What to know about your insuring your short term rental property

Renting your home to vacationers may be a quick way to maximize your returns. However it poses unique insurance risks.

Short-term vacation rentals are becoming increasingly popular — for homeowners and renters as a way to earn extra income, and for travelers as alternatives to hotels. By some estimates, there are over 1 million homes and rooms being rented short-term in the U.S.

But this growing industry leaves homeowners, renters, and travelers alike with more questions than answers about insurance.

To get the proper coverage, you need an independent insurance agent that understands the risks involved.

Short-Term Vacation Rental Insurance Designed For Airbnb®, HomeAway®, & Vrbo®.

In 1995, Vrbo® introduced an ad-listing service pairing homeowners with travelers, and the short-term property rental industry was born.

Not long after, short-term vacation rentals became popular with the introduction of Airbnb® and other major competitors.

However, it quickly became apparent that there was a serious liability coverage gap — not only for property owners, but also for guests and industry partners.

There are now a number of specialty insurance programs designed for short-term vacation rentals. Each one provides unique coverage offerings, and the majority of online booking companies have also partnered with insurance vendors.

Airbnb®, Homeaway®, and even Vrbo® all offer coverage. However, none of these vendors provide comprehensive coverage for the homeowner’s property or liability exposures.

Standard Homeowners Insurance Policies Have Significant Coverage Gaps

Standard homeowners insurance policies provide minimal coverage for business activities that are conducted in the home, as well as the added liability that comes with it.

The risk at question for most insurance providers has to do with how the property is being used, and more particularly with how it relates to business usage.

When a property has short-term rental exposure, standard insurance policies tend to have significant gaps in the way they offer coverage.

Homeowners insurance policies are designed for owner occupied properties.

Coverage issues often include a business liability exclusion, and the term short-term rental may not be strictly defined in the policy terms – leaving it up to the carrier for review during the claims process.

Some insurance companies may offer a Home Sharing Endorsement to your homeowners policy. This endorsement offers additional protection that would apply if something were to happen to a renter or their belongings while renting all or part of your home.

While the added cost to include the endorsement to your homeowners policy is affordable – often times less than $100 per year, you must meet certain requirements and coverage is only included up to the liability limit for certain overages on your homeowners policy.

To be properly covered, you would still need to purchase a commercial (business) policy.

Vacation rental owners and their properties are at the core of their brands, but how do you make sure you and your property are properly protected?

Because short-term vacation rentals do not fit into any one category, a trusted risk adviser has to tailor a policy specific to your short-term rental property. Many carriers are launching programs specifically geared towards short term rentals. virtually every carrier now is asking rental frequencies be listed on the application. Meaning misrepresenting the rental exposure of a property can comprise coverage in the time of need.

The good news is that the Commercial forms needed for properly insuring a vacation rental home is typically not much more than the standard rental forms. More often than not multiple properties can be listed on the same form and policy as well.

Make sure you speak with a licensed agent about your investment and describe the nature of the rental exposure.

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