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Protect yourself from the risks of the sharing economy

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If you're still hoping to catch part of the Democratic National Convention in Philadelphia but still haven't found an affordable hotel room, gulp hard and check your credit card balance. A room at a downtown Hyatt is going for a mere $1,750 a night on the website trivago.

Or you could check out Airbnb and find an apartment for $350 a night.

If you think this is an endorsement for house sharing, well it's not. But it is an indication of how quickly the "sharing economy" -- which includes everything from homes with swimming pools to car-pooling to cameras, golf clubs and designer dresses -- is growing, and why. A recent study by the accounting firm PricewaterhouseCoopers predicted that "sharing services" of all kinds will be a $335 billion business in less than 10 years.

Airbnb fighting San Francisco over registerin... 03:44

The upside to sharing: Bargains are easily available through the Internet. The open marketplace on the web makes it possible to access "underutilized resources," such as New Yorkers who go to the Hamptons each weekend and whose city apartments will be empty.

For those with less money there's the Couchsurfing website. Or a driver with a Corolla who needs to pay off college loans and is willing to chauffeur people from the Bronx to Queens. In addition to the well- known providers like Uber are companies such as TaskRabbit, which offers a variety of services, and even Park Circa for sharing hard-to-find parking spaces.

Why do Internet-savvy people use sites like Airbnb and One frequent traveler says it's easy to find good places, save money and have an "interaction with people" when traveling alone. She noted that "The average Airbnb gets 4.5 stars" -- but added that "once people make a personal connection with a place they're reluctant to give a bad review."

But sharing also has a dark side. First, government regulations and taxes are often ignored, which irritates businesses, like hotels and retailers, that do pay these taxes. And it irritates local governments even more. In what's shaping up to be a Battle by the Bay, Airbnb has filed a lawsuit charging that a San Francisco ordinance violates its right to post vacation listings on the Internet.

The San Francisco ordinance comes with $1,000 daily fines for people who don't follow the rules on registering their rooms or apartments -- a real kick in the teeth for Airbnb, which is based in this overcrowded, high-rent city.

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Other cities and towns where Airbnb operates will be closely watching this lawsuit. New York City is also cracking down on the company, which has 25,000 listings for the Big Apple. The New York State attorney general has said three-quarters of these listings are technically illegal. Other cities are also passing ordinances against short-term rentals.

And this leads to the second part of the downside. When a Philly homeowner rents an out-of-state conventioneer a room for a lower rate than a hotel -- because she doesn't have to pay those high hotel taxes -- both sides of the transaction drift into a gray area where they encounter less consumer protection.

Insurance is another big concern. Will your home insurer refuse to reimburse your damage claim if a paying "guest" from Idaho accidentally sets your house on fire?

"Failing to understand the insurance aspects ... can be financially risky," said President John Huff of the National Association of Insurance Commissioners (NAIC), the organization that sets standards for domestic insurers. "The NAIC encourages consumers to share with care."

In that spirit, the NAIC has shared some tips on sharing:

Purchase the right coverage. Regularly renting out rooms for a profit may be considered a home-based business. Since many homeowners' policies won't cover property damage caused by or injuries to a paying guest, hosts should talk to the home-sharing service and their own agent to determine if additional liability coverage or special landlord insurance is warranted. Some home-sharing companies offer host protection guarantees to cover disputes between owners and renters.

Demand proof of insurance. Consider renting only to guests who show proof of homeowners', renters' or personal liability insurance. If a guest damages a rented property, the host can report a claim on the guest's policy.

Review your personal policies. Renters who stay in accommodations secured through a service like Airbnb should confirm that their own homeowners', renters' or personal liability insurance policies offer protection for potential damages to the rental property.

Speak to your insurer. Before contracting as an Uber or Lyft driver, consult with your insurer. Personal auto insurance typically excludes coverage for business use of your car or when "available for hire."

Research before riding. Before accepting a shared ride, know the extent of protection in case of an accident. Most ride-sharing companies have liability policies that cover any passenger injuries. If you're injured while riding, file a claim with the driver's insurer and the ride-sharing company's insurer and let them sort it out.

Require a security deposit. When leasing goods, such as high-fashion clothing or a bicycle, obtain a security deposit to cover any losses. Take photos and record other information during a home inventory.

Make sure it works. You can be held liable for leasing out items you know don't work properly. A homeowners' policy may not cover this type of transaction because payment was exchanged for rented goods.

Know who's paying. Need to hire a stranger to help with home cleaning, moving or other tasks? First find out whose insurance covers what. The service may offer a guarantee, but often it's secondary to any insurance or policies already in place.

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