Nikki Johnson No Comments

Renting Your Property through Airbnb: Things You Need Consider

Airbnb offers individuals a unique opportunity to efficiently rent out their homes, spare bedrooms or other accommodations.

For travellers, Airbnb is a convenient platform that provides affordable and flexible alternatives to hotels. For property owners and tenants, the service easily connects various rental units with prospective occupants and makes collecting payments simple and secure. For the average homeowner, properties or spare rooms that are otherwise vacant can easily be transformed into a source of income.

Despite its convenience and the potential for profit, Airbnb is not without its risks.

Potential Insurance Gaps

If you are considering renting your property through Airbnb, your first step is to contact your insurance broker to review your current homeowners or renters insurance policy. Relying strictly on such policies while hosting guests through Airbnb can lead to significant gaps in coverage and leave you financially vulnerable.

While your homeowners or renters policy may allow you to rent your property to a guest, it is important to keep in mind that each insurer has its own restrictions and requirements. For example, some insurers may require advanced notice of any short-term rental, whereas others might insist that you purchase an endorsement to broaden your coverage.

Standard homeowners and renters insurance policies are designed for personal risks, not commercial use. If you plan to rent out your residence on a regular basis, many insurance companies will consider this commercial use. In many cases, regular Airbnb hosts will need to obtain a commercial insurance policy in order to be properly insured. It should be noted that a growing number of insurance companies now offer home-sharing liability insurance policies that can be purchased on a month-to-month basis.

Even more alarming, your homeowners or renters policy most likely won’t consider property damage caused by guests a covered peril. This means you could be left to cover the cost.

Issues with Airbnb-provided Protection 

To its credit, Airbnb does offer its hosts two forms of protection through its Host Guarantee and Host Protection Insurance. While hosts may be inclined to rely exclusively on these programs to manage their risks, there are significant gaps related to these offerings.

Host Guarantee

Airbnb backs every one of its bookings with its Host Guarantee coverage at no cost. Airbnb claims that this coverage will reimburse eligible hosts for damages up to $1 million. However, Airbnb readily admits that its Host Guarantee is not insurance and should not be considered a replacement or stand-in for homeowners or renters insurance. 

Moreover, payments through the Host Guarantee are subject to a lengthy list of terms, conditions and exclusions. Therefore, hosts should be aware of the following issues related to Airbnb’s Host Guarantee:

  • Hosts must attempt to resolve any issues with the guests involved prior to receiving any compensation. This also means that a host would have to make a claim on his or her own insurance policy before Airbnb would intervene.
  • Any sum collected from a standard policy or a security deposit would be deducted from the Host Guarantee.
  • The guarantee will only repair or replace covered property that is damaged during the time frame of an online booking.
  • This guarantee does not cover certain items, including, but not limited to, cash, collectibles, jewellery, pets, watercraft or any damage to property that is not considered a covered accommodation.

Host Protection Insurance

In addition to its Host Guarantee, Airbnb offers coverage to patrons through its Host Protection Insurance. Airbnb indicates that the program provides primary liability coverage for up to $1 million per occurrence in the event of third-party claims of bodily injury or property damage. Despite Airbnb’s claims, hosts should be wary of relying solely on this insurance program for a number of reasons:

  • Intentional acts that aren’t the result of an accident are not covered under this policy. In addition, Airbnb’s Home Protection Insurance does not cover what it refers to as property issues, which can include things like mould, asbestos and bedbugs.
  • Neither Airbnb’s Home Protection Insurance nor its fine print is readily available for review. What’s more, the policy is subject to limitations, conditions and exclusions. Together, this means that specifics around coverages are vague, and Airbnb hosts may not know what’s protected.
  • The personal property of any guest is generally not covered. Additionally, any theft or damage caused by a guest may not be covered either.

With Airbnb’s Host Protection Insurance, it’s best to assume that you aren’t equipped with the proper coverage. For full protection, it is likely that you will need to speak with an insurance professional to better understand the policy adjustments you will need in order to be fully covered.

Considerations for Condo Owners and Renters

While Airbnb opens its services to condo owners and renters, multi-unit buildings often have restrictive bylaws, homeowner association rules or lease terms that could impact one’s ability to host guests through Airbnb.

In many instances, commercial activities like renting out accommodations—even for a short period of time—are forbidden by lease or condo board policies. In some cases, hosts will need to contact their landlord or condo board before subletting or renting any accommodations out. Failure to do this can result in eviction or other forms of legal action. 

Even if you are allowed to rent out your condo or apartment through Airbnb, hosts should be aware that doing so can cause tension with neighbours. There’s the potential that your guests may be disrespectful to property in common areas, act inappropriately or noisily, or make other tenants feel uncomfortable.

Local and Provincial Laws Considerations

In response to the rising popularity of Airbnb, many provinces, cities and towns are moving to regulate short-term property rentals through their municipal codes or zoning regulations. In some cases, home rental services like Airbnb could be prohibited altogether.

If you break these local regulations, purposely or otherwise, you could face thousands of dollars in fines. What’s more, Airbnb says alignment with laws and regulations is the responsibility of those renting out accommodations. Accordingly, it is imperative to review local laws and regulations before you commit to using Airbnb to rent out accommodations.

Tax Considerations

Income from all sources is taxable in Canada, including internet-sourced rental income. Consequently, any income derived from Airbnb rentals must be reported to the Canadian Revenue Agency (CRA).

Depending on the number and nature of the services provided to guests, the CRA will consider money earned through Airbnb as either rental or business income. Furthermore, if the income you make from Airbnb exceeds $30,000 per year, you will most likely have to register for a harmonized sales tax (HST)/goods and services tax (GST) account through the CRA and will be subject to the applicable taxes. Provincial sales taxes (PST) will vary from province to province.

For those who have already earned unfiled income through Airbnb, coming forward through Canada’s Voluntary Disclosures Program (VDP) is recommended. Through the VDP, penalties for unfiled back taxes will be forgiven.

For more information on the tax implications of Airbnb and to ensure compliance, hosts are encouraged to contact a tax professional or the CRA.

The Bottom Line

While Airbnb offers a unique and potentially profitable service to users, it’s not without its faults. Before you decide to try it for yourself, be sure to consider all of the risks.

Again, you’ll want to minimize potential financial fallout by purchasing the appropriate insurance coverage. To discuss your options further, contact Reith & Associates Insurance and Financial Services Limited today.

Dan Reith, Principal Broker
Dan Reith, Principal Broker

Dan Reith

Principal Broker
Reith & Associates Insurance and Financial Services Limited
https://reithandassociates.com/
Nikki Johnson No Comments

Navigating Rental Car Insurance

When renting a car for a family vacation, road trip or other personal use, the last thing you want to worry about is your insurance coverage. Regardless, before renting a car, you will have to decide whether to purchase additional rental insurance or not. In most cases, the coverage and deductibles you have on your personal automobile insurance policy apply to a rental car, provided it is being used for pleasure and not business.

However, if you do not have a comprehensive policy, physical damage or a loss to the rental vehicle may not be covered. In this instance, you may have to pay for a claim yourself, which could end up costing you thousands.

In the event of an accident, the only way to protect yourself from a major loss is with the right insurance policy. As such, it’s important to understand all of your insurance options when renting a car, which include the following:

  1. Purchase a rental car endorsement through your insurance provider. Adding a rental car coverage endorsement to your current auto policy allows you to transfer your car insurance coverage from your own vehicle to a rental car. This can typically be done at a low cost, but you’ll want to have a solid understanding of what is and isn’t covered under your policy. Be certain to review with your provider in advance.
  2. Purchase coverage through the rental car agency. Car rental agencies themselves provide coverage—coverage that often has added perks like roadside assistance. While purchasing protection through a rental car agency is convenient, there are a number of considerations to keep in mind. For one, insurance purchased through a rental car agency can be expensive. Second, insurance from rental car agencies often carries a number of restrictions and may not include protection from lawsuits and may not cover the cost of lost income to the rental agency while the rental is off the road for repairs caused by you.  This cost could be out-of-pocket and cost you thousands.   As such, if you purchase coverage from a rental agency, it’s important to know what you’re getting.
  3. Use the coverage on your credit card. Many credit cards provide some form of rental car insurance, so long as you use the card to rent the car. In most cases, insurance of this kind provides basic protection for damage and theft. This type of coverage is typically only available if a person denies the insurance offered by the car rental company. Again limitations and exclusions may apply, so do your research before going this route. Notably, this coverage should not be used as a replacement for insurance, as protection is typically limited to only a few thousand dollars.

Properly structured, the best coverage, and most cost effective, for a rental car is through the rental car endorsement added to your own auto insurance policy.   

Depending on your insurance policy, you may need additional coverage in order to be fully protected. For instance, the type of vehicle you rent (e.g., moving vans, trailers, luxury cars and recreational vehicles) may have insufficient coverage under your policy.

These considerations can make the process of securing adequate coverage for your rental vehicle difficult. To ease the process, keep the following tips in mind the next time you plan to rent a car:

  • Check with your insurance broker whether your existing policy extends to rental vehicles.
  • Ensure the amount you’re covered for is equal to or greater than the value of the car you’re renting.
  • Check that your insurance coverage is comprehensive and includes protection for third-party liability, collisions, theft and vandalism.
  • Compare rental car insurance prices online. Keep an eye out for discounts and deals.
  • Check with your insurance broker about how an accident in a rental car would affect your auto insurance rates if you make a rental car claim.

Above all, to save you time and the headache of navigating your options, it’s important to speak with a qualified insurance broker. Your broker can explain your different options and ensure that you are protected in the event of an accident. To learn more, contact Reith & Associates Insurance and Financial Services Limited today!

Dan Reith, Principal Broker
Dan Reith, Principal Broker

Dan Reith
Principal Broker
Reith & Associates Insurance and Financial Services Limited
https://reithandassociates.com/
Nikki Johnson No Comments

Wrap-up Insurance Programs for Construction Projects

Wrap-up Insurance Programs for Construction Projects

Insuring all of the risks associated with large-scale constructions projects can be a daunting task for the parties involved. The traditional insurance approach requires each party to procure and maintain separate coverage. Generally, the contractor and subcontractor then include the cost of insurance, plus a mark-up, in their project bids. 

Typically, risk is then pushed downstream—from owners to general contractors, and from general contractors to subcontractors—through contractual indemnifications, contractually mandated minimum insurance requirements and additional insured provisions.

While this approach may be customary for the parties involved, it is not without complications. Due to the number of policies and insurers involved, the traditional approach creates the potential for unforeseen liability gaps to emerge. Some parties may have inadequate limits, gaps in coverage or no insurance at all. Furthermore, because there are various insurance companies covering one project, each claim has the potential to cause costly and time-consuming cross litigation.

As an alternative to having each party obtain separate liability policies, project owners and general contractors can turn to a wrap-up insurance programs to manage their risks.

What is Wrap-up Liability Insurance?

Sometimes referred to as controlled insurance programs (CIP), wrap-up insurance programs are centralized insurance and loss control programs intended to protect the project owner, general contractor and subcontractors under a single insurance policy or set of policies for the construction project.  

Insurers typically offer two types of wrap-up programs based on the party sponsoring the program:

  1. Owner Controlled Insurance Program (OCIP): Under an OCIP, the project owner sponsors and controls the program. Accordingly, the project owner is the first named insured, and the general contractor, subcontractors and other participants are named insureds.
  2. Contractor Controlled Insurance Program (CCIP): Under a CCIP, the general contractor sponsors and controls the program. The general contractor is the first named insured, and the subcontractors and other participants are named insureds. Depending on the program, the project owner is either an additional insured or named insured.

While wrap-up programs are most frequently used for large, single-site projects, a rolling wrap-up can be used to insure multiple projects under one program.

Wrap-up programs are designed to reduce the overall cost of insurance by providing what amounts to volume discounts for the entire project.

What Types of Coverage Do Wrap-up Programs Provide?

Although each wrap-up program is designed to meet the needs of the specific project, most programs insure employer’s liability, general liability and excess liability exposures for claims arising from the construction project at the construction site during the policy period. 

In many instances, builder’s risk, environmental liability, contractor default and other types of insurance can be included under a wrap-up program. Professional liability coverage can also be added to insure architects, engineers and other design professionals working on the project.

Liability occurring away from the project site is generally excluded under wrap-up programs. Accordingly, subcontractors, suppliers and vendors conducting off-site manufacturing or the assembling of building components may be excluded from the program. Claims arising from goods or materials in transit are often also excluded, preventing haulers and truck drivers from being covered under the program.

Wrap-up programs typically do not insure specific operations such as blasting, demolition or other high-risk operations. However, each program is different, and it is critical for program sponsors to be familiar with exactly what is and is not covered.

Benefits of Wrap-up Programs

Wrap-up programs can provide a number of benefits, including the following:

  • Potential cost savings: Wrap-up programs are designed to reduce the overall cost of insurance by providing what amounts to volume discounts for the entire project.
  • Consolidated coverage: Under the traditional approach, by which parties procure their own insurance, the project owner and general contractor can set minimum insurance requirements for downstream participants. However, it can be difficult to determine whether contractors and subcontractors have obtained the correct limits and types of coverage. By contrast, under wrap-up programs, the controlling entity exerts greater control over the types, scope and limits of coverage.  
  • Higher limits: Most wrap-up programs have very high limits. If a major disaster occurs at a project and is not covered by a wrap-up program, the responsible contractors may not have adequate limits to cover the claim. Thus, the owner or general contractor may be on the line for the difference. However, if the project is covered by a wrap-up program, the limit should be sufficient to cover the incident.
  • Centralized safety and risk management: Program sponsors, working in conjunction with their brokers, the insurer and safety professionals, can maintain centralized safety and risk management services. Doing so can reduce the frequency and severity of injury and property damage claims, thereby reducing insurance costs for the project.
  • Efficient claims processing: Because a single insurer is the control point for managing claims, the process tends to be more efficient under wrap-up programs.
  • Reduced disputes among insured parties: By covering all of the parties on a project under one policy, wrap-up programs reduce coverage disputes and subrogation issues between insureds and insurance carriers for covered claims that occur on the job site.
  • Access to projects: For contractors and subcontractors, wrap-up programs can provide them with access to projects that they may not have otherwise been able to properly insure.  

Potential Drawbacks

Because wrap-up programs often offer a broad range of coverage for many entities, they can be expensive to obtain. However, program sponsors are typically able to reduce costs by selecting higher deductibles or by distributing premium costs to all parties covered under the policy.

Since wrap-up programs tend to encompass several types of coverage for a number of different organizations, program sponsors generally inherit administrative tasks. Beyond purchasing the wrap-up program, sponsors may be required to review and approve program documents, meet with underwriters and review claims. To address these issues, plan sponsors can designate or hire individuals to help administrate the programs, which can add to overall costs.

While wrap-up programs often result in cost savings, like any insurance policy, they are subject to market fluctuations. Accordingly, potential cost savings should be carefully considered.

Additional Information

Reith & Associates Insurance and Financial Services Limited understands that implementing a wrap-up program can be a complicated process.  There is no “one size fits all” model, and each program needs to be properly analyzed and tailored to meet a project’s specific needs.

If you are interested in insuring your next construction project with a wrap-up program, contact Reith & Associates Insurance and Financial Services Limited today and we will take the time to walk you through your coverage options.

Dan Reith, Principal Broker
Dan Reith, Principal Broker

Dan Reith
Principal Broker
Reith & Associates Insurance and Financial Services Limited
https://reithandassociates.com/

Nikki Johnson No Comments

Home-Based Business Coverage

If you conduct business in your home, insuring your business properly is part of a solid risk management plan. We can help!          

What Protection Does It Offer?

Common coverages for home-based businesses include personal business property, professional liability, business income, personal and advertising injury, loss of business data, crime, theft and auto coverage. Depending on the type of options may be available.

Coverage Options

Based on your business needs, you have three basic coverage options to choose from, depending on your level of risk:

  1. Homeowners Policy Endorsement. This provides the least amount of coverage and, therefore, is not ideal for most home-based businesses (depending on the level of risk).  While it may provide enough coverage for a freelance writer with one computer and no business foot traffic, it’s not enough for someone who employs others, has clients visiting his or her home or has valuable business equipment and/or inventory.
  2. In-home Business Policy. More comprehensive than a homeowners policy endorsement, in-home business coverage is a stand-alone policy that provides higher amounts of coverage for business equipment and liability.
  3. Business Owners Policy, or BOP. A BOP bundles property and liability insurance into one policy. Created specifically for the small- to mid-size business, a BOP covers your business property and equipment, loss of income, extra expense and liability. It is the most comprehensive property and liability option. It does not include health or disability insurance, which are available as separate policies.

What’s Your Risk?

While most homeowners insurance policies do cover a limited amount of business equipment—computers, copiers and printers, to name a few—it’s likely that what you own is worth more than your policy’s limits. Also, your homeowners liability insurance probably won’t cover any injuries that may occur to the employees or clients that you have on your premises. What’s a home-based businessperson to do?

We’re Here to Help

Properly insuring your home-based business is crucial to protecting both your business and your home. At Reith & Associates Insurance and Financial Services Limited, we understand the small business owner’s personal and business needs, and can help you tailor coverage that’s as unique as the products and services you provide. Contact Reith & Associates today to learn more about how we can help you insure your livelihood.

Reith & Associates Insurance and Financial Services Limited
http://www.reithandassociates.com/
519-631-3862

Nikki Johnson No Comments

Privately Owned Company Directors & Officers Insurance – Coverage in Action

By: Dan Reith BA(Hons) CAIB
Principal Broker
Reith & Associates Insurance and Financial Services Limited

With today’s emphasis on corporate transparency and accountability, an organization’s directors and officers face a countless number of exposures. Regardless of your company’s size or mission, the legal costs associated with a lawsuit can be devastating for both the organization and your directors and officers.

Many wrongly assume that directors and officers (D&O) insurance is only necessary for publicly traded companies. However, privately held organizations can just as easily fall victim to lawsuits that can impact the company, its officers and board, marking D&O insurance a must!

Claims Scenario: Floored by a Breach of Duty Lawsuit

The company: A private flooring installation company worth approximately $20 million.

The challenge: A Manitoba-based flooring company with less than 15 employees was recently the subject of a lawsuit. A competing flooring company sued the insured, alleging purposeful contract interference.

Specifically, the competitor accused the company of diverting contracts and sought direct and consequential damages, including lost profits, punitive damages and attorney fees. As a result, the insured and its directors and officers were taken to court.

Private company D&O insurance in action: The case above alleges a wrongful act—an act that falls directly on the insured’s directors and officers. Thankfully, D&O insurance provides coverage for alleged or actual acts, which helps organizations respond to various types of litigation.

This is particularly important when you consider that the defence costs and mediation expenses for the above case reached $193,000. Without D&O insurance, the small-sized flooring company, as well as its directors and officers, would be forced to pay for the defence out of pocket.

Claims Scenario: Investing Gone Wrong

The company: A private company specializing in business process outsourcing.

The challenge: A private company works with several Fortune 500 brands and helps manage their shipping and customer care divisions. Recently, shareholders targeted the private company, alleging fraud and misrepresentation.

These shareholders claimed they were told the money they invested would be used to acquire smaller enterprises—bolstering the organization’s outsourcing capabilities. Using the shareholders’ money, the company would purchase these enterprises with the promise of doubling the original investment. However, when several of these acquisitions failed, shareholders claimed the directors and officers did not conduct the proper due diligence to ensure they were making the right decisions.

Private company D&O insurance in action: Despite their reasonable and best efforts, the directors and officers of the insured company failed in a high-risk, high-reward scenario. As a result, they were sued for negligence and possible fraud.

The company was taken to court—a process that went on for months and led to immense legal expenses. At the end of litigation, the D&O policy limits of $2 million were nearly exhausted but helped ensure the financial longevity of the company and its leadership.

Learn More About D&O Insurance for Private Companies

Many private organizations don’t believe they need D&O insurance. This can be dangerous thinking, as just one D&O claim can drain the personal assets of a company’s leadership team.

The current litigation climate for private companies presents an unending and potentially devastating challenge. Following a financial crisis, error, business interruption or similar incident, management can be held liable. Without the proper coverage, directors and officers would have to face claims brought on by competitors, customers, business partners and regulators on their own, likely with minimal success.

The Benefits of D&O Insurance for Private Companies

  • Legal Cost reimbursement—D&O polices can provide legal cost coverage for a variety of claims.  Specifically, D&O insurance can provide companies following allegation of wrongful acts, financial mismanagement, errors in judgement and negligence.  D&O lawsuits can occur without warning, it is critical that private company leaders arm themselves with the right policy.
  • Peace of Mind—D&O claims can come from a variety of courses including employees, clients, contractors and government bodies.  For private companies, claims from creditors and competitors are particularly common.  D&O insurance ensures that private company leaders are protected regardless of where claims originate, providing timely and effective coverage.
  • An improved ability to attract new leaders—Simply put, having a strong D&O policy in place makes board seats more attractive.  This is because purchasing insurance shows prospective leaders that you take D&O risks seriously and are prepared to protect them.
  • Coverage for regulatory exposures—Regulator agencies are increasing their scrutiny of private companies, making D&O insurance all the more important.  Paying the cost of a lawyer to defend a director or officer against a government enforcement action is expensive, and private company D&O insurance policies can help with these types of expenses.

To learn more about D&O insurance and other ways to keep your organization’s leadership team safe from litigation, contact your insurance broker today.

Talk to an Expert!

Reith & Associates Insurance and Financial Services Limited

519.631.3862

http://www.reithandassociates.com/


Nikki Johnson No Comments

Navigating the “Hard” Market

  • By:  Dan Reith  BA(Hons) CAIB
  • Principal Broker
  • Reith & Associates Insurance and Financial Services Limited

The insurance industry is in a phase commonly referred to as a “hard” market. As industry experts closely monitor the market, the state of the insurance industry continues to fluctuate. This can be confusing for business owners trying to forecast future insurance costs while experts try to project whether insurance premiums will rise and by how much.

What is clear is that risk management, loss control and safety continue to be crucial to the success of any business insurance package, regardless of market conditions. Now is a good time to evaluate your business’s risk management plan as a whole to ensure your business can attain favorable pricing regardless of market conditions.

What a Hardening Market Means for Your Business

During times of a soft market, like the past few years, business owners see cost reductions in their organization’s insurance premiums, even without a reduction in their risk. As a result, business owners are often unwilling to spend time and resources on loss control and risk management because they already see their insurance premiums dropping. This reduction in pricing is deceptive, setting businesses up for a shock when the market takes a turn.

It’s important to take advantage of the opportunity to get ahead of the game by proactively addressing losses and risks now. When insurance prices begin to climb, those organizations that have taken the initiative to address losses and mitigate risk will see modest increases in premiums, whereas those that simply rode the market without working to reduce risk will have a harder time placing coverage and won’t be offered as competitive of rates. As a business owner, a 15 per cent increase in cost will still be unpleasant, but a 40 per cent increase in addition to a reduction in coverage could end up affecting your company’s well-being in the short and long term.

Even in the hard market, a business with effective loss control and risk management initiatives will always pay less.

Risk management, loss control and safety continue to be crucial to the success of any business insurance package, regardless of market conditions.

Take Charge of Loss Control

The best approach to control losses is to prevent injury and illness, manage claims effectively and implement cost containment strategies. If you work to reduce risk and prevent loss now, the increase in your premiums later will be minimized. Reith & Associates Insurance and Financial Services Limited’s consultative approach can:

  • Pinpoint your exposures and cost drivers
  • Identify the best loss control solutions to address your unique risks
  • Create a solid business contingency plan to account for disasters and other unpredictable risks
  • Build a company culture focused on safety
  • Manage claims efficiently to keep costs down

Using all the resources available to you from Reith & Associates Insurance and Financial Services Limited, we can help you control costs and ensure your business is protected.