How to Read and Understand Your Insurance Policy

Having an insurance policy can save you hundreds or even thousands of dollars depending on the situation. Just as car insurance and homeowner’s insurance can provide a significant cushion in the event of an accident or break-in, short-term renter’s insurance can protect property managers from all the unknowns of renting vacation properties. 

If you manage multiple properties that are rented on a short-term basis, an air-tight insurance policy is essential. However, closely reading and understanding the terms of your insurance policy is just as important. This way, you won’t be caught off-guard by any unfamiliar concepts or gaps in your coverage.  

How to Read an Insurance Policy for Vacation Rentals

New to the world of short-term rental insurance? It’s no secret that insurance policies can be full of big words, long-winded sentences, and legal jargon that may feel confusing. However, the majority of insurance documents start with a declarations page that states the nature of the agreement followed by details of what’s insured and any exclusions, conditions, or relevant definitions. 

As long as you take the time to read and understand your insurance policy from top to bottom, you’ll be able to fully reap the benefits of it, knowing that you are legally protected as the property manager. Here are some of our top tips to fully grasp all the implications of your insurance policy terms.  

Confirm Essential Info

Once you have your short-term rental insurance policy in your hands, the first details to pinpoint are the basics. This includes information like: 

• Your company name or individual name (if functioning as a sole proprietor)
• An overview-style description of the coverage type
• Specific dates describing the policy’s duration
• Dollar amounts pertaining to coverage limits and deductibles 
• Insurance policy number

If you are given an insurance document with these specific details on it, you’ve probably already met with an insurance representative who collected this information and drafted a custom plan based on your needs. This is the time to ensure that all of your important details were relayed correctly and no essential terms are incorrect. 

What Is an Insurance Policy Number? 

Your insurance policy number is a code assigned to your specific insurance plan that allows representatives from your insurance company to look up and read the details of your policy at any time. As you’re scanning the document for essential basic information, make sure you see an insurance policy number. 

Research Any Unfamiliar Terms

If you’re just learning how to read an insurance policy, it’s likely that some of the terms you see within the document are unfamiliar to you. 

Insurance policies often contain legal terms that have a narrow definition or are even in Latin, which is the basis for many widely accepted legal concepts. Most insurance documents will provide definitions for these terms, but doing your own research in addition can help you to understand their implications more deeply.

The language used in insurance policies can also include words or phrases that you understand in an everyday context but that mean something very narrow when presented in an insurance context. It’s better to over-analyze the language in your insurance document than to have it be misconstrued by yourself or a problem tenant.  

Don’t Forget the Fine Print

All of the information listed in your insurance policy is essential for you to understand, and that includes the fine print. While your first instinct may be to skim over your insurance policy fine print, you could miss something important. 

Additionally, the fine print may offer insurance policy definitions or details about concepts mentioned in previous sections, and this could help with your all-around understanding of the document.  

Understand the Full Scope of Your Coverage

Since every short-term rental situation is different, every related insurance policy will be different as well. Depending on the location of your rental property, the home type, and other factors, your insurance policy may have a single “Insuring Agreements” section or multiple in order to list all of your specific coverage in detail. 

Once you understand the scope of your policy, you can deepen your understanding by comparing this against any exclusions. 

Review Any Limitations, Conditions, and Exclusions

Every insurance policy has a detailed list of limitations, exclusions, and conditions. These clarify any hypothetical situations in which your insurance policy would not be liable to cover you based on your actions, actions your renter has taken, or circumstances that are outside of the control of both parties. 

Keep in mind that conditions, limitations, and exceptions can be found throughout your insurance policy document and not just within a specified section. This is another reason why reading through the full policy is essential. 

Test Yourself by Asking Questions

As you’re learning how to read an insurance policy for short-term rentals, the best way to check your knowledge and level of understanding is to ask yourself questions. Pretend that you are the insurance representative and a client is coming to you with the following questions:

• What is covered under my policy?
• When does my coverage expire? 
• How can I find my insurance policy number?
• What are the exclusions to my coverage?
• What is my deductible?

Take the time to think through detailed answers to all of these questions. If you’re able to do so, you’ll know for sure that you properly understand your short-term rental insurance policy. If you feel that any of your answers are incomplete, you can always refer back to the document to familiarize yourself with the details even more. 

Create a Custom Policy With Safely

Learning how to read an insurance policy is a process, but it is worth undergoing as a property manager. With a commercial insurance policy to protect you from problematic renters and other unforeseen circumstances, you can focus on maximizing your profit and providing an amazing experience for your renters.

At Safely, we understand that vacation rentals can present unique challenges. We help to prepare property managers for the unexpected with short-term rental insurance. Learn more by contacting us at Safely today.