What Is Short-Term Rental Insurance and What Does It Cover?

Short-term rental insurance is for property owners who rent out their homes or apartments on a temporary basis, such as through platforms like Airbnb or Vrbo. This insurance typically covers risks that standard homeowner’s insurance might not, including property damage caused by guests, liability for injuries that occur on the property and loss of rental income due to covered events. It acts as a safeguard for both the property owner and the renter, ensuring that unexpected incidents do not result in significant financial loss. Some short-term rental policies may have exclusions for certain types of damage or require the landlord to install smoke detectors or take other risk mitigation measures.

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How Short-Term Rental Insurance Works

Short-term rental insurance is a specialized type of coverage designed to protect property owners who rent out their homes or investment properties temporarily. This insurance protects against risks that standard homeowners or landlord insurance policies may not cover. Typical covered risks include guest injuries, property damage caused by renters and potential loss of income due to cancellations or other disruptions.

Short-term rental insurance typically offers a combination of property and liability coverage tailored to the specific needs of short-term rental hosts. Property coverage protects against physical damage to the home or its contents caused by guests or natural disasters. Liability coverage safeguards against legal claims if a guest is injured on the property or damages someone else’s property. Some policies also include coverage for lost rental income if the property becomes uninhabitable due to a covered event.

Landlords need to be aware that not all insurance policies are created equal. It’s essential to thoroughly review the terms and conditions of any short-term rental insurance policy to confirm that it provides adequate coverage for their specific situation. For example, some policies may have exclusions for certain types of damage or may require the landlord to take specific safety measures, such as installing smoke detectors or securing valuables. Additionally, landlords should consider the policy’s limits and deductibles so that they are comfortable with the level of financial protection provided.

Who Needs Short-Term Rental Insurance?

Short-term rental insurance is worth considering for property owners who frequently rent out their homes or apartments on platforms like Airbnb, Vrbo, or Booking.com. These platforms often provide some level of coverage, but it is typically limited and may not cover all potential risks.

Even those who rent out their property occasionally can benefit from short-term rental insurance. While the risk may seem lower for infrequent rentals, the potential for significant financial impact remains. Occasional hosts might assume their standard homeowner’s policy will suffice, but many policies specifically exclude coverage for commercial activities, including short-term rentals.

How to Find Short-Term Rental Insurance

Start looking for short-term rental insurance by checking with your current homeowner’s insurance provider. It may offer add-ons or separate policies for short-term rentals. Contact your agent to discuss your needs and see if they can provide a tailored solution. This approach can  be more convenient and cost-effective since you are already a customer.

If your current provider doesn’t offer suitable options, consider specialized insurance companies that focus on short-term rental properties. These providers understand the unique risks associated with short-term rentals and can offer policies that are more aligned with your specific needs. Researching and comparing quotes from these specialized insurers can help you find the best coverage at a competitive price.

Online insurance marketplaces can be a valuable resource. Some websites enable comparing policies from multiple insurers quickly and easily. User reviews and ratings, when available, can help you gauge the reliability and quality of the insurance providers.

How to Determine the Amount of Coverage You Need

The amount of insurance coverage you need depends on your unique situation. To come up with a figure, first assess the value of your property and its contents. Begin by calculating the replacement cost of your home, which includes the cost of rebuilding the structure in the event of a total loss. Obtain current construction costs from local builders or real estate professionals.

Next, inventory the furnishings, appliances and personal items within the property. Assign a replacement value to each item and total up the individual costs. This comprehensive evaluation will provide a solid foundation for understanding the minimum coverage required to protect your investment.

Liability is another concern. Short-term rentals can expose you to liability for guest injuries or property damage caused by tenants. Liability coverage safeguards against legal claims and medical expenses that may arise from such incidents. Medical claims, in particular, can be costly. However, premiums are based on the amount of coverage, so balance the cost of obtaining the coverage against potential losses.

Bottom Line

Short-term rental insurance safeguards property owners who rent out their homes on platforms like Airbnb and Vrbo. This specialized coverage goes beyond standard homeowner’s insurance by addressing the unique risks associated with short-term rentals, such as guest injuries, property damage and loss of income due to cancellations.

Tips for Real Estate Investing

• A financial advisor could help you determine which type of real estate investment can fit your portfolio’s needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• If you’re financing the purchase of a short-term rental property, the size of your mortgage payment is a key consideration. SmartAsset’s mortgage calculator could help you estimate your monthly payment, including interest, principal, taxes, insurance and other costs.

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