What Types of Insurance Do I Need for My Short-Term Rental?

Well, here is it.  The truth about insurance that no one is telling you.

If you have a home that you are doing short-term rentals out of and you only have a regular Home Owner’s Policy, you probably are wasting your money because you are NOT covered.

If you have a Landlord’s Policy, you have the same problem.  You are probably not covered.

If you are depending on Airbnb’s $1,000,000 policy, you are leaving huge gaps in your insurance needs.

So, now that I’ve scared the bejesus out of you and have your attention, let me just add that’s it’s an easy fix.

First, you want to ask your agents some questions and you want to SEE, with your own eyes, meaning have your agent point out to you, specifically where in your policy that these things would be covered by a short-term renter. 

Questions like:

• What if a guest starts a fire in my kitchen?
• What if a guest’s child drowns in my pool? In our community pool?
• What if my garage door closes down and crushes a guest’s car?
• What if a guest trips on an uneven tile in my bathroom and gets injured?
• What if a guest becomes ill from drinking from an improperly cleaned coffee maker on my property?
• What if a guest steals my television, my furniture, or my appliances?
• What if a guest damages my property, breaks something, or destroys something?
• What if a guest harms my neighbor? What if a neighbor harms my guest?
• What if my HOA fines me for my guest’s actions?
• What if the damage a guest does causes me to cancel future reservations and I lose income?
• What if my property floods? Would my computer and office equipment be covered?
• What if the car I use for my STR is wrecked?

What you need to understand, too, is the fact that what we (as Airbnb hosts) consider “Guests” are not really guests under the law.  A guest is usually a person who we invite into our home.  A “Guest” that PAYS to stay in our home isn’t really considered a guest at all under the law or in terms of insurance coverage.  A paid transaction, an exchange of money, has taken place – a legal business transaction.  So, in the eyes of the law, this doesn’t even fall under traditional renting.  You are now a Business.  Therefore, you are going to need (Short-Term Rental) Business Insurance.

Good to know, right?  Critical to know, really.

Thousands of people are walking around thinking they are covered right now but aren’t.  What’s worse is that some insurance agents believe that they are covering their clients, too, when they are not.  Verbiage – the way in which your policy is written – is critically important.  You want to see your policy and make certain that the way it is written clearly describes and covers your paid “Guests” as short-term renters.

So, Airbnb and VRBO give you some peace of mind but there are gaps in their coverage.  You need to know what they are.  Also, all coverage is at their discretion, so if you have no tangible proof, you may have challenges.  An additional Business Policy or Umbrella Policy is highly suggested.

So, what type of coverage do you need?

• You need liability coverage. This covers your guests if they are injured or killed, it covers their property if it gets damaged, and it covers you in case of a lawsuit if the guest sues you and takes you to court.

• You need property coverage. Property coverage (with specific verbiage for short-term rental guests) will protect your dwelling, the contents inside and outside, everything attached like the cabinets & closet racks, plus all the appliances & electronics.

• You may need flood insurance depending on where you live.

• You may need disability insurance if you do everything yourself.

• You may also want Business Income Insurance to cover any loss of income due to an inability to rent out your property, say if there was a fire and you had to fix the damage.

• You may want an Umbrella Policy to cover limits in policy coverages or a Blanket Policy to cover gaps in policy coverages.

What do you need to know before going out and looking for Comprehensive Commercial or Business Insurance?

• Know what you want to cover. Those questions will help.
• Know what the value of the items you want to be covered will cost to replace.
• Know what you can afford as a deductible.

Options to weigh when you are looking for coverage:

• Your coverage needs
• Limits of Liability
• Exclusions
• Deductibles
• The Cost of the Policy

There are a few quick answer companies like MyPropertyProtect.com that offers protection to your property from guests.  You get a $10,000 policy with a $250 deductible for $5 a night.

If you want something more substantial, as I recommend, I would look into companies like Proper Insurance.  They specialize in finding coverage for short-term rentals and are rated A+ on the Better Business Bureau’s website.  Plus, they are backed by Lloyd's of London, the oldest insurance agency in the world.  We've attached their brochure at the bottom of this page.

We hope you will use this article to find the best coverage for your STR Property and wish you great success in your business.

Also, If you are doing events on your property, like weddings with catering, or if you have other businesses on-site, like a gift shop or laundromat, you will need separate additional coverage that we didn’t cover here. Do your due diligence and write out all the scenarios that could occur and find an agent that helps you cover every single one.

Proper Insurance has a GIFT for you.  Download their 2-page Brochure (by clicking the image below) that will answer many of the questions you may have about Short-Term Rental Insurance.  You can also contact Proper Insurance Risk-Free just to ask some questions by calling them at 888-631-6680.  Remember, they're backed by Lloyd's of London, the oldest insurance company on the planet.  If you already carry insurance, at a minimum, you can get a quote from Proper and get a free coverage comparison.

Now go and grow! 

Michelle R Russell

© The Prosperity Process, LLC  

for BNB-Boss