wisely!
  • Set clear rules and expectations for guests.
  • Document everything between you and the platform as well as between you and guests.

Participating in the Sharing Economy as a Customer

If you’re someone participating in the sharing economy as a customer, you should:

  • Understand the policies for guests (rules and responsibilities) and recourse if your property is damaged or you’re hurt while participating.
  • Ask the person about their insurance.
  • Make sure all communication is through the sharing platform and that you have documentation.

Enjoy the benefits of the sharing economy in Canada but always remember to be smart about it too!