Why You Need Vacation Rental Insurance and How to Choose One

Vacation rental insurance can safeguard your short-term rental business. Learn why vacation rental insurance is a smart investment and explore the top vacation rental insurance companies on the market.

Starting and running a vacation rental business requires a significant investment. Yet, despite this fact, many property owners still wonder if they need vacation rental insurance for their business. 

While some vacation rental sites offer insurance coverage, it’s typically not complete coverage. Add to that unique challenges like bed bugs that can cause trip interruption, it’s best to invest in proper insurance tailored for vacation rentals. Vacation rental insurance will help prevent dreadful complications and financial losses, helping you stay on the safe side and protect your business and rental property.

Key Takeaways:

• A standard homeowners policy generally excludes commercial use which means that you won’t be covered for guest stays. 
• Comprehensive short-term rental insurance plans usually include protection against property damage, trip cancellation, emergency medical expenses, theft, and some liability concerns.  
• Vacation rental insurance policies typically exclude gradual deterioration, damage caused by natural disasters, and problems because of poor property maintenance.

Why Do I Need Vacation Rental Property Insurance?

While platform policies offer protection from minor issues, they are insufficient when it comes to more serious cases. On top of that, keep in mind that a standard homeowners policy 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.

Renting your property to strangers means more potential risks. You have more liabilities related to your guests and the likelihood of accidents increases. This is another reason why getting vacation rental home insurance is a smart move.

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 (in other words, it’s not used for any business activity). 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. 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 property.

The Top 10 Vacation Rental Insurance Providers

To make your search for the best vacation rental property insurance easier, we’ve compiled a list of top insurance policies.

1. Proper Insurance

Proper Insurance is backed by Lloyd’s of London and Concert Specialty Insurance, endorsed by Vrbo, and recommended by leading Airbnb tools and resources like AirDNA and Rent Responsibly. It covers a wide range of property types, including cabins, condos, and vacation rental homes.

It has created a specialty short-term rental policy that offers both commercial and personal use coverage. In fact, it’s the pioneer of the modern short-term vacation rental insurance policy. Depending on the policy, you’ll also qualify for pet liability, squatter protection, and business income loss.

2. CBIZ

CBIZ is one of the most popular insurance providers for vacation rentals. It covers all renters’ stays no matter how those stays are booked (directly or via Airbnb and other OTAs) and various types of properties like single-family homes, condos, duplexes, etc. 

It’s especially a great option if you consider going the rental arbitrage route. It has an insurance policy that offers flexibility for various leasehold arrangements and includes:

• Commercial general liability
• Property damage caused by guests
• Business income protection
• Coverage for amenities and contents

3. Foremost Insurance

Foremost 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. 

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. It serves as an addition to homeowner’s insurance and provides coverage for hosts’ property against theft of damage. As it offers limited coverage, you’ll need to get additional insurance that covers the guest too.   

5. Safely

Safely has developed vacation rental home insurance and a special guest screening service. With its Safely Protection Policy, you’re covered against:

• Pet damage
• Theft
• Bodily injury (homeowners and property managers receive liability coverage for guest injury) 

One clause that deserves special mention is its coverage for property damage caused by guests. Not only do they cover intentional damage, but also damage caused by what they simply label as “stupidity”.

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 against damage and certain types of theft caused by temporary occupants.

7. RentalGuardian

RentalGuardian provides vacation rental insurance for travelers, property managers, as well as property owners. Here is a brief overview of the products that RentalGuardian has on offer:

• Travel protection programs aimed at guests
• Accidental damage protection for unintentional damage
• Liability coverage
• Corporate damage protection aimed at extended stays, like monthly rentals
• Bed bug protection

It’s important to note that RentalGuardian acts as an insurance distribution platform. It partners with InsureStays, an insurance agency that underwrites these different vacation rental travel insurance products.

8. Truvi

Formerly called Superhog, Truvi provides protection both to hosts and guests. Like some of the other short-term rental insurance options mentioned on this list, Truvi isn’t an insurer in the true sense of the word. Instead, they have an underwriting agreement with an insurance carrier. 

Another key differentiator is its flexibility. With their pay-per-booking pricing model, you can get guest screening and damage protection for anything from only $500 to $1,000,000.

9. InsuraGuest

InsuraGuest includes accidental medical coverage (including accidental death) and property damage. Like Truvi, its flexibility is what makes it one of the most popular insurance options. 

While it doesn’t let you pay per booking, it allows cost sharing where guests help pay. This way, you can charge guests a percentage of your monthly insurance premium.  

10. VRMA Member Insurance Program

VRMA Member Insurance Program is available only to VRMA members. 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.

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:

Insurance for Assurance: Protecting and Growing Your Vacation Investment

Proper insurance is essential for vacation rentals. It will provide you peace of mind and will make your business less susceptible to unfortunate and unexpected events like personal property getting stolen or a property manager suffering an injury while inspecting your vacation home. 

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 in an affordable way. By making iGMS your best companion, you can be sure that your vacation investment will go from strength to strength.

FAQs

How much does vacation rental insurance cost?

Across the USA, the cost of vacation rental insurance varies between $2,000 and $3,000 per year. 

Do I need vacation rental property insurance?

Yes. Although Airbnb, Vrbo, and websites alike provide basic protection, there are a number of situations where it doesn’t help much and can’t replace comprehensive coverage.

Why is liability insurance important for a rental property?

Liability insurance will cover the legal fees if a guest gets injured on your property and decides to take you to court. It will also cover the medical expenses linked to the guest injury.

Why is short-term rental insurance so expensive?

The cost of your vacation rental insurance will depend on the following factors:

• Property location 
• Rental frequency (the more often you use your property as a short-term rental, the more expensive your insurance will be)
• Amenities
• Property size
• Benefit limits