Accidents happen. Damages occur. Business revenue can be lost. And yes, with short-term rentals, too. So you must think about protecting yourself from guest-related damages.
Similar to other industries, whereby protection and premiums are put in place to cover damage and loss of assets – such as equipment rentals and car hires – the short-term rental industry is no different.
As your rental property is a valuable asset to you and your business, you need assurances in place from the get-go.
The ultimate short-term rental insurance and damage protection guide is finally here!
In this article, we’ll take you through everything you need to know about vacation rental insurance for owners and damage protection.
What is short-term rental insurance?
Short-term rental insurance (STR insurance) is a subtype of property insurance that covers potential liabilities while guests rent your home for a short period of time. It offers financial protection in the case of unintentional and malicious incidents.
Short-term rental property insurance is usually provided by a third-party platform offering homestay and booking services or companies specializing in property damage protection, like Superhog.
Damage insurance for vacation rentals is the only reliable way to get reimbursed when someone damages your property. It’s a method of managing risks and protecting you from the unexpected.
How to classify ‘short-term basis’?
Short-term rentals are furnished, self-contained accommodations rented for a short period of time and seen as an alternative to hotels.
Typically, this is classified as less than six months; however, in the rapidly booming sharing economy, a property rented between one night to a few weeks is considered a short-term rental.
Why do hosts and property managers need short-term rental insurance?
Let’s start with a rhetorical question:
“What business would lend a stranger hundreds of thousands (or millions) of dollars worth of assets, no questions asked?”
They wouldn’t.
Yet, in the vacation rental industry, property managers and owners do this every single day. But why?
As a short-term rental property manager, host, or owner, you’re renting out your property to a high turnover of unknown guests on a regular basis. This increases your chances of potential damage, liability and even the probability of being sued, which is why as a host, a vacation rental damage insurance is a no-brainer.
It’s important to note that although it is not yet a legal requirement to obtain proper insurance when operating a home rental in the majority of countries and US states, it is highly advisable that insurance for short-term rentals is put in place.
The tightening of home-sharing regulations will no doubt bring specific short-term rental insurance requirements, so it’s a good time to ensure you have the right coverage.
It is a well-known sentiment for guests to believe holiday lets and vacation homes that are bookable online are held up to the same public liability standards as mainstream hotels; however, this just isn’t the case.
The consequences of guest-related damages can be potentially disastrous. To prevent burning a hole in your pocket in unprecedented times, you will need short-term rental insurance for owners to suit your business needs.
The role of vacation rental insurance is to:
- Provide financial stability and avenues for economic growth
- Reduce the impact of loss
- Provide certainty and peace of mind
- Damage control
According to Leo Walton, Co-founder of Superhot: “It is undoubtedly in the interest of every party involved in the short-term rental sector to be appropriately insured.”
This goes for guests too! Safety is of utmost importance to them when booking holiday rentals; therefore, the certainty that vacation rental home insurance can provide you will also bring peace of mind to them.
So is vacation rental insurance worth it? Definitely yes. But you must analyze different short-term insurance options before choosing one and know what is and isn’t covered.
What is covered by short-term rental insurance?
Even the best insurance for short-term rentals won’t cover all types of damages, so you must know the rules right away. This will protect you from cases when you hope for reimbursement, but the damage isn’t covered by short-term rental liability insurance, or the sum is not enough.
Of course, short-term rental insurances differ among rental platforms, but most of them cover the following damages:
- Property damage. Small to severe damages caused by guests, like broken furniture.
- Liability coverage. Protection against potential claims made when guests face damages resulting from the rental.
- Owner’s personal belongings. Furniture, appliances, and other costly items in the property.
Some platforms, including Airbnb homeowners insurance, also cover the loss of income that happens because of confirmed booking cancellations resulting from guest damage. We will talk more about short-term rental insurance for Airbnb below.
What is NOT covered by short-term rental insurance?
Don’t assume your short-term rental insurance policy always covers you, and you do not need to do anything.
There are some types of damages you shouldn’t expect to be covered:
- Intentional damage. Any damage guests did on purpose is not usually covered.
- Wear and tear. With time, things lose their look and freshness, which is normal and doesn’t fall under short-term rental insurance.
- Limited theft coverage. While many items are covered in case of theft, valuables like jewelry or cash usually aren’t.
- Losses resulting from acts of nature. Short-term rental insurance won’t help if a hurricane or flood hits your area.
Overall, short-term insurance works well for direct damage, like when a guest breaks something unintentionally but falls flat, with more rare but severe cases like theft or intentional damage. The only way to minimize risks is by using additional precautions like security deposits or waivers.
Does homeowners insurance cover short-term rentals?
Traditionally, standard landlord and homeowners insurance does not cover short-term rentals and holiday lets, nor do they provide the proper levels of coverage you need to lease out your property on a short-term basis.
Homeowners insurance is designed for primary residences and doesn’t cover risky short-term rentals that are more likely to cause damages.
Are there homeowner policies suitable for short-term rentals?
The good news is we are seeing more and more property insurers allowing owners to engage in the short-term rental-sharing economy without invalidating their policies.
However, there are still significant coverage gaps within these policies, so it’s important to fully understand the T’s & C’s that come with this. The coverage may not be the right fit for you.
Remember, insurance is not one size fits all, so if you have multiple properties in different regions, states, or even countries, it’s even more important to check where you’re covered.
We suggest you choose a specialist short-term rental insurance provider that will provide dedicated policies and comprehensive host insurance to your short-lease properties, especially when using booking platforms such as Airbnb, Vrbo, and Booking.com.
Alternatively, short-term rental damage protection might be the solution you’re looking for to help bridge the coverage gap of your current insurance policy.
Does AirCover provide sufficient damage protection for Airbnb hosts?
Airbnb is a short-term rental marketplace that acts as a broker between hosts and guests. It is one of the most popular booking platforms in the short-term rental space.
Airbnb offers AirCover for Hosts, which is free for all hosts on the platform, offering up to $3 million in damage protection and $1 million in liability insurance.
However, if you are looking for full damage protection that protects your properties across all booking channels, then AirCover is not the best insurance for Airbnb hosts. AirCover can only be used for bookings made on the platform and can not be used on alternative booking channels or OTA platforms.
Learn more details in the Airbnb damage policy overview.
What about short-term rental insurance at Vrbo and Booking.com?
The HomeAway Group – including Vrbo – doesn’t offer its own insurance for short-term rentals but has a preferred partner for US vacation rentals, offering $1 million in liability coverage. Booking.com has several means to protect your short-term rental business. It provides damage reporting, requesting guests to pay on your behalf, and has partner liability insurance with up to €/£/$1,000,000 coverage.
How much does short-term rental insurance cost?
Like most insurances on the market, STR insurance costs will vary depending on multiple factors, including the coverage type you are after and even your property premises.
With that being said, there are some competitive prices out there. We can’t give you the direct short-term rental insurance cost as each company is different. You just need to ensure you choose what’s best for you.
Top Tip: It’s best to go directly to the provider for quotes on your short-term rental insurance or damage protection, as cost calculations are personalized to each host, owner, and business. You will learn how much is short term rental insurance cost in detail.
For a competitive quote on adding comprehensive damage protection to your short-term rental bookings, get in touch with Know Your Guest today.
The best short-term rental insurance providers
We know running a short-term rental can have its curve balls, so it’s always good to know what protection is in place.
Some of the best short-term rental insurance options available to property managers, hosts, and owners include:
Proper Insurance
Proper Insurance is the most popular short-term insurance provider operating in the US. They have a whole pack of short-term rental insurance services, including the $1,000,000 commercial general liability standard.
AllState
AllState is another US insurance company that may be the best short-term rental insurance option if you like home sharing. It offers protection when your belongings are stolen while guests are staying in the property and provides accidental damage protection of up to $10,000 per rental host period.
Safely
Safely specializes in short-term rental protection, with a policy that covers pet damage, intentional acts, theft, bodily injury, and many other types of guest-caused damage. This short-term rental insurance covers damages of up to $1,000,000 for bookings made through third-party websites like Airbnb and Vrbo.
How do you know you have the right coverage in place?
If, after choosing a short-term rental insurance provider, you still worry that the coverage may not be enough, you need to:
- Look at your insurance documents, including existing homeowner’s insurance, buildings insurance, and business policies
- Measure the risks associated with your rental property
- Value your asset
Ask yourself whether or not you will have the financial remuneration needed to resolve any incidents of damage and whether you have the assurances to continue hosting as a policyholder.
Is there an alternative to short-term rental insurance?
It’s always good to check where the gaps in your protection are, so you can better understand the areas you need to mitigate risks.
But how do you mitigate these risks and bridge the gap?
You need a risk management strategy. This links back to: “What business would lend a stranger hundreds of thousands (or millions) of dollars worth of assets, no questions asked?”
Short-term rental insurance doesn’t prevent these risks and acts as a more reactive solution to a problem.
However, if you implement risk management solutions alongside your policy, you will be better prepared to prevent the risk from entering your property in the first place. These are preventative solutions by Superhog that can serve as an alternative to short-term rental insurance:
- Intelligent guest screening
- ID capture
- Sex offender screening
- Deposit management
- Damage waivers
With these risk-mitigating strategies, you will be equipped to:
- Know exactly who your guest is
- Keep your neighbors happy
- Prevent parties
- Prevent fraudulent bookings
- Follow the latest regulations and law
- Have the means to cover smaller guest damages without the need to contact guests for reimbursements
Home insurance vs. damage protection
Damage protection is a guarantee or feature that can be applied to your rental property as an added layer of protection against accidental guest damages that may occur during their booking.
Short-term rental damage protection can help bridge the coverage gap of standard home insurance, but it is important to note that it is not a substitute for homeowner or landlord’s insurance policies.
By ensuring your rental property has both insurance and damage protection, you are building an effective multi-faceted risk management strategy. The additional layers of protection will allow you to host with confidence and peace of mind that you are covered from all angles, protecting you from the unexpected.
Superhog: an extra layer of protection for your short-term rental business
Know Your Guest by Superhog is one of the leading technology solutions for the short-term rental industry, focusing on building trust, mitigating risks and bridging the damage protection gap between standard insurance and the STR industry.
Know Your Guest offers tech-based services and products to property managers, hosts and owners, including:
- Embedded insurance to short-term rental property managers, owners and hosts, in the form of damage protection up to $5 million across any booking channel
- Facilitating the collection of damage deposits
- Providing the opportunity for new revenue through the option of a damage waiver
Book a demo now to protect your rental business from financial losses with Know You Guest.
