When it comes to cover, sharing can be risky

THE booming sharing economy is creating dangerous financial risks for people trying to earn some spare cash on the side.

Home insurance and car insurance policies are unlikely to pay up if people use these assets to generate extra income by letting out rooms or by using their car to ferry strangers around.

Reports last month of a short-term rental property being trashed by a party involving up to 50 youths in Melbourne have highlighted the risks of this type of home letting, and Insurance Council of Australia spokesman Campbell Fuller said it was a big issue.

“When you rent a property out through one of these shortterm holiday letting services, your normal contents cover is unlikely to cover you,” he said.

The risks of property damage were significantly higher for short-term holiday rentals, and while some insurers might offer some cover, most would not, he said.

Mr Fuller said people should contact their insurer to find out if they were covered or if additional insurance could be organised, potentially costing more.

Building damage policies and strata insurance are also unlikely to pay in a claim.

Landlord insurer

Terri Scheer is seeing more examples of property owners using websites such as Airbnb to rent out rooms. “We will cover people renting property through Airbnb but only if it’s the whole property – not just renting out one room,” said Terri Scheer executive manager Carolyn Parrella. “Anyone who is renting out a room should check with their insurer to see if they are covered. Often you have invited these people in and they have paid you to be there. If they walk out with your telly, will your insurer cover it?”

More than one in five Australians makes money from the sharing economy.

Property owners are earning around $8000 a year and drivers $10,000 a year on average.

Even people who earn just a fraction of that could find themselves in insurance hot water.

Mr Fuller said ride sharing services had an “almost identical” insurance scenario to home and room letting services.

“Using your vehicle for a commercial purpose is seen as having a higher risk. Therefore, your normal motor vehicle insurance is unlikely to cover you,” he said.

“However, some insurers will cover you under certain circumstances, and others will for an additional premium.”

Mr Fuller said the insurance industry had adapted to the sharing economy and had “created products to help customers who want to use their property in these ways”.