Google searches and questions in hospitality forums show that many hosts struggle to understand short-term rental insurance and what it covers.
Here are answers to some of your frequently asked questions about vacation rental insurance and whether you need a separate policy from what you already have.
What is short-term rental insurance/vacation rental insurance?
A short-term rental or vacation rental insurance policy protects you against the risks that come along with hosting. It doesn’t fit into one insurance category and often combines parts of homeowners, landlord, and commercial liability insurance. How comprehensive the coverage needs to be depends on how often you rent out your home, amenities at the home, geographical location, and your own tolerance for risk.
Homeowners and landlord policies are not short-term rental insurance. They will not fully cover you without a special endorsement.
Homeowners and Landlord/Second Home policies typically carry a business activity exclusion. However, your insurer may offer an occasional home-sharing endorsement for your existing policy.
A home-sharing endorsement will cover some property damage caused by guests provided that you rent out our home for a limited period of time – usually up to 90 days out of the year. Each insurer defines occasional home-sharing differently, so you need to check with your insurer for their detailed definition.
For example, American Family lets you add a temporary rental and a low-cost landlord endorsement to your existing policy if you rent your home for less than 62 days per year, according to Investopedia.
What does short-term rental insurance cover?
Short-term rental policies contain some of the coverages that also are in a landlord policy and homeowners policy, but the following are coverages that are specific to an STR policy:
Dwelling coverage – the cost to rebuild your home in the event of a total loss.
Other structures coverage – protects outbuildings and structures that are separated from the main home such as accessory dwelling units, casitas, detached garages, sheds, and fences.
Household furnishings coverage – As described, but make sure you keep a detailed inventory of your furnishings and their value as well as a record of all of your purchases.
Fair rental value/loss of rent – This coverage will pay you fair rental value typically for up to 12 months for your short-term rental. Fair rental value means you’re reimbursed for the average rental rate in your area and not your actual loss of rent (the nightly rate you charged guests).
Actual sustained loss/business income loss – This coverage pays you for your actual loss of income while your short-term rental is out of commission after a covered loss. Most insurers cap this at 12 months or a cap that you choose.
Liability protection, aka per-occurrence premises – This coverage protects you from claims made by a guest, visitor, or neighbor. If you are a property manager, you must be listed as additionally insured or liability extended to others on your client’s policy.
Medical payments to others, aka additional liability protection – This coverage makes medical payments to guests who sustain an injury at your vacation rental.
Off-premises liability – This coverage protects you if a guest is injured while riding a bicycle or other sporting equipment that was provided at your vacation rental but was operated outside of your property line.
Pet liability – Whether or not you’re a pet-friendly vacation rental, you might be required to host a service dog, and pet liability insurance can protect you against liability for animal bites and other incidents.
Read more in FAQs: Service Animals in short-term rentals
There also are add-ons, aka endorsements, such as bed bugs, liquor, and squatters. These endorsements cover you in the event that you serve alcohol at your vacation rental, experience a bed bug infestation, or someone refuses to leave your vacation rental and isn’t paying for it.
What claims does Airbnb cover?
When you rent out your home through Airbnb, you receive a host protection program called AirCover at no cost to you. AirCover includes $1 million in host liability insurance coverage if a guest or visitor at your rental makes a claim against you and $1 million in host damage protection.
Host damage protection reimburses you for damage to your property caused by accidents, vandalism, pets, smoke, or fire during your guest’s stay. Special items such as jewelry, collectables, and artwork are excluded from the coverage. Airbnb also won’t reimburse you for weather-related damage, mold, or mildew.
What claims does Vrbo cover?
In exchange for using the platform, Vrbo offers $1 million in host liability coverage, protecting you against claims made by a guest, visitor, or by a neighbor who accidentally damages your property. Vrbo does not provide host property damage protection.
Do I need short-term rental insurance?
You need short-term rental insurance if you rent out your home for periods of less than 30 days.
Even if you rent out your home through third-party platforms like Airbnb and Vrbo that provide liability coverage, you will need additional coverage. Vrbo, for instance, recommends on its website that homeowners purchase a separate vacation rental insurance policy.
A separate policy also allows you to rent out your home through direct bookings, referrals, and online or newspaper ads and still have insurance coverage.
Whether you can get by with an occasional home-sharing or short-term rental endorsement on your existing homeowners insurance policy, or need a separate short-term rental policy with commercial general liability coverage, depends on how often you rent out your home and whether it’s your primary residence.
More HOAs, cities, counties, and states have passed regulations that require homeowners to show proof of commercial general liability insurance coverage for their short-term rental. The minimum is typically $1 million in coverage.
Who does short-term rental insurance?
Growth and advances in the short-term rental industry mean that the insurance available for such properties is constantly expanding and improving. The following list, in alphabetical order, may not be comprehensive but will help to kick off your research for insurance carriers:
- Allstate
- American Family
- American Modern (only for occasional short-term renting)
- CBIZ
- Farmers
- Mercury
- Nationwide
- Proper Insurance
- State Farm
Which carrier is for you depends on whether you are a home-sharing host, rent out a whole home, and your tolerance for risk.
How do I make sure I have adequate coverage for my short-term rental?
The short answer is you have to do the research and ask the right questions of your insurance agent or underwriter.
Check out our guide, Questions to ask your agent about your vacation rental insurance, for further guidance.