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Why You Need Vacation Rental Insurance and How to Choose One
Vacation rental insurance is a proven way to protect your property from unexpected events and adversities.
Despite this fact, many homeowners still wonder if they need vacation rental insurance for their business. While vacation rental sites do not require you to have insurance, it’s better to err on the side of caution. Vacation rental insurance will help prevent dreadful complications and financial losses. It will help you stay on the safe side by protecting your business.
Recognizing the vacation rental business as a significant investment, it’s crucial to safeguard it with the right insurance, especially considering the unique challenges like bed bug and flea protection tailored for the short-term vacation rental industry.
Find out why short-term rental insurance is a smart investment and explore the top insurance providers on the market.
Do I Need Vacation Rental Property Insurance?
If you are looking for a short answer to this question, it’s a definite yes. Though Airbnb, Vrbo, and websites alike provide basic protection, there are a number of situations where it doesn’t help much. For example, Airbnb Host Guarantee doesn’t cover theft of cash and securities.
There is also no coverage in the event of intentional property damage. While platform policies offer protection from minor issues, they are insufficient when it comes to more serious cases. Simply put, basic policies on platforms cannot replace comprehensive coverage.
On top of that, keep in mind that standard homeowner’s insurance is not enough for running a full-fledged business. Once you start earning money with your short-term vacation rentals, it becomes a business endeavor from a legal perspective.
This is distinctly different from traditional landlord insurance, which is designed for landlords with permanent tenants and covers risks like property damage, theft, liability, and lost rental income. Vacation rental insurance must address the unique risks and legal considerations of short-term rentals, distinguishing it from landlord insurance.
Even if you rent your property occasionally, filing a claim in case of property damage might be problematic. To get such issues sorted out, the best idea is to opt for insurance specifically designed for vacation rental owners.
Considering commercial insurance, such as a comprehensive Lloyd’s of London policy offered by Proper Insurance, is crucial for protecting the business aspect of short-term rentals, ensuring compliance with hospitality and insurance laws.
Vacation rental insurance vs. second-home insurance
It’s easy to confuse these two terms, but they have a completely different meaning. A second home is a residence that you use in addition to your primary residence without any intention to generate income. A second home is not usually rented out and is used as personal property for non-commercial purposes. In this case, your insurance coverage will be similar to standard homeowner’s insurance.
Renting out your second home for more than 14 days in a year will be considered a business activity. Second homeowners opt for this strategy to save on expenses arising from homeownership and its maintenance. At this point, your second home turns into a vacation rental.
Renting your property to strangers means more risk. You have more liabilities related to your guests and the likelihood of accidents increases. In this case, purchasing vacation rental home insurance would be a smart move.
When you start renting out your property, the standard homeowner’s insurance becomes insufficient. It won’t provide any coverage should anything any emergencies occur at your property during your guests’ stay. So, it’s imperative to get comprehensive vacation rental home insurance to sleep well at night.
Top 11 Vacation Rental Insurance Providers
To make your search for the best insurance easier, we’ve compiled a list of top vacation rental insurance companies. Additionally, some insurance providers offer vacation rental travel insurance, specifically designed to protect against travel-related risks, enhancing the financial security of both owners and travelers.
1. Proper Insurance
Proper Insurance is backed by Lloyd’s of London and exclusive endorsements from the top OTAs such as HomeAway & Vrbo. The Property Insurance policy covers both commercial and personal use of your vacation rental.
Its solution represents a homeowner’s policy, a landlord policy, and a business policy all wrapped into one. It provides coverage for vacation homes, townhouses, condos, duplexes, cabins, cottages, apartments, and more.
More good news is that you can get a tailor-made policy specific to your vacation rental home. The Proper Insurance agents will help you to acquire the most comprehensive insurance for your property.
2. CBIZ
CBIZ is one of the most popular insurance providers for vacation rentals.
CBIZ covers all renters’ stays no matter how those stays are booked (directly or via Airbnb and other OTAs). This insurance covers various types of properties like single-family homes, condos, duplexes, etc. The coverage includes:
- Replacement costs for a property owner’s building, its contents, and additional structures
- Damage caused by a guest
- Backup of sewer and drains
Additionally, the insurance program from CBIZ can provide coverage for medical expenses and litigation costs.
3. Foremost Insurance
Foremost Short-Term Rental Insurance offers tailored coverage for vacation rental properties, designed specifically for platforms like Airbnb and Vrbo. Established in 1952, Foremost provides comprehensive property coverage, liability protection, loss of income coverage, and more, with the flexibility to customize policies.
The insurance does not require the primary residence to be insured with them, offering a potential discount for multiple policies. Key benefits include coverage for named perils and the option to insure multiple properties under one policy.
4. Allstate – HostAdvantage
AllState is a widely-known insurance carrier that allows customers to buy insurance policies in bundles. For hosts, it offers a special program called HostAdvantage Home-Sharing Insurance. It serves as an addition to homeowner’s insurance and provides coverage in the following cases:
- Theft (the insurance program helps protect your belongings while your guests are staying at your home)
- Damage (HostAdvantage can provide coverage of up to $10,000.00 for each rental period).
5. Safely
Safely has developed vacation rental home insurance and a special guest screening service. With Safely you, as a property manager, can get up to $1,000,000 in structure and liability protection. Also, you get up to $10,000 of insurance on the contents of your home and guest’s belongings.
The Safelystay algorithm helps estimate the risk of every reservation. Thanks to its extensive database, Safelystay helps hosts run guest checks before they make a reservation.
6. American Family Insurance
American Family Insurance offers a short-term rental coverage designed for homeowners who rent out their property for up to 62 days a year. This coverage acts as an add-on to a homeowner’s insurance policy, providing protection from damage caused by temporary occupants.
It covers various scenarios such as theft, damage from incidents like kitchen fires, and even situations involving house swapping. This insurance aims to protect both the property and its contents under circumstances typical of short-term rentals, offering policyholders peace of mind while renting out their homes.
7. Nationwide
Nationwide is a large company that provides personal and business coverage in all 50 US states. Nationwide offers short-term rental property insurance which is called a Business Liability Policy.
It can replace your existing homeowners’ insurance if you rent out your property on a regular basis. If you rent your house out occasionally, you can buy an “endorsement” to your existing policy.
By opting for multiple policies from Nationwide, you’ll be eligible for a discount from the company.
8. RentalGuardian
RentalGuardian provides vacation rental insurance for renters as well as property owners.
RentalGuardian offers coverage for both owners with a few units, as well as for large multinational holiday resorts. Here is a brief overview of the products that RentalGuardian has on offer:
- Travel protection — this type of insurance is geared toward short-term rental guests. It covers costs that may arise from unexpected events that can happen before or during your guests’ stay at your property.
- Accidental Damage Protection — protects against unintentional damage to your rental during your guests’ stay.
- Liability Coverage — protects owners and their properties from liabilities created by guests.
- Corporate Damage Protection — this insurance protects corporate housing and extended-stay properties from accidental damage.
9. Superhog
Superhog provides protection both to hosts and guests. The company’s mission is to “make short-term rentals 100% safe for everyone, removing any risks of the unknown.”
Superhog’s screening system helps verify properties, hosts, and guests. Superhog claims to protect each booking by a free damage deposit and its £1M guarantee.
10. InsuraGuest
InsuraGuest is a digital insurance provider and an insurtech (insurance + technology) company. Its software platform delivers insurance to b2b clients but it’s also currently expanding its services to b2c markets.
InsuraGuest focuses on providing flexible insurance packages that are tailored to meet the hosts’ needs. It covers situations that are not included in traditional insurance packages. These are incidents that may occur without direct fault like accidental property damage or injury.
11. VRMA Member Insurance Program
VRMA Member Insurance Program is available only to the members of the VRMA association. VRMA Member Insurance Program focuses on the main needs of the customer and provides coverage at a reasonable cost. VRMA insurance agents will analyze your current insurance policy and its gaps. Afterward, they will suggest the best insurance programs based on your unique requirements.
How Much Does Vacation Rental Insurance Cost?
On average, you’ll need to pay two to three times higher rates for your vacation rental insurance than for your homeowner’s one. Across the USA, the cost of vacation rental insurance for owners varies between $2,000 and $3,000 per year. It will be much higher if you rent a property in popular tourist destinations such as California and Florida. In this case, be ready to spend up to $9,000 annually for full coverage.
The cost of your vacation rental insurance will depend on the following factors:
- Property location. If your rental’s location attracts lots of travelers, the cost of your insurance will be higher.
- Deductible. The higher your deductible premiums, the lower your monthly cost will be.
- Rental frequency. The more often you use your property as a short-term rental, the more expensive your insurance will be.
- Amenities. Amenities such as a swimming pool, hot tub or fireplace bump up the insurance cost due to the higher potential risks.
- Replacement costs. The more expensive your property is to repair, the more expensive insurance it will require.
What Does Vacation Rental Insurance for Owners Cover?
Before opting for a particular insurance plan, do thorough research on what it covers. The perfect insurance plan should include the following four aspects:
Liability coverage — Your insurance plan should provide coverage in case your guests are injured while staying at your property, including emergency medical coverage as an essential aspect of liability protection for guests. No matter how safe your holiday home is, accidents might happen. The liability for guests’ safety is the biggest risk of each host and property manager. The insurance plan that you select should minimize or eliminate this risk.
Property and its contents coverage — Incidents like fire, damage, or theft usually happen out of the blue. This is why it’s crucial to have insurance that covers replacement or repair costs when anything unexpected takes place.
Rental income — Unforeseen events may lead to a potential income loss. To avoid dealing with substantial losses, you should make sure that your insurance plan protects your rental income, including trip cancellation coverage to safeguard against cancellations due to unforeseen events like major weather disruptions or property damage. Though it may not cover 100% of your income, at least partial coverage will help keep your business up and running.
Additional coverage — If your property is located in an area where natural disasters such as floods, earthquakes, or tornadoes occur quite often, you may want to get extra coverage. Owners might also want to consider plans that include coverage for rental cars as part of travel insurance. Again, it’s better to be on the safe side, rather than face unpleasant consequences.
Choosing a comprehensive insurance plan that covers all aspects of owning and renting out a vacation home is crucial for peace of mind and financial protection.
Final Thoughts
Vacation rental insurance is an essential asset to your business. Getting insurance will provide you peace of mind and will make your business less susceptible to unexpected events.
To bring even more stability to your business, consider using vacation rental software. A software solution such as iGMS will help automate your business and streamline your operations.
By making iGMS your best companion, you can be sure that your business will go from strength to strength.
