Short term rental insurance: Ironclad your home with 3 layers of protection
The key is to layer protection with different short term rental insurances. Replying on just one of these layers might not be enough in term of amount of coverage and might not cover different types of losses.
1. Platform Insurances
Airbnb insurance
If you rent on Airbnb, there 2 different types of airbnb insurance for host that you can tap into.
Airbnb host guarantee
Airbnb host guarantee is a airbnb insurance policy available to airbnb hosts that cover damages done by guests. There is strict timeline and process you need to go through with airbnb to file a claim.
This will be the first thing you would tap if there is damage or theft.
What does airbnb insurance cover?
Damage to a host’s property (home, unit, rooms, possessions)Every Airbnb listing in every country
Payments made through the Host Guarantee are subject to airbnb Host Guarantee Terms and Conditions. If damages occur, documentation (photos, receipts, etc.) will need to be provided as part of the resolution process. Please review the Host Guarantee Terms and Conditions for applicable conditions, limitations, and exclusions.
What’s not protected?
Personal injury and property damage claims from third parties (those are protected by airbnb Host Protection Insurance)Damage to shared or common areas of the building that aren’t part of the listing itselfCash and securitiesDamage caused by a petDamage from ordinary wear and tear
Certain items, including but not limited to: artwork; antiques items, including furniture and jewelry; valuable rugs, collectibles; and other items may have more limited protections under the Host Guarantee.
Airbnb insurance policy: host protection insurance
Airbnb host protection insurance is a separate program from airbnb host guarantee. It provides primary coverage for Airbnb hosts and landlords (when landlords are named in a lawsuit), worldwide.
What does airbnb insurance cover?
The airbnb insurance policy covers certain property damage in common areas of a property outside of the listing itself (for example: a building lobby). Landlords and homeowner associations are also covered in certain cases when claims are filed against them due to a guest suffering an injury during a stay or if a guest damages building property.
What’s not covered?
The Host Protection Insurance program is limited to certain types of liability. Examples of what’s not covered include, but are not limited to:
Property damage due to things like pollution or moldDamage or injury from something done intentionally (not an accident)Loss of earnings
For more information about what their Host Protection Insurance covers and doesn’t cover, visit airbnb Help Center.
You can also download a comprehensive program summary.
Vrbo insurance: if you rent on VRBO/Homeaway
If you list on VRBO, see VRBO’s damage claim process here. You can use these 3 tactics:
VRBO damage deposit
Surprisingly VRBO damage deposit can add protection to your home. On VRBO, damage deposit works very different from Airbnb security deposit. Read more.
CSA property damage protection — vrbo insurance policy
What is vrbo property damage protection insurance?
Vrbo property damage protection insurance provides homeowners with coverage for damage that could occur to a rental property during a guest stay.
Your guest or you must purchase damage protection at least 24 hours before check-in. Read more.
Policy options
$59 for $1500 of coverage$79 for $3000 of coverage$99 for $5000 of coverage
VRBO liability insurance
What is the $1M Liability Insurance?
$1M Liability Insurance provides owners and property managers with liability protection; giving owners $1,000,000 in primary liability coverage no matter what other short term rental insurance you currently have.
How you’re protected:
Traveler injury claims made against you — If a traveler is accidentally injured while staying in your vacation rental property, this program may provide coverage for claims made against you.
Property damage claims made against you — If a traveler accidentally damages the property of a third party (such as a neighbor) while staying in your rental property that third party may sue you for that damage, this program may provide coverage for these types of claims.
Note — $1M Liability Insurance does not cover damage caused by a traveler to your own property.
How it works:
Up to $1 million in coverage — Eligible claims handled under this program are subject to a maximum limit of $1 million USD in coverage per property, per year.
Primary coverage for eligible claims — If you don’t have liability insurance for your rental, this program provides that protection. If you do have liability insurance for your rental, this program works with your current provider and gives you $1,000,000 in added protection.
Liability protection for vacation rentals — Typical homeowners policies may not provide liability protection when your property is used as a vacation rental.
Global reach — This program provides protection worldwide where VRBO operates.
If you have further questions about coverage and claims, please view the policy summary.
2. Short term rental insurance
https://www.youtube.com/watch?v=mIcp2DfVtyw
Why platform policies aren’t enough
If you book your property through platforms like Airbnb, you are entitled to some automatic protection such as the airbnb insurance policy above, both programs are not as inclusive as a short term rental insurance policy.
Usually platform policies don’t cover things like loss of income or environmental factors such as mold.
Is short term rental insurance expensive?
Vacation homes are considered higher-risk properties for several reasons and, therefore, have higher rates. Risks include being vacant and subject to vandalism or burglary, tenants who don’t care for the property leading to a major loss, or tenant claims of injury or property damage. Vacation properties rented out are considered business issues and thus have a higher risk in general.
Even though it usually more expensive than a typical homeowner insurance, it is a cost of doing business and is usually covered by your higher rental income from short term rental.
What type of short term rental insurance do you need?
There are different types of insurance such as homeowner insurance, landlord insurance, and renter insurance. Since you’re doing short-term rental, regular homeowner insurance or landlord insurance might not cover your home. It’s best to look for a short-term rental insurance policy from a reputable company that know how to deal with vacation properties.
Common short term rental insurance coverages include
Loss of incomeExcess use of utilitiesInfestationLiquor liabilityIdentity theft
Key factors that impact short term rental insurance costs
Location: ex: flood zoneType of propertyAmenities
Ways to save on short term rental insurance
Choose a location with less riskBundle your policies — to get discountsInstall an alarm system — the more secure your home is, the lower your premium will be
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Your home insurance might already cover short term rental. Call your insurance company to see what is covered. Some home insurance policies cover short-term rentals.
Major companies offering short term rental insurance include
ProviderBest ForNationwide InsuranceCondo owners with master association policies but who need specific loss assessment coverageAllstate InsuranceHomeowners using and rent the property seeking to have a homeowners endorsementFarmers InsuranceBeach rentals in frequent hurricane and flooding communities where policies are hard to getForemost InsuranceProperty owner seeking a customized policy with an agreed upon loss settlement provision to save on cost.Proper InsuranceShort-term vacation rental property managers with over 10 different bookings each year
Proper Insurance is a popular choice for short term rental insurance since the policy is written for this purpose.
Steps to insure your vacation rental home
Create a home inventoryTake photos of all furnitures, appliances, etc.Record the basics: cost, date of purchase, serial numbers, etc.Don’t forget off-site items — ex: beach gears you provide for guests that are stored outsideKeep proof of value — keep receipts, purchase contracts, and appraisals with your listFigure out how much short term rental insurance you needShop aroundKeep all your documents together (policy, insurance agent contact, home inventory, proof of value, etc.)
3. Rental property reserve fund
Set aside funding for repairs and maintenance is a smart thing to do. You might also want to set aside 3–6 months of operating expenses to cover periods of downturn as a rental property reserve fund.
Why do I need a rental property reserve fund?
Homeowners and rental-arbitrage hosts are struggling these days with lockdowns and quarantine in many cities across the US and worldwide. Travel demand vanished overnight. Many are looking into forbearance just to make it for the next few months.
If we all have 3–6 months worth of all expenses in the bank right now, it might save our businesses until the pandemic passes.
When platform policies or your short term rental insurance don’t cover or are not enough, having a reserve might help you stay in business. Never run out of cash is an important business rule.
How much should I set aside as reserve?
Calculate a minimum rental property reserve fund
To calculate a small maintenance reserve for rental property (1–10 units), add up the following expenses for all of your properties:
monthly mortgagestaxesinsurance premiumscondo feesoperating utilitiesother operating costs: supplies (condiments, etc.) and small wears and tears that you need to replace opten (linens, towels, etc.)
Then, multiple it by three, and then cut the total in half to reveal your minimum rental property reserve fund.
How much rental property reserve fund do I really need?
The answer to this is how much money in the bank that you need to keep you sleep soundly at night. For each investor, depending on your risk tolerant, this amount will be different. But at least keep a minimum rental property reserve fund.
How to build a rental property reserve fund?
Separate your bank accounts: each unit should have its own account, and more importantly they need to be separated from your personal spending account.Use accounting software or manually keep track of all your costs. Be fully aware of all the costs to operate your business so you don’t underestimate your expenses.Build a realistic reserveFund your account — set a budget, set up automatic transfer.
Remember to rebuild
Remember, the goal is to keep this minimum amount in your account at all times. If you pull from this savings, or go below this minimum threshold, be sure to rebuild it as fast as you can to maintenance reserve for rental property.
Conclusion
If you don’t choose to get vacation rental insurance coverage, you may be taking a big financial risk. Even though the cost of short term rental insurance is higher, it’s still worth it to get the right policy to protect your hard earn investment.
How will you keep your home safe from property damage by guests?
Join the Airbnb community using this link and get $40 credit your first booking!
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