Here is a story that happens too often.
A guest checks into your property, and everything goes well, until one moment they call you and threaten with a claim. They have fallen off a chair and say it’s your fault because it was broken. Now, they want you to pay all medical bills and moral damage.
A good vacation rental insurance is the best way to protect yourself from liability and damage in such cases. Even though platforms like Vrbo and Airbnb offer a certain level of protection, experts recommend getting additional vacation rental insurance.
Is vacation rental insurance worth it?
Yes. Your peace of mind and safety are much more important than some extra expenses on vacation rental insurance. You will also get higher profitability and more responsible guests as a bonus. More about what is vacation rental insurance and the benefits it brings in our post.
What is vacation rental insurance?
Vacation rental insurance is a special type of insurance offered to property owners and managers who rent on short term. The word “vacation” implies that people rent a property when they come for vacation, but not necessarily. Business trips and other brief stays also count.
The key idea is that new renters check in every several days, so damage and liability risks are much higher.
Vacation rental insurance is not a universal policy offered by a booking platform or insurer. Multiple providers have different offers.
You will have to choose one of them, analyzing their coverage, liability sum, and other aspects.
Overall, vacation rental insurance for owners usually covers the following cases:
- Guest liability insurance. This is the basic coverage that protects a host from liability if their guest gets injured in the property or causes damage to a third party (e.g., floods the neighbor’s apartment).
- Property damage. Vacation rental insurance for owners may cover minor damage, like floor scratches, broken furniture, etc. If your guest breaks something, an insurer will reimburse the sum you spend on repairs.
- Theft or burglary. Vacation rentals increase the chance that renters will steal something from your property, intentionally or unintentionally. If it happens, you can contact a short-term rental protection provider and ask to cover the financial losses.
Some insurers and booking platforms also cover the loss of income due to force majeure or damage caused by previous guests. In particular, the Airbnb Host Guarantee does it.
How does it work?
The first thing you must know about vacation rental insurance is that it usually works as an addition to policies offered by Airbnb, Vrbo, and similar platforms. It covers the gaps in the insurance policies from booking providers to protect you in any trouble.
Second, your personal policy cannot replace vacation rental insurance. Moreover, if your insurer finds out that you provide short-term rentals with regular insurance, they may cancel it altogether.
That’s why vacation rental insurance is a separate type of insurance you should purchase.
“Since renting your house out is technically ‘running a business out of your home’ you will need a commercial policy vs. a personal policy because any normal homeowner’s policy has a business exclusion clause. Personal policies won’t cover claims for an airbnb at all- whether its caused by a renter or not.” explains Taylor Stults, Territory Executive, on Quora.
You can learn more about short-term vacation rental insurance in our guide.
Reasons to buy vacation rental insurance
Third-party vacation rental insurance gives you extra protection that Airbnb, Vrbo, and other platform-based policies don’t provide. In particular, you can get reimbursed for accidental guest damage.
Now, let’s talk about other reasons why vacation rental insurance is worth it.
Increased rental business stability
Poor insurance policy means you are more likely to pay for property damage and claims out of your pocket. As a result, you will regularly lose large amounts of money and may reach the point where your rental business is no longer profitable.
Vacation rental insurance helps to avoid that. When you cooperate with an insurer that has a decent policy and covers most problematic cases, your rental business becomes more predictable.
You know someone covers your back and can better plan your expenses, avoiding unexpected ones.
Fewer interruptions between rentals
When you don’t have insurance, and an unpredictable claim hits, or you need to repair a whole flat after an accident, it may cause significant disruptions in rentals.
Instead of welcoming guests and earning money, you put effort into fixing everything.
With vacation rental insurance, you get reimbursed in weeks. That’s why you can get on your feet much faster and avoid idle periods.
Easier property management
If you have one property for rent, liability claims and damage may seem like minor trouble. But the more properties you manage, the more difficult it becomes to handle everything.
So, if you don’t set up a smooth claim processing using the help of a third-party insurer, things will start to pile up.
Benjamin, Cody Wood, COO of STR Accommodations, has been in such a situation:
“We basically exploded. My partner brought 75 properties in which he was managing with little technology, operations or systems. He was always on the phone. He was going crazy. He was the definition of a hectic host. We dialled back to 60 properties and ended up making the same amount of money we’d made with 157. We realised quantity doesn’t always equal profitability.”
Read more about how STR Accommodations automates short-term rental management.
Better customer experience and reviews
Even though this benefit might not seem obvious, cooperation with a good STR insurer will also improve your guests’ experience. Extensive insurance that covers guest damage, among other losses, allows you to avoid chasing guests trying to get money from them since you can claim the insurer instead. Everyone is happy. Guests safely go home while you get your expenses covered.
Possible drawbacks of vacation rental insurance for owners
Well, the main and most evident drawback of vacation rental insurance for owners is that you will need to pay for it. Even though charges are nothing compared to the financial losses you avoid, many people still hesitate to pay several hundred dollars for their peace of mind.
Another issue is that finding a reliable insurance partner may take time. There are many insurers that cooperate with short-term rental businesses, but not all of them are a good choice.
Insurers may take too long to process a claim, offer too narrow coverage, don’t operate in all locations, etc. That’s why you must carefully read your future insurer’s website and policy to know what you agree to and be aware of the limitations.
Is vacation rental insurance worth it? Insurers and hosts share opinions
If you still have doubts about whether vacation rental insurance is worth it, read what other hosts and insurers say about it.
Philip Minnes, insurance agency owner, believes a separate STR insurance is necessary for vacation rentals since the specific of short-term rentals is unique:
“Insuring a vacation rental is very different from a long-term rental situation. It is important that the carrier be aware the rentals are short-term and to report your best-estimated occupancy.
A short-term vacation rental policy will include general liability, coverage for the property itself and for your furnishings/contents. It is important for business income/lost rent also be covered if you are unable to schedule a renter due to a covered claim.”
A business owner investor, Michael Ciao, agrees that vacation rentals need another kind of insurance and shares advice on making claims:
“It needs to be landlord rental property insurance, not homeowner insurance.
You shouldn’t have valuable removable objects in rental Airbnb properties, you are asking for trouble.
You shouldn’t make insurance claim on inexpensive stuff, lots of trouble and insurance companies will raise your rates. If they find out you are doing airbnb, they will not pay you and cancel your policy, may even get in blacklist.”
Hosts and property managers who have been in the industry for a while also support the idea that small monthly charges on STR insurance are worth the money. They waive liability for considerable sums and may save you from going bankrupt.
“You can do everything in your power to protect your stuff, but you can’t control your neighbors or natural disasters like tornados. While i’m sure your friends & family will do their best to support you, the cost of replacing EVERYTHING all at once &/or finding a new place to live is way outside anyone’s budget. It’s not something to skip. It also comes out to roughly like $10/month depending on the features.” – says KayBieds.
Finally, specialized insurance also makes your rental business more lawful. A verified host nicknamed beaconpropmgmt, warns that the lack of proper insurance may even lead to fraud charges:
“Its a MUST to ensure you have the proper insurance coverages, to ensure your lender will permit short term rentals, to wrap up your permits if required, and wrap up the other legalities of operating a business from your home/property. I recommend a solid STR policy and a $1-5 mil umbrella policy based on your assets. If you have your mortgage set up for primary residence, look up mortgage occupancy fraud which carries a 30 year prison sentence and a $1 mil fine in the US. They can and will find out.”
Cost of vacation rental insurance and what affects it
There are no standard charges, and each insurance provider sets its own rules. On average, annual premiums range from $2000 to $3000. In reality, the prices of vacation rental insurance for owners considerably vary and depend on your property type, coverage, area, and other aspects.
Here are the factors that may affect the cost of insurance:
- Insurance coverage. Policies that offer larger coverage will predictably charge you more, as well as policies that protect you in a broader range of cases.
- Location. If your property is located in an area where natural disasters or crimes are more likely to happen, the cost of vacation rental insurance increases since the risks for the insurer are also higher.
- Property type and size. A luxurious villa with a large swimming pool or a historic house may be more expensive to get insurance than a small apartment. Since financial losses are potentially more considerable in expensive property, insurers have to impose higher rates.
- Rental frequency. The more often you rent a property, the more likely it is to get damaged, and, therefore, the higher vacation rental insurance cost may be.
- Claims history. If you have made insurance claims in the past, an insurer may consider your profile as high-risk and increase charges.
Is vacation rental insurance worth its money?
Yes. Vacation rental insurance for owners might seem like an extra charge you can avoid, but the benefits outweigh the expenses. Hosts and property managers can be sure that whatever happens, they won’t lose everything because of severe property damage or liability. It allows them to accept more guests with minimum risks and, therefore, make more money.
Dtravel, a blockchain-based direct booking infrastructure company, uses Know Your Guest to give property managers more control over their business:
“Protection Service allows our property managers to build their business, knowing they can accept direct bookings, mitigate the risk of suspicious bookings, and have the ultimate backup plan in place.”
Know Your Guest offers Damage Protection, a decent addition to standard short-term insurance. It’s affordable, covers small damage, and has multiple levels of protection to choose from.
Superhog’s damage protection as an alternative to vacation rental insurance
If you don’t want to purchase the standard short-term insurance for vacation rentals, use Damage Protection in Know Your Guest by Superhog. This service protects hosts for up to 5,000,000 in damages and covers types of damage many insurers don’t.
You can get reimbursed for accidental and malicious damage, damage due to theft, and damage to belongings. The dispute resolution process is rapid – report an incident, share evidence, and get paid.
Besides, Know Your Guest provides tools for guest ID verification and automates the collection of damage deposits and waivers.
Book a demo to learn more about the Know Your Guest platform and Damage Protection insurance.
Vacation rental insurance FAQs
