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The Airbnb & Vacation Rental Insurance Guide [2021]

Listing your property as being available for short-term rental is a great way to generate potentially large amounts of revenue. However, one factor that is often neglected when hosts and short-term rental property managers are putting together their business plans is the potential losses that can be incurred by the homeowner when something gets damaged or stolen. Typically homeowner policies don’t cover short-term rental claims as renting your property on Airbnb or other platforms is considered an exempt business activity. Short-term rental activity is also not typically covered by group policies, should your property be a condo or apartment.

We think it’s best to thing about short-term rental insurance as early as possible. In fact, we think it should even be taken into consideration if you’re a property investor deciding where to buy a vacation rental property. Some cities, such as Denver, include in their short-term rental laws a requirement to provide evidence that you have an active general liability insurance policy.

Damages arising from hosting aren’t uncommon – even if you don’t leave valuable items in your vacation rental, a popular Airbnb listing can result in a large number of guests passing through your property, leading to a much faster rate of wear and tear for your property and it’s amenities, and that means large and unforeseen costs for the property owner. Then there’s the possibility, which should be considered, of a guest slipping when exiting the hot tub.

Taking out insurance on your short-term rental listing makes sense, but explanations of coverage are often vague, policies and prices vary widely by location. The insurance provided by the main hosting platforms also doesn’t extend nearly as far as hosts and property managers might expect.

In order to help Airbnb hosts make the right call, we’ve put together a summary of the vacation rental insurance landscape as we see it. Starting with the coverage provided by Airbnb, Vrbo and other hosting platforms, and then taking a look at the best vacation rental insurance packages provided by companies external to these platforms. Finally, we take a look at the factors that will influence how much your Airbnb insurance will cost.

Contents

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Airbnb & Vrbo's Liability Insurance Policies

In order to establish themselves as credible home-sharing platforms, Airbnb and Vrbo have established policies protecting hosts against a number of potential liabilities associated with handing over keys to a stranger. Both of these policies come at no additional cost to the host.

Airbnb’s Host Protection Insurance will pay out if guests cause damages amounting up to $1 million for:

– traveler accidental injury

– 3rd party accidental property damage (covering accidental damages to the property of a third party such as the guest, comunal area, or neighbor)

Vrbo’s policy offers similar liability insurance that covers up to $1 million of claims related to traveler accidental injury or 3rd party accidental property damage.

So 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 always included. Damage to your property or belongings, loss of income and intentional damage or injury is not covered either. 

While these policies are welcome, they are widely regarded as insufficient as standalone insurance policies. Airbnb has even repeatedly stated that their policy is, in fact, not an insurance policy. A vacation rental host that is looking to protect themselves and their property should really see the policies provided by Airbnb and Vrbo as a layer of protection that is supplemental to a dedicated vacation rental insurance policy.

Insurance Provider 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.

Best External Providers Of Vacation Rental Insurance

With over 30,000 policies written in all 50 states, Proper Insurance is one of the clear leaders in the nascent vacation rental insurance 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.

Safely 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, Safely 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.

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.

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.

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).

InsuraGuest’s Hospitality insurance product aims to provide specialized coverage to vacation rental properties, offering coverage on accidental in-room property damage, theft of personal property, and some more serious potential claims like accidental medical expenses. InsuraGuest’s proprietary software platform allows for quick and easy claim filing online too, should you need it.

Red Sky Travel Insurance are a company dedicated solely to the provision of insurance products for managed vacation rental companies, which means they have a lot of experience working with vacation rental hosts and provide coverage that’s designed for hosts and property managers from the ground up. 

Red Sky offers 4 different packages for different destinations types:

1) Sun Trip Preserver (for coastal destinations)

2) Mountain Trip Preserver (for mountain destinations)

3) Ski Trip Preserver (for ski destinations)

4) Ski Pass Preserver (ski pass insurance for ski destinations)

One unique aspect of Red Sky Insurance’s products is that they offer coverage for destination-specific factors. For example, their Ski Trip Preserver product will provide coverage in the event that a lack of snowfall results in the ski facility your vacation rental relies on being closed.

Intasure is a UK-based insurance provider which has a policy specifically developed for Airbnb hosts. Their Airbnb host policy covers any guest stay lasting up to 6 months, and includes coverage for loss of rent following an insured claim, accidental damage cover, and public liability cover. The company has a great reputation amongst its users, so we think it’s a great option for hosts in the United Kingdom.

What Factors Determine How Much Your Vacation Rental Insurance Will Cost?

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:

Average Host Income

The cost of your insurance will depend partly on how much you make on Airbnb as a short-term rental host, which in turn depends on how you price your Airbnb and what occupancy rate you can achieve. Imagine a pipe bursts in your vacation rental and you can’t rent your property for a month, the amount of revenue you would look to claim as lost income would be higher if you’re renting a mansion in Malibu which typically brings in $10,000 a month in host fees.

Property Value

The higher the value of the property, the more expensive the insurance will be.

Property Contents Value

The more valuable the contents of your Airbnb, the more the insurance company will charge you in premiums, as the potential claims for loss or stolen items are higher.

Rental Frequency & Occupancy Rates

The revolving door of guests increases liability, so the more frequently your property is rented, the pricier your premiums. If you have a particularly high average occupancy rate – say the property is occupied with guests for more than 180 days a year – then you’ll likely be quoted a higher premium.

Deductibles

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, and can affect premiums.

Host Compliance

If your property is in a market where hosts tend to throw parties at Airbnb properties, that might factor into your insurance premiums. One way to offset this is by using vacation rental host apps which monitor noise levels and how many cell phones are active in your property (to monitor compliance with maximum occupancy restrictions).

Conclusion

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. Optimizing your property to minimize your premiums and thoroughly shopping the marketplace for the best-fitting policy will ensure you’re protected against the unexpected.