Your Guide to Vacation Rental Insurance: Best Providers, Tips, and Insights
From gentrification to increasing rent costs and rising home prices, the vacation rental industry is not without its fair share of controversy. Among the complications is the current status of vacation rental insurance. Explanations of coverage are often vague, policies and prices vary widely by location, and the insurance provided by hosting platforms like Airbnb doesn’t extend nearly as far as hosts and property managers expect.
In recognizing these industry loopholes, here at AllTheRooms Analytics, we’ve utilized our unique knowledge of the market and hand-picked the best available policies. For hosts, property managers, real estate investors, and those interested in the market’s early-stage development, here’s your guide to vacation rental insurance.
Current State of Rental Insurance
Insurance Provided by Airbnb and Other Hosting Platforms
In order to establish themselves as credible home-sharing platforms, Airbnb, HomeAway, VRBO, and other sites have policies protecting hosts against many potential liabilities associated with handing over the house keys to a stranger. That said, relying on these policies alone may leave many hosts vulnerable.
For example, Airbnb’s Host Guarantee will pay out if guests cause damages amounting up to $1 million. While many hosts consider this a sufficient insurance policy, Airbnb has repeatedly stated that it is, in fact, not an insurance policy. Standard run-of-the-mill damage is often covered, but things like cash and securities, collectibles and artwork, jewelry, damage caused by pets, and wear and tear are not. HomeAway has a similar $1M Liability Insurance that covers and excludes similar items.
Insurance Provided by Standard Homeowner Policies
The first step towards a smart and cost-effective short-term rental insurance strategy is determining what is already covered by your homeowner’s insurance. Unfortunately, coverage varies widely depending on location, and each company has its own unique set of fine print.
Homeowners looking to only “occasionally” rent out rooms in their home may be covered by traditional insurance companies like Nationwide and State Farm. That said, the companies have respective definitions of “occasional.” Moreover, your existing insurance may reserve the right to deny claims if they were not made aware of the guest’s stay. So, for example, if a large event like the Super Bowl comes to town and a host is looking to capitalize on a spare room, any damage caused by the guest may not be claimable unless the insurance company was informed of their stay in advance.
If you’re planning on regularly renting out your home, your homeowner’s insurance will most likely consider it a commercial endeavor, and homeowner’s policies don’t cover business activities. For serious hosts and property managers looking to churn significant profits from short-term rentals, investing in vacation rental insurance is the best course of action.
Vacation Rental Insurance Costs and Determining Factors
Just as the short-term vacation rental industry is relatively new, so too is the insurance industry associated with it. As a result, there aren’t many cost standards across the market.
Generally speaking, the average rates for vacation rental insurance are about two to three times that of a standard home insurance policy; or about $2,000 to $3,000 annually in the U.S. If you’re looking for renters insurance in travel-heavy destinations like Florida or California, expect to pay upwards of $7,000 to $9,000 USD per year.
Some of the most important factors determining the cost of vacation rental insurance include:
Property Location: As mentioned above, the more sought-after your rental’s location, the more expensive the insurance will be
Rental Frequency: The revolving door of guests increases liability, so the more frequently your property is rented, the pricier your premiums
Deductible: As is the case with standard insurance policies, deductibles and premiums have an inverse relationship. The higher the deductible, the lower your monthly costs
Amenities: High-end amenities like swimming pools, hot tubs, fireplaces, and wood-burning stoves all present potential dangers, so can affect premiums
With over 30,000 policies written in all 50 states, Proper Insurance is one of the clear leaders in the vacation rental space. Rather than adding a separate policy, Proper Insurance operates on a model that replaces existing homeowners’ insurance. Amenities are entirely covered, and their pricing is dynamic, so it’s a great service for rentals that are highly dependent on seasonality.
CBIZ vacation rental insurance is viewed as one of the best names in the vacation rental insurance industry. With coverage for both everyday hosts and property managers operating on a larger scale, CBIZ provides solutions for a wide array of clients. Because of the partnership CBIZ has with property managers, the property manager’s commission income, as well as the owner’s income, are insured.
In addition to being one of the most prominent companies in the entire insurance landscape, Nationwide has a Business Liability Policy, which replaces existing policies and is used for properties making an income. If your listing is only rented out occasionally and is primarily used as a second home, opt for their “rider” or “endorsement” options, which are add-ons to current policies (and significantly cheaper).
Safelystay is a dedicated vacation rental insurance company that presents some intriguing perks. First, the company offers a “Check a Guest” and a “Check a Home” service that performs background checks on potential hosts and guests – giving the platform the feel and security of a long-term insurance plan for landlords. Additionally, Safelystay also offers a payment protection service that acts as a kind of escrow, holding off payment until after the stay to ensure all parties are satisfied.
For international properties, Rental Guardian is an excellent option. Plans are tailored to the hosts’ budget, and can be purchased on a daily rate as an á la carte option. Rental Guardian also offers insurance solutions for large enterprises and property managers.
One of the biggest names in renters’ insurance also has a plan for short-term rentals. Allstate’s Host Advantage plan provides protection against lost or stolen items, and bundles it with flood insurance for vacation rentals on the coast or in flood-prone areas.
The Bottom Line
When gearing up to establish a profitable short-term vacation rental, it’s important for hosts and property managers to familiarize themselves with the differences between standard homeowner’s insurance and insurance that covers business activities. In shopping for a plan, make sure it includes liability coverage, lost income, contents and structure coverage, and any additional coverage for unique items. Thoroughly shopping the marketplace for the best-fitting policy will ensure you’re protected against the unexpected.