Vacation Rental Insurance

Vacation Rental Insurance: Which Policies Protect Homeowners?

When homeowners decide to start out in the vacation rental business, one of their biggest concerns is whether they will ever have any unpleasant surprises. Unforeseen events can arise from many different situations and can cost a fortune. However, in legal terms, if your business isn’t well protected, little can be done to resolve these problems once they’ve occurred. So how can you avoid this? Protect yourself beforehand – in other words, choose the best vacation rental insurance. 

You have to find the vacation home insurance that’s right for your business. Not all cover what you think when it comes to protecting your rental. Although your home insurance can have multiple policies or liability insurance, it may not cover renting out to guests as a business. There could also be incidents in which neither you nor your guests would be covered, for example, if someone broke into your property during their stay and took their belongings.

What Does Vacation Rental Insurance Cover?

Every owner needs to analyze what they want to protect and which insurance best suits them. Due to the increase in vacation rentals, many insurance companies and policies aim to protect homeowners.

1. Liability Insurance

Liability insurance covers accidents that occur whilst guests are staying in your property but does not cover damage to the property. Some homeowners think that accidents are unlikely but you really never know.

In any case, if you want you and your business to be protected, it’s a good idea to take out liability insurance. In the event that a guest has an accident or is injured on your property and decides to sue, all the legal costs and proceedings will be covered.

Vacation Rental Insurance

2. Insurance on Airbnb and HomeAway

Advertising your holiday rentals on platforms such as Airbnb or Homeaway offers the possibility of taking out insurance that protects the owner and has further benefits. For starters, these listing sites offer an option where you can get a deposit from the guests, acting as a guarantee in case they damage your property. You can choose the amount you would like for the deposit in advance, making guests more careful with your property for fear of losing this amount.

In addition to allocating a security deposit, Airbnb, a leading company in holiday rental advertising, provides its hosts with the possibility of taking out host protection insurance with a coverage value of up to $1,000,000 for third-party claims of personal injury or property damage. Airbnb also offers a Host Guarantee, which is a protection program for property damage up to $1,000,000.

HomeAway provides $1,000,000 liability insurance for homeowners and property managers listing through their site. Even if you already have your own liability insurance, if someone makes a claim against you, HomeAway provides additional coverage. 

Although these policies have pros, they do have some drawbacks. For starters, the host protection insurance provided by Airbnb only covers damage caused by travelers, but it won’t insure you in the event of a claim, whoever is at fault. It will also not cover damage that is not caused by guests, for example, if there is a flood in your house (which is nobody’s fault) and it leaks to your downstairs neighbor. In that case, you’ll have to pay whatever it takes out of your own pocket.

3. Travel insurance

If something goes wrong that prevents your guest from taking their trip, such as sickness, injury, jury duty, bad weather, natural disasters, job requirements, or they have to cancel last minute for whatever reason, travel insurance ensures that the guests’ money is returned and the host can keep their rental payment. This way, you’ll be able to protect the guest relationship, meaning guests will have more confidence in your business and will feel more assured in booking your rental in the future after they had to cancel.

Vacation Rental Insurance

4. Insurance with Exclusive Policies for Vacation Rentals

It’s always better to prevent something from happening than to fix it when the damage has already been done. That’s why homeowners prefer to have insurance that covers all the situations in which they could lose money by having to make repairs to the house or simply having to replace things. Remember that your current home insurance may not automatically cover your property for renting out to guests. 

Experts recommend taking out multi-risk insurance to cover fire, flood, and third-party claims, as well as coverage for guest theft, electrical damage, or any weather-related situation. Employee liability insurance is also recommended if gardeners, cleaners, or maintenance personnel have been hired. And, of course, you should insure your house when it’s empty as it will be extra vulnerable. This also includes when you are undergoing any renovation work on your property.

Dos and Don’ts of Vacation Rental Insurance

To ensure you (or the owners of the properties you manage) have the right protection, here are five essential tips to follow when setting up your short-term rental insurance plan.

1. Don’t assume your existing home insurance policy will cover you

Many property owners make the mistake of thinking their underlying home insurance policies cover their rental property. However, many insurers consider making money from your home a commercial activity. As a result, they are likely to compromise or completely invalidate the existing policy.

For those rare few insurers who say they do cover home-sharing, make sure they provide the cover you need. There is a difference between your insurer allowing you to home-share and having the proper coverage when you’re home-sharing.

2. Don’t assume you need a landlord policy for home-sharing

Landlord policies don’t work for home-sharing because they are traditionally used for ‘tenanted’ properties – and require extensive checks on tenants. While you may screen guests, in general, you will not carry out full checks as travelers only stay a few nights each.

3.  Don’t assume Airbnb’s Host Guarantee provides the cover you need

Listing platforms such as Airbnb have done a great job of providing some cover through their guarantee, but they make it clear that this is not a substitute for insurance. Airbnb encourages all their hosts to have the right insurance in place, so follow their advice.

4. Do speak to your insurer (or if you’re a property manager, ask your hosts to speak to theirs)

We know that no-one wakes up in the morning looking forward to speaking to their insurer, but it’s important to have ‘the chat’. The worst thing they will say is that they won’t cover you. It’s always better to know sooner rather than later, so you can organize the cover you need before something goes wrong.

5.  Do document it

If you are a property manager working with lots of hosts, make sure they give you a written confirmation that says they have the right vacation rental insurance. It only takes a sentence, but having it can save you a huge amount of hassle in the long run. It’ll also mean you’ve taken all reasonable steps to make sure your hosts are properly informed.

Vacation Rental Insurance

Insurance Companies That Specialize in Vacation Rentals

So, how can you find insurance that’s right for you? Insurance differentiates from state to state, the type of property, the number of properties, and what exactly you want to be covered. It’s important to do all the research and know what exactly you are looking for you and your business. Remember that insurance also differs in every country. 

Specific vacation rental insurance already exists, which is neither home insurance nor insurance for a standard business. They offer insurance purely to protect your vacation rental. They also include some services, such as guest screening services, or payment protection. They could offer you some specific policies depending on the budget you want to spend on this side of your business, as they are flexible around each type. Many insurance companies already offer insurance for vacation rentals, so don’t hesitate to ask your current insurance company.

Here are some examples: 

Over to You

It’s always better to be covered by vacation rental insurance, even if you think something is unlikely to happen. By protecting yourself, your home, and your guests ahead of time, your business will run much more smoothly and your future self with thank you. Although we don’t like to think so, things can always go wrong in life and it’s better to be overprepared in those situations.

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Show Comments (4)
  1. This information did not give any examples or insurance company information for those of us who know that we have to have insurance beyond what Airbnb or Home Away has offered. Is there nowhere to go to get names and companies to contact?.

    I have been searching for full coverage insurance for all of the 18 years I have been a vacation rental owner. I only have found insurance companies who offer bed and breakfast business insurance, which my insurance agent has procured for me, even though it is not a thoroughly honest description of of my vacation rental business.

    Insurance is a major expense for those of us who have vacation rentals and want to be correctly covered. If there is a direction you could point me in to discover good insurance companies, please pass that information on.


    Suzann PIlot
    Olympic View Cabins
    360 460-7112

    1. Hi Suzann!
      Thanks for bringing this to our attention. We’ve updated the article – you will now find four examples of insurance companies that specialize in vacation rental insurance. Hope this helps!


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