How does short-term rental insurance work?

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3 min read
Checking in to vacation rental

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.

It’s the best way to get covered for property damage incurred from wild guests or in the unfortunate event you get sued for some type of injury that occurs at your rental. Major companies offering short-term rental insurance include:

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.

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.