In today’s dynamic and competitive real estate market, short-term rentals have flourished as a popular and profitable investment option. As a result, understanding the intricacies of short-term rental property insurance has become a hot topic for property owners.
Short-term rental property insurance is designed specifically to cover the unique risks associated with renting out a property on a short-term basis, whether through Airbnb, VRBO, or a rental agency. Just like many other kinds of insurance, this policy is there to act like a safety net – protecting property owners from potential financial loss. However, the special nuances of short-term rentals necessitate a specific kind of coverage that goes beyond the scope of a standard homeowners or landlord insurance policy.
In this blog, we will touch on what exactly short-term rental property insurance is and the potential risks that come with short-term rentals. We will lay out the key components of short-term rental property insurance, including property damage coverage, liability protection, and loss of income coverage. Lastly, we will highlight the undeniable importance of having substantial insurance in place for short-term rentals. 
Having this knowledge at your fingertips can make all the difference in ensuring your rentals are secure and have the chance to be successful.

What is Short-Term Rental Property Insurance

Short-term rental property insurance is a specialized type of coverage that is designed to address the unique risks associated with renting a property on a short-term basis; usually for periods less than 30 days. This could be a property that is listed on platforms like Airbnb, VRBO, HomeAway, or a rental agency such as one you would find at popular beach destinations like Cape May, New Jersey. Regardless of the purpose of the property, whether that may be for an investment property or vacation rental, if it is being rented out on a short-term basis – this insurance policy is a must.
The purpose of short-term rental property insurance is multifold. This policy provides coverage for physical damage to the structure, like fire, theft or vandalism – just like you may see on a standard homeowners policy. However, it also extends to cover situations that are particular to short-term rentals, such as accidental damage due to guests, loss of rental income due to a covered loss and liability claims that could arise from a guest sustaining an injury on the premises. 
Some property owners believe that their homeowners insurance or landlord insurance would cover their short-term rental operations; although, that is not usually the reality of the situation. A standard homeowners policy is designed to protect owner-occupied properties – not property used for commercial reasons or rental activities. For this reason, carriers often exclude or severely limit coverage for business activities, which includes short-term rentals. Insurance carriers take this seriously, if you are found to be engaging in short-term rentals without properly notifying your insurance company you could potentially get claims denied, or even a cancellation of policy. 
On the other hand, landlord insurance is designed for long-term rentals, under the circumstances that the property is leased for several months or years at a time. This policy does not usually extend coverage to frequent short-term guest stays because of the frequency of people moving in and out of the unit – the associated risk under those circumstances is increased. 
This is where short-term rental property insurance comes in, it offers the necessary coverage that is tailored to meet the specific demands and risks associated with this type of market by providing protection to not just the property and its owner, but the guests/ tenants as well. This policy bridges the gap between traditional insurance policies and solidifies that the property owners are sufficiently protected against the risks they face by being in the short-term rental market. 


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The Risks Associated with Short-Term Rentals

Risks that come with the nature of the short-term rental business can pose notable financial implications if the property is not properly managed. Property damage, theft, liability, loss of rental income, identity theft or fraud, and compliance risks are among some of the dangers that property owners face when getting involved in the short term rental game. 
Property Damage: Whether on purpose or accidental, guests can cause all kinds of damage to the property. The damage could be miniscule, like a carpet stain or a shattered wine glass. On the other hand it could be as serious as a broken door or busted piece of furniture. The cost of repairs or replacements can be a significant financial hit, especially when unexpected or for more severe damages. 
Theft: With a packed rental schedule, means a revolving door of guests coming in-and-out of the property, this makes the possibility of something disappearing in the unit or home much higher. Items of value such as electronics, appliances or decorations could be stolen – leaving the owner with the responsibility of replacing the piece. In the event this happens during the busy rental season, it can result in you having to shell out the money to replace it in time for the next guest – sometimes within just hours. 
Liability: In the event a guest gets injured on the property, whether they tripped on the stairs, due to an appliance malfunctioning, or even an unforeseen hazard – the property owner can be held liable. This could result in legal expenses and potential medical bills, creating a financial strain. 
Loss of Rental Income: In the event a guest causes extreme damage and the property is uninhabitable, the landlord may lose out on rental income during the repair period. Depending on the timing of the peril and the booking rate, this lack in revenue can cause considerable financial loss to the owner and their family. 
Identity Theft or Fraud: There is a potential risk of falling into the trap of fraudsters in this type of market. Scammers may make reservations with stolen credit card information, resulting in the owner without rental income and potentially having to handle legal issues; along with having to consult with the bank. 
Compliance Risks: Local laws and city regulations typically govern short-term rentals. These ordinances can impose specific insurance requirements, zoning restrictions and tax obligations. In the event someone is found not complying with the rules, they can be served with a hefty fine and even legal action.
When assessing coverage levels for your rental property it is important to keep these potential risks in mind.

Key Components of Short-Term Rental Property Insurance

As the owner of a short-term rental property, it is important to understand that having comprehensive insurance coverage is a necessity in order to protect you and your property. A part of having this coverage is to fully understand what key components are covered: property damage, liability protection, liquor liability and loss of income. 
Property Damage: Ensuring your property’s protection against physical damage is extremely important and a direct correlation to the level of success of the rental. Whether the damage is due to a guest, or weather related incident, having coverage for property damage safeguards the investment and will aid in the repair or replacement cost. 
Liability Protection: Accidents are inevitable, which is why having liability protection is a non-negotiable. This aspect of insurance is there to cover the property owner from having to pay out-of-pocket for lawsuits or claims in the event a guest is injured on the property. This coverage also accounts for damage to the renter’s belongings – if there is an accident and something is damaged, liability protection can assist in paying for a replacement or repair of the item.
Liquor Liability Coverage: All alcohol should be removed before the guests come to stay in the rental, but if not – this could be an issue for the property owner. Alcohol that is left on the premises is fair game to the renters, and if they consume the liquor and get injured as a result, they can put in a claim against the owner of the property. 
Loss of Income: If a covered incident makes the property unlivable for a period of time and there is no chance of it being rented out, having loss of income coverage can compensate the owner for the rental income lost during the repair period. This coverage offers you financial stability that without it, the property owner would be missing out on that amount of income. 
By understanding these key components, especially when considering the potential financial risks of the market, short-term rental property owners can be sure that they have a well-rounded insurance policy that protects them, their investment and financial wellbeing. 


Other Considerations

Short-term rental property insurance is designed for property owners renting out their secondary home, condo and apartment for brief periods of time, whether it is a week or two beach vacation or a weekend getaway somewhere in the mountains. 
Popular platforms like Airbnb can also have their own policies specifically through their platform, however, they may not all be customizable.
Airbnb offers host liability insurance as a part of AirCover for hosts. This policy provides the host with one million dollars in coverage in the event they are found legally liable for a peril occurring at the property during a rent time period. In the event that a guest gets hurt, or their belongings are damaged or stolen – this coverage also can include the co-host and cleaners. 
This policy covers: bodily injury, damage or theft of property and damage caused by guests to common areas (if any on the property like the building or lobbies).
Host damage protection is another policy they offer, with three million dollars in coverage in the event the property or belongings in or outside are damaged. This policy covers: damage to the home, furnishings, valuables or belongings, damage to parked vehicles like boats or cars, as well as extra cleaning costs due to guests.  
Experiences liability insurance offers one million dollars in coverage if a guest gets injured or something happens with their belongings while on an Airbnb experience. This policy only covers: bodily injury to a guest, damage or theft to their property, as well as the area one is prepping for the experience or cleaning it up, even an online experience. 
Now, these policies do have various exclusions that vary from each individual policy, just like any other. For example…
  • Host liability insurance excludes damages or injuries that were done intentionally.
  • Host damage protection excludes loss of currency and loss due to natural disasters such as earthquakes.
  • Experiences liability insurance excludes damage, loss or theft to the owner’s personal property; as well as online related risks that can have a direct impact on one’s business like defamation. 


Each short-term rental property has its own unique set of circumstances along with it. Factors such as location, duration of rental, proximity to water or flood zone, intent of use, and even where the rental will be advertised are all a part of the conversation in regards to insuring the property properly. We recommend having a detailed conversation with your insurance agent to understand what is and is not covered under your specific policy, and to find one that checks off all of your requirements.
At LG Insurance Agency, we are always ready to assist you with your questions, comments and concerns – in order to help you find the right policy to fit your budget and needs. Give us a call at (877) 288-7169 for a comprehensive discussion about your insurance requirements! 
Check out this episode of the “…and Insurance” podcast, where Aaron Levine and Lisa English discuss first-hand experience, tips and tricks, and the current state of the market. 

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