Umbrella vs top-up insurance

What is umbrella insurance?

Umbrella insurance is insurance that covers all the users of a platform under one policy. For example, Airbnb’s host protection insurance is an insurance policy taken out by Airbnb to cover all its hosts from legal liability to guests in the event of an accident.

How does an umbrella insurance policy work?

The umbrella policy covers the platform for a defined set of covers. In the case of nightly letting of an entire home or room, it may include property damage or legal liability. However, the key point is that it covers the platform, not you as an individual customer. This means you have no legal right to benefit from this insurance contract, and equally it may not be suitable for your individual needs and circumstances.

If you have a claim, you’ll need to agree this with the platform first. Only once the platform is satisfied that you have a valid claim will it be put forward to its insurer. The platform will be responsible for liaising with the insurer, agreeing the final position and arranging any repairs or providing refunds. How the platform chooses to handle claims with its users is not a process protected by the Financial Conduct Authority (FCA) or the Financial Services Compensation Scheme (FSCS). The regulation only extends to the platform and its insurers.

What are some examples of umbrella insurance policies?

When it comes to house-sharing platforms, a number of sites use umbrella policies, including Airbnb, Onefinestay and Underthedoormat. However, these insurance contracts are made between the sharing platform and its chosen insurer, meaning the host would not have any control over, or involvement in, a claim made either by them or against them.

The full terms and conditions of umbrella insurance policies — in particular the covers, excesses, limits of liability and aggregate limits — are often not shared publicly, leaving hosts unable to assess whether or not the cover is suitable for them.

Does Pikl offer umbrella insurance?

While Pikl may work with providers on umbrella policies, we always recommend to hosts that to be certain you have the right cover, you should take out your own direct policy. At Pikl we offer ‘top-up’ insurance, which provides the best additional cover you need on top of your primary insurance policy for sharing activity, such as hosting on Airbnb.

How does top-up insurance differ from umbrella insurance?

The main differences between top-up insurance, which we offer at Pikl, and the umbrella insurance that’s ‘included’ with sites like Onefinestay and Underthedoormat, are as follows:

  • With umbrella insurance the policy is between the platform and its insurer, so you as a customer have no legal rights on that contract, meaning there’s no level of certainty that a claim will be dealt with.
  • An umbrella policy may not disclose its cover levels, excesses, liability limits or aggregate limits (for example, not paying out once £600,000 is exceeded), but with a direct insurance policy you can be sure of the full terms and conditions.
  • With top-up insurance, you’re party to the contract as it’s in your name, meaning you have legal rights, the cover is designed to fully meet your individual needs, and you’re adequately protecting the asset your mortgage is held against. There’s complete disclosure with your home insurance provider and therefore you’re not invalidating your home insurance.

Why wouldn’t an umbrella policy fully protect me?

Many sharing platforms employ an umbrella policy (e.g. Airbnb’s host protection insurance programme) to reassure their customers, but the danger is this can make customers think they’re covered and don’t need to disclose their hosting activity with their home insurance provider. However, failure to provide this information could invalidate your home insurance policy. See our blogs on how to talk to your insurer for more information.

It’s important to note that an umbrella policy doesn’t usually cover you as an individual; therefore you’re not a legal beneficiary of the insurance contract. This means that while a platform may have a facility to cover damages, you are dependent on their good will to manage this through their umbrella contract.

What’s more, you may not have access to the exact terms of the umbrella policy, which usually help you decide whether or not the cover is suitable for you. Umbrella policies often have an aggregate limit — for example, they might say they won’t pay out more than £600,000 in one year for total claims, so if your claim occurs after the limit has been reached then you may not be covered. You also have no means of direct communication with the insurer about any claim you make and you’re not covered by the Financial Conduct Authority (FCA) or the Financial Services Compensation Scheme (FSCS). This type of insurance is usually not deemed to provide acceptable cover by mortgage lenders since you’re not a legal beneficiary of the insurance contract, so it’s important to understand the risks and be clear if the cover is going to work for you.