Short-Term Rental Insurance

Fact-checked with HomeInsurance.com

1

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Which bank should I choose?

Get personalized bank recommendations in 3 easy steps.

If it seems like everyone has an Airbnb rental these days, you’re almost right: Airbnb recently announced it has reached six million listings across the globe. That’s more than the combined number of rooms available from the world’s top six hotel groups. Before you jump on the hosting bandwagon, however, take a few extra steps to protect your home and assets.

It’s important to understand that running a vacation rental from your primary residence is rarely included in your existing homeowners insurance policy. Because hosting is considered a business activity, you’ll need additional coverage to protect against property damage and personal liability.

What’s the best way to do this? The answer is short-term rental insurance.

Short term rental insurance can be taken out either as a renter or as a landlord. For a landlord, this policy will cover their property and paying guests while the home is rented. Short term rental insurance is designed for short-usage cases and not year-round rentals to the same tenants. For that, you’ll want landlord insurance.

Now, this doesn’t mean that you need to take out an additional insurance policy if your family is coming to stay for a couple of weeks. Most basic homeowners insurance policies will cover non-commercial guests. It’s usually only once it becomes a business activity that you’ll need insurance for short term rentals to cover your guests.

Keep reading to find out how to get short-term rental insurance and what is (and isn’t) covered by hosting platforms like Airbnb.

Short-term rental insurance explained

Many insurance companies offer short-term rental insurance as a rider policy, meaning it’s added onto your current homeowners insurance policy to give you additional coverage for your rental activities. Whether you’re homesharing a room in your house or another house on your personal property, an additional policy can protect your assets in case of an extreme circumstance unique to vacation rentals.

Depending on the insurance company, you may be able to pay only for the nights you actually have guests staying at your property. Picking one of those companies can help reduce your costs if you only plan on offering your property as a rental on a part-time basis.

Common short-term rental coverages include:

  • Loss of income
  • Excess use of utilities
  • Infestation
  • Liquor liability
  • Identity theft

To get short-term rental insurance, you can first check with your current homeowners insurance company to see if they offer a policy. Because this is still a relatively new phenomenon, you might not have immediate success with your current carrier. If you don’t, explore other home insurance companies to compare prices and coverage. Most companies list out their services and let you request a free quote online to simplify the process.

Hosting as a renter

Another scenario to be aware of is if you currently rent your apartment or home and want to sublease it as a vacation rental. Whether you plan on listing the entire place or just one room, you first need to check your rental agreement to see if your landlord prohibits subletting. If so, you can’t rent out the place.

If subletting is allowed and there aren’t any other prohibitive agreements in place, you should start thinking about additional insurance coverage. Ideally, you already have renters insurance in place. If not, that’s your first step before hosting. Then, look for a second policy that covers your business activity as a host. It could be with the original company or as a rider from an insurer that specializes in this area.

Companies that offer short-term rental insurance

If you have decided to purchase a short-term rental policy, the first thing to do is to shop around between different companies. Not only does this help you to get the best price for your plan, but it ensures you get the specific coverages that you want.

When shopping around for short-term rental insurance, there are a lot of options. With so many different companies offering this type of insurance, you will find varying rates and policy coverage details with each one. Some companies will have more competitive rates but lower liability coverage, while others will have superior coverage and higher premiums.

To help you get started, we’ve gathered together some of the top insurance companies that offer short-term rental insurance. These companies are an excellent place to start shopping around for a policy.

Major companies offering short-term rental insurance include:

How much does short term rental cost?

Short-term rental insurance can be fairly costly, especially if it’s for a commercial enterprise such as renting out your home as an Airbnb. According to insurance company American Family Insurance, short term rental property insurance can cost around $2-3 thousand per year in premiums and is often around two to three times as expensive as a homeowners policy for the same property.

Numerous factors can go into determining short term rental premiums. The location of the property will play a significant role, as will the condition of the home. In general, most of the variables that impact the premiums for your homeowners policy will also affect a short term rental policy.

These factors can include proximity to fire stations, crime rates in the area, affluence level of the neighborhood, your insurance credit score, the types of material used in the home and much more. Because these factors overlap so much with homeowners insurance, multiplying the cost of your homeowners insurance by around 2-3x should give you a rough estimate of how much short term rental insurance would cost for that property.

As we have seen, short term rental insurance can be expensive. This is mostly due to it being a higher risk area than traditional homeowners insurance. With numerous guests coming and going, the odds of property damage or bodily injury go up. The fact that rental properties are often used for vacations also factors into this steep cost.

Alternative options to protect your short-term rental

One alternative to short-term rental insurance you may consider is landlord insurance; however, this type of policy is usually designed for long-term rentals. Since your guests aren’t vetted as much as a long-term tenant would be, most carriers won’t allow homesharing to qualify for landlord insurance.

Another option is to consider finding a comprehensive insurance policy that covers both your home and your short-term rental. This type of coverage streamlines the process and can potentially save you money since you’re bundling multiple policies into one.

What Airbnb host insurance actually covers

If you book your property through Airbnb, you are also entitled to some automatic protection, although both programs are not as inclusive as a short-term rental policy.

When you become an Airbnb host, you’re covered by the company’s host protection insurance. This coverage includes up to $1 million primary liability coverage of bodily injury or property damage.

This coverage does not include property damage from environmental factors such as mold, damage or injury from intentional actions or loss of earnings. If you need to file a claim, you must first contact Airbnb, who then puts you in touch with a third-party claims administrator.

In addition to the protection insurance, hosts also automatically qualify for Airbnb’s host guarantee. This covers any damage to your listed property and possessions up to $1 million. However, this isn’t considered an insurance policy and Airbnb still recommends getting additional insurance to protect your listing.

Bottom line: Get the coverage you need

As you consider becoming an Airbnb host, approach the process as a business owner, because that’s exactly what you are. Even if you’re just trying to earn some extra money by using Airbnb as a side hustle, there are bound to be expenses involved. More importantly, you need to take the appropriate steps to protect yourself and your property.

Before you start snapping photos to create an online vacation listing, get the right coverage. In an ideal world, you’ll never need it. But when you do, you’ll be relieved you have it.