Can Airbnb and other sharing platforms supplement your retirement?

21 September 2016

Perhaps it's headlines like "Airbnb hostess stole my husband" or the opportunity to earn some extra money from that spare room - put it towards that retirement nest egg - which is contributing to the growing awareness of sharing economy businesses like Airbnb in New Zealand. But is it all as easy as it sounds?

Online marketplaces like Airbnb, VRBO and HomeAway (bookabach) enable people to list, find and rent accommodation or holiday homes for a fee. It's a good way to put the bach or your spare space to work as you transition towards retirement.

The catch is that you are opening up your home, or property, to strangers and as a result, a certain level of risk enters the frame.

Every business has a duty of care to its customers

"Half of respondents would rather have flights and accommodation for a mystery break (55%) or $1,000 gift card from their favourite store (54%) instead of a year’s worth of life and income protection insurance." - Therese Singleton

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Whether you are renting out a room part-time or a bach or a rental property within the sharing economy, you are conducting business (or an undertaking), and that means you have a primary duty of care to ensure the health and safety of every individual in that 'workplace'.

AMP's Head of General Insurance, Rob Dibley, said this means everybody involved with the 'business', including customers, staff, contractors and trades people.

"First off, it is important that you take expert advice from health and safety experts, your lawyer and insurance Adviser before you take the plunge and sign-up to the sharing economy.”

"For example, if you are hosting strangers in your home you will most likely need to do a full assessment of the hazards, and the measures taken to manage the risk because you are potentially required to adhere to legislative requirements such as the latest health & safety changes" he said.

In addition to legal and expert advice, hosts should consider insurance options as part of the risk management approach - as any good business should do. Again seek professional insurance advice on this.

You may need to change your insurance status

Mr Dibley said it appears that many hosts in New Zealand are getting an endorsement to their private/domestic insurance.

"However, this doesn't take into consideration the extra exposure to liabilities, because liability under a private/domestic insurance contract will reflect private or domestic use only.”

"It is important that your particular situation is discussed with an insurance professional to ensure that you are aware of the insurances that should be considered, such as statutory liability (primarily). You may need more, depending on your circumstances.

Online marketplace insurance policies. Are they reliable?

It depends on the business model you are entering into and the wording of the insurance policies, If there is any confusion it is always best to seek independent advice. Sometimes the guarantees provided are there to protect the interests of the business model you are entering, but not the total additional risks you are now being exposed to such as your property and liabilities.

"One prominent online accommodation marketplace does guarantee US$1,000,000 of protection against the damage that guests may do to a host's property, but this does not include cash, collectables, artwork, jewellery, pets or personal liability. They also note that this guarantee does not replace your current insurances.”

"There is also a process that hosts need to go through to claim on this, and there will be terms and conditions to consider."

Online marketplace cover doesn't replace home and contents insurance

Mr Dibley said insurance policies provided are not designed to replace your home/contents/car insurance. By you entering into the business model, you are changing the status of your policy - hence the need for independent, personal advice.

"Customers should always disclose changes to the insurance risk profile to their insurer. Most insurers are prepared to insure under differing terms and conditions," Mr Dibley said.

If you are participating in the sharing economy and would like some independent advice, an AMP Adviser would be happy to answer your questions.

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This AMP branded general insurance product is underwritten by Vero Insurance New Zealand Limited, 48 Shortland Street, Auckland.

The content provided is intended to be used as information only and does not constitute financial advice. Before acting on any of the results provided, we recommend that you seek advice which takes your individual circumstances into account.