6 ways to protect clients using home-exchange services

A common-sense checklist keeps brokers and clients covered.

The ad reads like a real-estate listing: the house has three bedrooms, a large yard, and is close to Toronto. But it’s not for sale—it’s one of many local homes and condos listed on a popular home-exchange website for tourists.  ”You can even use our car!,” it says.

Swapping houses with fellow travelers can be more comfortable, and sometimes cheaper than staying in a hotel. And newer services like airbnb.com and ahaGO.com are taking the practice beyond exchanges, turning city condos and rural retreats into short-term vacation rentals while the owners are away.

But in both cases, things can get uncomfortable—and expensive– quickly for homeowners who don’t have proper coverage before they leave. “Home exchange programs call for due diligence,” says Leonard Sharman, spokesman for The Co-operators. Although most companies will assess coverage for the exchanges on a case-by-case basis, brokers should share the following tips with clients before they hand over the keys.

1) Talk to me 

Make it clear that clients should let their broker, agent or insurer know about an exchange or vacation rental program before signing any agreement.

“Technically, it’s a material change of risk,” says Jim Cervo, underwriting manager at Westland Insurance in Vancouver. “If they don’t disclose [what they’re doing], an insurance company can refuse a claim, because all of a sudden, the home has become a rental.”

Straightforward home exchanges generally aren’t a problem, says Sharman. But with services that turn condos or houses into short-term rentals, “the homeowner must discuss the details with their agent to figure out whether any changes to the policy are needed, as limitations or exclusions may apply.”

2) Choose a reputable service 

Homeowners will have better luck with well-established services with clear professional standards, says Cervo.  A home-exchange site that magically appears to coincide with a big event like the Olympics, and has no history usually won’t be a good choice.

Examining the service agreement and its requirements is also a good idea, adds Marilyn Horrick, assistant vice president of personal insurance at Chubb Insurance Company of Canada.

3) Screen the visitors 

Several Whistler and Squamish area homeowners opted to rent out their homes during last year’s Olympics, with many renting to coaches, Olympic delegates or RCMP officers working security.

Cervo closely screens the clients who will stay in a Westland client’s home. “We scrutinize them as much as possible,” he says. To do that, he’ll ask for the questionnaire used by the rental/service. “I would also hope that they’d do a reference check,” he says.

Some red flags: the visitors don’t have a home insurance policy in their own hometown, no occupation, or they haven’t made the purpose of their trip clear.

Screening will help ensure that your client is exchanging homes with someone who is genuine, “not someone using the service to victimize the homeowner,” adds Sharman.

4) Review the visitor’s coverage 

The visitor’s coverage should also get a thorough review, says Horrick. Look for exclusions or limitations well before the exchange takes place, she advises,  ”so there are no surprises along the way.”

5) Consider any extras 

And what about that car in the online ad? When homeowners throw a car into the deal, things can get trickier.

“In the case of a swap of homes that included vehicles, the person who will be using your car for a period of time should be added to your auto policy, and that might affect your premiums. We’d have to look at those on a case-by-case basis,” says Sharman. “If it were the case that the car was being rented out, along with the home, that is likely not a risk we would insure.”

6) Put valuables in a safe place 

Most home-exchange programs put tourists in each other’s homes, which usually means they’ll be respectful. But this past summer, one airbnb user in California returned home to a trashed apartment and missing personal items. Just to be safe, Horrick also advises clients to remove any valuables from the house.

Overall, broker-client relationships should include regular conversations so that clients will use them as partners when situations like a home-exchange come up, she says. “We wouldn’t recommend going ahead without a consult.”

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