The best home insurance for short-term rentals

Who needs short-term rental insurance?

Short-term rental insurance is not required if you have friends or family staying with you for free. It is also not mandatory if you rent your accommodation as a long-term rental. These will require landlord insurance as a long term lease is not considered a business. Short-term rental insurance is for landlords who rent a home, rental property, or vacation home to guests for short-term stays. Especially if you use platforms such as Airbnb and Vrbo, roommate insurance can be essential to provide adequate protection. Even if you don’t earn a lot of rental income, insurers still consider it a business.

Airbnb offers hosts who use its services $1 million in coverage in case a guest is injured or their property is damaged or stolen. However, the insurance offered by these platforms does not cover everything and this amount may not be enough. Even if covered by this insurance, landlords should consider an additional short-term rental policy.

You may want to consider short-term rental insurance if you:

  • Own a rental property or vacation home and rent it out to guests for stays of less than one to two months. Many insurers consider a short-term rental as a place rented for two months or less.
  • You rent a guest room or a separate building on your property several times a month.
  • You bring in over $2,000 a year in short-term rental income. Even if you rent accommodation sporadically, most insurers define a business as any transaction that generates more than $2,000 in revenue per year.

How much does short-term rental insurance cost?

The average premium for home insurance is $1,725 ​​per year. Similar to a typical homeowner’s policy, the cost of a home-sharing policy will depend on factors such as the amount of coverage, the location of the property, and the deductible.

One factor that will impact a short-term rental policy, but not a regular homeowner’s policy, is the amount of business income you would want to replace if you were unable to rent out your home. Depending on different factors, the average cost of short-term rental policies can range from $1,500 to $3,500 per year.

What does short-term rental insurance cover?

Just as a hotel requires a different type of insurance for its guests, if you are renting out your properties for short stays, you want to make sure you are protected against common risks. Here are the main risks covered by short-term rental insurance.

  • Responsibility – If a guest is injured on the property, short-term rental insurance can help cover medical expenses and legal fees.
  • Building and content – If a customer steals or damages property, short-term rental insurance can help cover losses up to policy limits.
  • business income — if a property cannot be rented due to a covered peril, a short-term rental policy can compensate the landlord.
  • Excessive use of public services — If a guest abuses the air conditioning or forgets to turn off the water, a short-term insurance policy can cover the additional costs.

Just like a home insurance policy, damage caused by floods and earthquakes are not included. Homeowners will need to consider obtaining additional coverage for flood or earthquake risk.

How to choose the best short-term rental insurance

Choosing the best policy depends on various factors. Like any other home insurance policy, the most common factors to consider are:

  • The cost of the policy or premium for the short term rental policy or additional endorsement to your existing policy
  • Amount and limit of coverage for damaged or stolen property and liability
  • Deductible options and amount for a claim
  • Solidity and reputation of the insurer
  • Is it easy to handle complaints

Here are the different coverage options available for a home sharing policy.

  • Depending on your existing home insurance policy, you can add an endorsement or endorsement to your existing policy
  • Take out a separate short-term rental insurance policy
  • Take out a landlord’s insurance policy that covers short-term rentals
  • Purchase a commercial property insurance policy

All of these options have their pros and cons. The key is to find the best policy for you and your situation. Compare coverage and cost of different options. You can get a discount by bundling your auto and home policy. If you’re concerned about risk and want solid coverage, a standalone policy may be right for you.

You will need short-term rental insurance if you are renting out your home, rental property or vacation home for the short term. A typical home insurance policy does not cover business use of a home. It’s important to get adequate cover before you start renting to short-term guests.

About Michael B. Billingsley

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