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posted: 3/10/2017 6:00 AM

Super Bowl Party triggers insurance 'hangover' for homeowner

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Party-throwing owners and renters may be held financially liable if a visitor gets sick after the festivities have ended.

Q. We threw a big Super Bowl party at our house this year. My brother brought along some strange dude that he knows from his job, and now the weirdo has sent us a bill for nearly $2,400 because he claims he had to spend two days in the hospital for food poisoning that he said was caused by food we served. Do we have to pay this bill, even though my wife and I did not invite the guy? If so, will our homeowners' insurance policy cover his expenses?

A. Good news, bad news: The bad news is you're likely on the hook for the man's medical bills, unless you're willing to go to small-claims court to prove his claims are unfounded. The fact that you didn't personally invite him to your Super Bowl shindig is irrelevant, because you voluntarily let him in through the door and then, apparently, didn't insist that he leave.

The good news, though, is that even the most basic homeowners' insurance policy automatically provides $1,000 to $5,000 in medical coverage for a guest who may get sick after visiting your home. If more than one visitor becomes ill, the insurer will pay $1,000 to $5,000 for each individual.

Don't confuse your home's medical-insurance coverage with its liability protection. Liability covers more serious problems, such as a postal worker who breaks a leg after slipping on your porch or a visitor who gets a fractured skull because a fancy new TV set you purchase for the next Super Bowl falls off the wall and lands on his noggin.

A standard homeowners policy, known as an HO-3, provides $100,000 in liability coverage. But many insurance experts say you should pay the extra $50 or $100 a year to boost your coverage to at least $300,000, because jury awards in liability lawsuits continue to soar.

Real estate trivia: A 2015 poll sponsored by the nonprofit Insurance Information Institute found that only 40 percent of renters had insurance to protect against damage or theft of their personal possessions, compared to 95 percent of all homeowners who had similar coverage.

Q. We have a small vacation home in the mountains where it snows quite a bit this time of year. My husband always cranks up the thermostat when there's snow on the roof, but my father always told me that the inside of a home with a snow-covered roof is naturally warmer than one with a roof that is bare. Who is right?

A. Chalk one up for Dear Ol' Dad. Snow on the roof basically acts as an organic insulator, helping to keep the heat that's already inside a home from escaping into the colder air above.

Think of the dome-shaped igloos that Eskimos still build out of ice blocks for temporary housing in places like Northern Canada and Alaska -- often when they're on long hunting or fishing trips. The frozen roof helps to keep the heat that's naturally generated by its human occupants and their dogs inside, rather than rising into the frosty air.

However, there's a flip side to the insulating effects of snow and ice: Snow that's on the ground rather than on a roof keeps the heat generated by Earth's core trapped in the dirt instead of climbing upward. That's why temperatures in snow- or ice-covered areas usually are lower than those that don't get a lot of subzero precipitation.

Q. Last fall, I sublet the apartment I rent to a married couple from Europe for six weeks through Airbnb so I could visit my parents in Australia. Airbnb has already sent me a copy of Internal Revenue Service Form 1099-MISC, Miscellaneous Income. Do I have to declare the money the couple paid to me as "rental income" on my federal income-tax return, even though I don't own the property myself?

A. Sorry, but yes.

The IRS generally allows taxpayers who rent their homes or apartments to others for a total of 14 days or less each year to keep all of their profits tax-free. But your letter states that you sublet your apartment for six entire weeks, so you'll owe tax on all of the rental income.

Airbnb, VRBO, HomeAway and other such companies that specialize in arranging short-term rentals automatically send taxpayers like you a 1099-MISC form to show how much money the rental generated. A copy also is sent to the IRS, so trying to avoid declaring the earnings is useless.

Fortunately, you'll be able to offset taxes on some or all of the rental income by claiming many of the same deductions that full-time landlords can take. That includes the amount of rent that you paid to your own landlord during the six weeks that the subtenants were there, any utility bills they may have incurred but that you had to cover, and so on.

Visit the IRS' new "Sharing Economy Tax Center" page at www.irs.gov for more details. Also consider discussing your situation with an accountant or similar tax professional.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405. Net proceeds will be sent to the American Red Cross.

© 2017, Cowles Syndicate Inc.

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