Renting out your swimming pool can provide additional income given the opportunities provided by today’s sharing economy.

The website Swimply functions like the aquatic equivalent of Airbnb or HomeAway for pools. It offers a digital marketplace for homeowners to rent out their pool by the hour. Rentable pools are available in at least 18 states.

Complete with colorful, impressive photos, many homeowners posting on Swimply offer other amenities along with their pool rental such as use of a barbecue grill, towels, a hot tub and Wi-Fi access. Rental rates vary from $20 per hour on a weekday in Gilbert, Arizona, to $200 per hour on a weekend in Miami, Florida.

However, renting a pool brings great risk and immensely increased liability to a homeowner’s insurance profile. The result is that a Homeowners Insurance policy could be non-renewed if their insurance carrier discovers they are renting their pool.

It also should not be assumed that a homeowners policy will cover this business operation, even if the pool is only rented only a handful of times, according to Bill Gatewood, Corporate Vice President and Director, Personal Insurance, Burns & Wilcox.

“You have potentially catastrophic risks around a swimming pool at any point and that’s really a concern if you are renting it to others,” Gatewood said. “You’re significantly increasing the likelihood of a claim being made, whether it’s a serious injury in your pool or something as simple as a sprained ankle caused by a slip and fall.”

Gatewood recommends that homeowners speak with their insurance broker or agent so that they can make an informed decision about whether or not to rent their pool.

“We live in a very litigious society and there are plaintiff’s attorneys just waiting to file suit,” Gatewood said. “You stand the risk of losing all the assets you’ve worked so hard to acquire if you decide to rent your swimming pool without taking the time to learn how your insurance coverage will respond.”

“You have potentially catastrophic risks around a swimming pool at any point and that’s really a concern if you are renting it to others. You’re significantly increasing the likelihood of a claim being made.” – Bill Gatewood, Burns & Wilcox

Before renting out your pool, check on local code enforcement laws and state laws that govern such a transaction. Some communities may require lifeguards, regular water tests, and mandate health, safety and compliance rules.

Given the commercial nature of the activity, renting might not be legal. Officials in some New Jersey communities say renting is not allowed while one New York county requires a permit.

Coverage can be pulled for many reasons

Most homeowners policies have some sort of exclusion for business operations, although each policy may define business operations differently. A policy may exclude coverage for business operations if you earn over a certain amount of income per year. In other policies, any income may disqualify coverage. The question of whether the business is “incidental” or “full-fledged” may decide the level of coverage.

Many insurance companies may not have the appetite to provide coverage for consumers renting out a pool. This could be considered a matter of strict liability (sometimes called absolute liability), which refers to the legal responsibility for damages or injury, even if the individual(s) found strictly liable was not at fault or negligent. So if a claim is made because of something that happened by a pool renter, the insured homeowners may not be able to argue in court that they are not negligent.

“You stand the risk of losing all the assets you’ve worked so hard to acquire if you decide to rent your swimming pool without taking the time to learn how your insurance coverage will respond.” – Bill Gatewood, Burns & Wilcox

“I think we’re talking about swimming pools being one of those strict liability examples,” Gatewood said. “Dog bites are another example. These are exposures that many carriers underwrite very carefully.”

The Insurance Information Institute recommends pool owners consider increasing the liability portion of their homeowners policy to a minimum of $300,000 or $500,000.

If consumers do decide to rent out their pool, the availability of coverage may be a bigger issue than the increased cost of the existing policy, Gatewood said. While there are many optional coverages homeowners can purchase to cover a variety of risks, consumers may find no endorsement exists for pool rental coverage.

“It’s really an underwriting issue more than a pricing issue,” Gatewood said. “If your insurance carrier discovers you are renting out your pool, you may find yourself losing your homeowners insurance entirely.”

If carriers find out after the fact that a claim has been made while a pool was rented out, the carrier may not pay the claim and also could cancel the policy. As a result, insurance in the future would be much more expensive, because homeowners are legally required to disclose any losses when applying for a new policy.

“And even if the homeowner doesn’t disclose a prior loss, most insurance companies report their losses to a centralized data base, so they will find out,” Gatewood said. Not disclosing information on an application can be considered material misrepresentation, which could result in a policy becoming null and void.

An umbrella policy could add an additional $1 million in liability coverage for a few hundred dollars per year. But while umbrella policies are available to enhance your homeowners policy, they may not be in effect if a homeowners policy denies or excludes coverage for a particular loss.

“I recommend that everyone at least consider an umbrella policy to protect their assets, but it may not be a factor here,” Gatewood said. “It’s really all about making sure you have the right coverage in place for the risk exposures you have on your property. Renting your pool is a high risk exposure.”

The dangers of swimming pools

There are an estimated 10.4 million residential swimming pools and 309,000 public pools in the United States, according to the Association of Pool & Spa Professionals.

There were an average of 3,536 fatal unintentional drownings (non-boating related) annually in the U.S. between 2005 and 2014, according to the Centers for Disease Control and Prevention. That is about 10 deaths per day.

Accidents can happen — and lead to lawsuits. The family of a 13-year-old California boy who drowned in a school pool settled a lawsuit with the school for $11 million last month. In January, actress Demi Moore settled a lawsuit for an undisclosed amount after a man drowned at a party in her pool in 2015.

The concept of a sharing economy can be advantageous whether you are renting out a pool, a house, a boat, a parking spot in your lawn or anything else. But all of the risk lies with the property owner, Gatewood cautions.

“My advice is to make sure you understand all of the risk exposures you have,” Gatewood said. “Walk through them with an agent and then it’s up to you with how much risk you are willing to take on.”

As with any coverage need, an insurance broker or agent should be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.

This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent to review your Homeowners Insurance policy and ensure you have proper protection.