How a Claims Process Works for Short-Term Rental Insurance

While it might be tempting to compare short-term and vacation properties to services like hotels and long-term rentals, they actually have a number of key differences. Short-term rentals are unique in that they contain many complexities and deal with a constant turnover of short-term tenants. 

As such, the process for filing an insurance claim is also quite different for single-unit property owners than for other residential and hospitality services. In this post, we’ll examine insurance claims for short-term rentals, explain how to file them, and discuss some peculiarities specific to the industry.

Basics of the Short-Term Rental Insurance Claims Process

In many ways, the insurance claims process for short-term and vacation rentals isn’t too different from other property insurance. However, a few areas do diverge. Here are the basic steps.

File the Claim

As soon as possible after the damage occurs, take photos or videos of the property to show the extent of the devastation. Save receipts, invoices, and any other documentation that may be relevant to the claim. The strength of your case hinges directly on how much evidence you can generate.

Contact Your Insurance Provider

Call your insurance company as soon as you’ve taken inventory and collected the evidence. Forward all the photos or videos and supporting documentation. Giving your agent these items quickly increases the chances of an expedited process and a successful claim.

Assess the Damage

The adjuster should visit your short-term rental property at this point. They’ll inspect the property to verify any additional issues. They’ll also document the damages to support the claim and come up with a fair estimate. The cost covers any laborers and materials that will be used in reconstruction.

Once this is done, the adjuster submits their own report to the insurer, including estimated repair costs. The insurer then validates the dollar amount and goes forward with pursuing the settlement (if they approve).

Receive Payout

Your insurer will have specific steps to take before they approve your compensation. Be ready to give any additional information you haven’t shared with your adjuster.

Once the insurance company verifies and approves your claim, they’ll work on turning around your compensation. The time it takes to get your first check varies by insurance company. Most of the time, though, checks get sent out within one to four weeks after they’ve been approved.

Things to Know About Short-Term Rental Insurance Claims

Here are some aspects of the short-term rental insurance claims process that property managers should keep in mind.

The First Check May Not Be the Last One

The payment on your claim may be spread across multiple checks rather than just one. It’s important to remember this when your first payment comes in and the dollar amount doesn’t match up with your claim. 

Know Your Coverage Limits

All insured parties should know what their policy covers and what its limits are. Some insurers may have restricted payouts for property damage, liability, and lost revenue. After reviewing your policy (or speaking to your insurance agent), determine whether your coverage fits your needs. Be clear about coverages that are excluded, too.

Conduct Guest Screening

Many insurance companies offer premium discounts for short-term rental managers who screen guests before arrival. Other insurance companies require guest screening to be in place before issuing a policy. 

In all cases, however, guest screening is a beneficial and crucial step. No matter what your insurer does, it’s in your best interests to have a screening policy in place.

Replacement Cost and Actual Cash Value

Some property insurers pay out claims that address how much it will cost to replace damaged items. Others send out an actual cash value that takes property depreciation into account. This is one aspect of short-term rental insurance that may be confusing for managers. Verify which value model your insurance deploys to issue claims.

Personal Injury Liability

If a tenant gets injured on your property and the injury can be linked to management neglect, you may be deemed liable for the damage. In addition to insurance for damage, ensure that you’re covered in cases of personal liability.

Differences Between Short-Term Rental Insurance and Other Property Insurance

A few factors set short-term rental insurance apart from other kinds of property policies. Here are just a few.

Guest Rotation

With long-term rental properties, there’s not much of a mystery as to who will be found liable: the tenant. However, short-term rental tenants come and go all the time. Unless you’ve taken photos or videos with timestamps, it may be difficult to ascertain which guest experienced (or caused) the damage.

More Detailed Inventory

Especially if the damage occurs in more than one rental unit, there’s a good chance you’ll have to document far more detail than with single units. But even if only one unit has been impacted, you’ll likely have to provide more documentation than permanent homeowners. Scrutinize every detail of your lost inventory to make sure it’s complete.

Be Prepared for Long Turnarounds

As mentioned above, insurers typically remit their payouts between one and four weeks after the claim has been approved. However, this is not an enshrined industry standard, just a likely scenario. Be prepared to acknowledge that your payout might take a little longer than originally believed.

Tips on Making a Short-Term Rental Insurance Claim

Here are a few brief suggestions about making a claim for damages on your short-term rental property:

• Take pictures and videos of the rental property before any tenant stays there to prove that damage has indeed occurred
• Make sure your guests know the house rules and the consequences of breaking them
• Know your policy and coverages as completely as possible
• Consider whether you need to raise rental rates to afford your insurance policy

With a complex issue like property damage, it’s imperative to manage the claim process deliberately and thoroughly.

Safely: Insurance for Short-Term Rental Property Owners

Safely focuses squarely on the short-term rental property industry. Thus, when you need to think about things like the rental insurance claim process, know that we have the specialized knowledge to get you coverage. Safely also offers a quick turn-around time, with payment for most claims under $1000 delivered in 1 business day. 90% of claims are paid in 4 business days. 

For a free consultation, reach out to us on our contact page.