Renting your home to vacationers is an option that you might be interested in, but you need to learn how to protect your property before allowing guests to stay. There is coverage for this purpose, and it is called short-term rental insurance.
The short-term rental coverage protects the home and its belongings while guests stay temporarily. Short-term rental homeowners insurance may be available as an add-on or endorsement to a standard homeowners insurance policy, or as a separate policy from a specialty insurer. By having a policy in place, you will not have to worry about anything getting ruined, so you can maintain a steady side income by renting out your space to those looking for rentals.
Whether you are active on AirBnB or VRBO, these sites do not protect your property from damage. While there are guidelines you can create for the guests to follow, you need to have an active short-term rental insurance policy in place because your homeowners insurance is likely not going to cover these stays. The main distinction of this policy is that the guests are not homeowners and this is not a permanent residence. They are temporarily renting the space, and you are likely going to have a selection of different people coming and going.
Getting a short-term rental insurance policy
If you have short-term renters that are staying in your home, then you need a short-term rental insurance policy. Many people get confused and wonder if they need this policy when friends or family stay over, but this is not necessary. A short-term rental policy implies that you are making money while renting out your home. This is why homeowners insurance policies will not suffice because this involves a combination of a business endeavor and protection for the dwelling and contents.
Endorsements
There are many carriers that allow you to add endorsements to your existing homeowners insurance policy. You can ask your agent if they have a short term rental endorsement if you plan on renting out your home. This will allow you to maintain both the rental coverage and the homeowners coverage through one policy.
Separate policies
If your insurer does not offer a short term rental endorsement, you need to find a standalone short-term rental policy to protect your property. You can ask for recommendations from your agent or consult with others who rent their homes on AirBnB or VRBO. There are many carriers that offer this type of insurance.
If you have standalone short-term rental homeowners insurance, you may be able to save money by bundling it with other types of insurance, such as auto, umbrella, or life insurance. Some insurers may offer special bundles for short-term rental homeowners that include coverage for loss of income, guest belongings, or business liability. Ask your insurer if they offer any bundling options for short-term rental homeowners insurance and see how much you can save.
Coverage included with short-term rental insurance
Most short-term rental policies are going to look similar. You can expect to see the following coverages included in the policy:
- Loss of income
- Excess use of utilities
- Infestation
- Liquor liability
- Identity theft
Along with covering the dwelling and the contents inside the home, you can see how these unique additional coverages might differ from what you would find on your typical homeowners insurance policy.
Another great coverage included with these policies is liability protection. This can help cover a guest’s medical bills in case they are injured while they are in the home. Accidents can happen at any time, so being prepared for these situations will make you an exceptional host.
Short-term rental insurance takes into consideration what could happen when you allow guests to stay in your home, and it protects you in case you do run into any of the above situations. This is an essential safeguard to have in place because you would have to pay out of pocket if you did not have a short-term rental policy.
While sites like AirBnB and VRBO are known to offer insurance options, it should be noted that these policies do not cover all damages. There are some exclusions that need to be reviewed carefully, and many people recommend simply getting your own short-term rental policy so you are aware of the protection in place. This will leave no room for accidents to fall through the cracks and not be covered.
Short-term rental insurance vs landlord dwelling fire insurance
Short-term rental insurance and landlord dwelling fire insurance are two types of coverage that homeowners can buy to protect their rental properties. However, they have some key differences that you should be aware of before you choose one over the other. Here are some of the main differences between short-term rental insurance and landlord insurance:
- Purpose: Short-term rental insurance is designed for homeowners who rent out their property or a part of it to guests for a short period of time, usually less than six months. Landlord insurance is designed for homeowners who rent out their property to tenants for a longer term, usually more than six months .
- Coverage: Short-term rental insurance typically covers both property and liability risks that come with renting out your property to guests. Property coverage covers your dwelling and your personal belongings from damage caused by perils such as fire, theft, vandalism, or weather events. Liability coverage covers your legal responsibility for bodily injury or property damage to others caused by your negligence or by your property’s condition. Landlord insurance typically covers only property risks that come with renting out your property to tenants. Property coverage covers your dwelling and any additional structures, such as fences or garages, from damage caused by perils such as fire, lightning, explosion, or windstorm. It typically does not cover your personal belongings or the tenant’s belongings.
- Cost: The cost of short-term rental insurance and landlord dwelling fire insurance depends on several factors, such as the location, value, and condition of your property, the frequency and duration of your rentals, the amount and type of coverage you choose, and the insurer you buy from. Generally, short-term rental insurance may cost more than landlord insurance because of the higher risk of damage and liability involved with renting out your property to guests.
Homeowners policy exclusions
It is important to ask your current insurance carrier if it is okay that you to rent out your home to guests. There are many carriers out there that do not insure homes that also double as rentals, so making this distinction clear is a must. You can always ask about any exclusions that your homeowners policy might have to make sure you are fully covered when you start hosting.
A lot of homeowners insurance policies are very comprehensive, but they only apply to residents of the home. This is why they are often not applicable when it comes to starting out on websites like AirBnB and VRBO. You might believe you are covered, only to file a claim and realize the activity is excluded from your homeowners insurance policy. To prevent this from happening, it is important to always be upfront with your primary insurer.
Home sharing: what is it?
Home sharing is similar to listing your home on a rental site, but these stays might be slightly longer. While they are still considered short-term rentals, a short-term rental policy will also apply to these situations. You might want to rent your home for a few months to someone you know, even while you are still living there. Being able to rent out a room in your home offers you a chance to make some supplemental income and can be a great option if you take the time to make sure you are properly insured.
Whether you are in this situation or one similar, renting out your home on a frequent basis is what you need to think about while you are shopping for your insurance. Many homeowners insurance policies would consider allowing renters one time but if it is going to occur more than once, it is best to get a short-term rental policy in place.
Frequently asked questions
Why do I need short-term rental homeowners insurance?
Short-term rental homeowners insurance can help you cover the risks and liabilities that come with renting out your property to guests. For example, if a guest damages your property or belongings, or if a guest gets injured on your property and sues you, short-term rental homeowners insurance can help you pay for the repairs or legal fees. Standard homeowners insurance policies may not cover these scenarios, especially if you rent out your property frequently or for commercial purposes.
How much does short-term rental homeowners insurance cost?
The cost of short-term rental homeowners insurance depends on several factors, such as the location, value, and condition of your property, the frequency and duration of your rentals, the amount and type of coverage you choose, and the insurer you buy from. Generally, short-term rental homeowners insurance may cost more than standard homeowners insurance because of the higher risk of damage and liability involved.
What does short-term rental homeowners insurance cover?
Short-term rental homeowners insurance typically covers two types of coverage: property coverage and liability coverage. Property coverage covers your dwelling and your personal belongings from damage caused by perils such as fire, theft, vandalism, or weather events. Liability coverage covers your legal responsibility for bodily injury or property damage to others caused by your negligence or by your property’s condition. You can choose the amount and type of coverage that suits your needs and budget.
What are some exclusions or limitations of short-term rental homeowners insurance?
Short-term rental homeowners insurance may not cover everything that can happen on your property. Some common exclusions or limitations include: intentional damage by you or your guests, wear and tear or maintenance issues, damage caused by pets or animals, damage caused by mold or fungus, damage caused by war or terrorism, damage caused by nuclear hazards, damage caused by earthquakes or floods (unless you have separate coverage for these perils), loss of income due to cancellation or interruption of your rentals (unless you have separate coverage for this), loss or damage to your guests’ personal belongings (unless you have separate coverage for this), liability arising from illegal activities, discrimination, assault, or sexual harassment on your property. You should read your policy carefully and understand what is covered and what is not before you buy short-term rental homeowners insurance.
Conclusion
Getting into the rental business can be a lucrative choice, especially if you have a home available for guests. Now that you know how crucial short-term rental insurance is, you can move forward the right way and protect your home and its belongings.
