Renting out your vacation home is a great investment, but there are inherent risks that come with allowing strangers to stay at your property, including damage to furniture and appliances, slips that cause bodily injury, and guest fraud.
So there’s no question that specialized short-term rental (STR) insurance is a must. But understanding what that should cost and the coverage you should receive can be complicated when there are so many options on the market.
In this article, we explore:
- How does short-term rental insurance work?
- What does short-term rental insurance cover?
- What does short-term rental insurance not cover?
- How much does short-term rental insurance cost?
- If I already have Airbnb insurance, do I also need short-term rental insurance?
- Factors that affect insurance costs
- How much vacation rental insurance can save hosts
- Reducing or eliminating the cost of vacation rental insurance
- Business benefits to short-term rental insurance
- Key takeaways
- Frequently asked questions about short-term rental insurance costs
How does short-term rental insurance work?
Any time you buy a home, you should purchase a homeowner insurance policy. These policies have varying levels of coverage, but they generally protect you from liability and most kinds of property damage.
However, if you rent your home on Vrbo, Airbnb, or a similar platform, those protections go out the window. Almost all homeowner insurance policies specifically state that they do not cover short-term rentals or commercial ventures inside your home.
That’s where short-term rental insurance comes in. A short-term rental policy covers your home while a paid guest is staying there. When you have both homeowner insurance and short-term rental insurance, your home will be covered while it’s vacant, while you have a paid guest, and while you (or friends, family, and other unpaid guests) are in your home..
What does short-term rental insurance cover?
Generally speaking, a short-term rental insurance policy will cover the following:
Damage to the home itself
If a guest accidentally damages your home, your short-term rental insurance will usually cover the damage. Similarly, if the home is damaged by something else (like fire), your policy should pay as long as that specific loss is covered under your policy.
Damage to your property
The structure of your home isn’t the only thing that can be damaged during a guest’s stay. If your furniture, appliances, or other kinds of personal property are damaged, your policy can pay for repair or replacements.
Damage to other people’s property
In some cases, your policy may cover damage to other people’s property. For example, in the unfortunate event that a guest causes a fire that damages a neighbor’s home, your policy would likely pay for the damage to the home.
Injuries to guests
If a guest is injured on your property and files a lawsuit against you, you may be held responsible for thousands of dollars in medical bills. You’d also need to retain an attorney and cover your own legal fees.
Short-term rental insurance includes liability insurance, so if you do find yourself facing a lawsuit, your policy will cover your legal fees and any damages awarded to the injured guest (up to your policy limit).
Loss of rental income
If short-term rentals make up all of your income, you could be severely affected if you’re unable to rent one due to damage. Most short-term rental policies will cover your loss of income in certain cases. For example, if a guest caused fire damage and you lost bookings while your home was being repaired, your policy could reimburse you for those lost bookings.
Of course, bear in mind that each carrier (and each policy) is different. Always make sure you completely understand what your policy covers.
Safeguard your rental properties with Safely’s short-term rental insurance. Learn more about what we cover.
What does short-term rental insurance not cover?
Short-term rental insurance covers a lot, but like any policy, it has limitations. Here are some examples of events that aren’t typically covered:
- Damage that occurs when the home is not being rented
- Damage due to floods or other weather events
- General wear and tear
- Mold and rot issues
- Problems due to poor maintenance
It’s also important to note that short-term rental insurance isn’t meant to cover year-round renters. If you rent homes to long-term renters who have a lease , you need landlord insurance instead. When you’re researching home rental insurance costs, make sure you’re looking at the right kinds of policies!
How much does vacation rental insurance cost?
The average annual vacation rental insurance policy cost ranges from $2,000 to $3,000. The cost is roughly two to three times that of standard homeowners’ policies, which usually don’t cover short-term rental damages.
Vacation homes are considered riskier than primary residences since there’s an increased chance of damages and accidents, but there are many other factors that go into determining your short-term rental premium, like the condition of the property, and its location.
If I already have Airbnb insurance, do I also need short-term rental insurance?
Vacation rental platforms like Vrbo and Airbnb often have their own insurance programs. And, of course, the Airbnb insurance cost makes it enticing — it’s free. However, when you look closely, you’ll see that you need actual short-term rental insurance to adequately protect yourself and your property.
Airbnb offers free Host Liability Insurance (HLI). This policy covers you as the host if a guest sues you for an injury or damage to their own property. However, HLI is capped at $1 million, so it might not be enough to cover all claims. For financial protection and your own peace of mind, it’s a good idea to have your own short-term rental insurance as well.
Airbnb also offers something called Host Damage Protection. This policy is not technically insurance, but it can reimburse you (up to $3 million) for damage caused by guests. Notably, it does not cover loss of rental income.
Host Damage Protection sounds like a good deal, but a quick skim through Airbnb host forums will show you that the claims process is an arduous one, and Hosts often aren’t reimbursed for the full value of the damaged items. The average vacation home insurance cost might be more expensive, but it covers much more than the built-in insurance offered by most platforms.
Factors that affect insurance costs
How much is insurance on a short-term rental property? Just like your homeowner insurance, your Vrbo or Airbnb insurance cost will depend on multiple factors:
The location of your home: A property that’s close to a famous location for events like concerts will probably have higher costs because of its popularity and potential for risk.
The property type: An old property that’s more susceptible to damage (for example because of the condition of the window frames or fencing) will have a higher cost.
Also, facilities, such as fireplaces and swimming pools, could raise the risk of damage and injury to the renter on the site, so this may also incur greater prices.
How often you rent your home: If you only rent your home a few times a year, the cost of your insurance will be fairly low. However, if you have a year-round rental property that constantly stays booked, your costs will be much greater.
Your deductible: Your deductible is the amount you pay out of pocket before your insurance kicks in. If you get a high-deductible policy, your monthly premiums will be lower. However, if you’d prefer a policy with a lower deductible, your monthly premiums will be higher.
Replacement cost: It costs more to insure a new sports car than an older daily driver. Likewise, if your home is filled with valuable antiques or high-end furniture, your insurance premiums will likely be higher.
Your service provider: Every insurance provider is different. It’s essential to get insurance quotes from each and understand the different coverage options they are offering you. You may also want to be mindful of how they charge you. Is it per month, per year, or per booking?
Safely only covers the days you have bookings, so you will only pay for when you have a reservation.
Extent of coverage: Some service providers might only cover on-site property damage for the homeowners; others may have different replacement costs.
Safely’s insurance policy covers on-site incidents for the homeowners, property managers, and guests. It allows you to claim replacement costs of up to $ 1,000,000 for structural damage or bodily harm.
How much vacation rental insurance can save hosts
Homeowners insurance won’t normally pay out when the property is used for commercial purposes (so that excludes your vacation rental). Also, the coverage you receive from online travel agencies (OTAs) like Airbnb and Vrbo isn’t from a specialist insurance provider, so can result in drawn-out claims processes that require the guest or host to accept responsibility.
And if you rely on, say, a $500 security deposit, the protection is clearly very limited—fine if you just need to replace some broken dishes, but nowhere near enough if your oven or refrigerator gets seriously damaged. And if someone has a poolside slip, the costs and stress could make that security deposit look minuscule.
This is where short-term rental insurance is a lifesaver. With a solution like Safely, you’ll be able to claim up to $1,000,000 in liability coverage for structural property damage and bodily injury, and $10,000 for damaged contents.
Not only that, but since you can make those claims following a simple three-step process, you won’t have to worry about reaching out to your guest. You can just go ahead and make your claim without them even knowing about it—so your guest relationships and five-star reviews remain intact, too.
Reducing or eliminating the cost of vacation rental insurance
Here are two ways to cut back on your vacation rental insurance cost:
Use pay-as-you-go insurance
Some insurance companies charge a flat rate, while others like Safely only charge you for nights you book.
We recommend you look for an insurance platform that integrates with your property management system (PMS) so your protection automatically kicks in whenever you have a reservation—no time-consuming admin required.
Include the fee in the pricing
Especially if you have a pay-as-you-go solution, it’s easy to add on the cost of your short-term rental insurance to your nightly rate or to the add-on service/damage fee. If you do either of these, you can even generate additional income on the cost of the insurance.
As a result, vacation rental insurance can essentially pay for itself.
Business benefits to short-term rental insurance
Short-term vacation rental insurance not only offers the comprehensive coverage you need for a short-term rental business but, as we’ve seen, you can add the fee to your nightly rate plus a small markup to increase your overall profitability.
Also, at Safely we have a record of fast payouts, with most claims resolved within five days. So when damages do occur, you can quickly recover the cost of maintenance and replacement.
As one customer said: “The claims process is insanely simple to go through, especially compared to other industry companies in vacation rentals. It’s also a really, really powerful thing when you can make a claim on something that isn’t necessarily accidental.”
Summing up the cost of short-term rental insurance
If you have a short-term rental property, you’ll need short-term rental insurance to protect you since your homeowner’s insurance doesn’t cover excess damage made by guests.
The cost of your short-term rental insurance will depend on multiple factors such as location, property type, service provider, and extent of coverage, with a typical policy totaling fees from $2,000 to $3,000 per year.
However, with Safely, you pay as you go—so you don’t pay anything unless you have a reservation.
We process most claims within five days, offering up to $1,000,000 in liability coverage, with the homeowner, property manager, and guests named and protected for every stay.
Frequently asked questions about short-term rental insurance costs
What are the benefits of short-term rental insurance?
If you have a second rental home, your existing homeowner policy probably won’t cover a slip and fall, theft, or a broken window. Additionally, large commercial claims on your homeowner policy can negatively impact future premiums which will leave you paying more. Short-term rental insurance like Safely’s will cover you and the renter in case any damage to the property or person occurs.
What does short-term rental insurance cover?
Safely’s comprehensive insurance policy covers on-site incidents, including property contents, structural property damage, and personal injury—for the homeowner, the property manager, and guests. It covers property theft, structural damage to your property, and bodily harm.
What type of insurance do I need for a vacation rental property?
Most homeowner insurance policies don’t cover you when your property is used for commercial purposes, so you need short-term rental insurance to protect all parties for a vacation rental stay.
If I have short-term rental insurance, do I also need homeowner insurance?
Yes. Short-term rental policies only cover property and liability claims while you have a paying guest in the home. For example, if a guest slips, falls, and gets injured while renting, your short-term rental insurance will cover you. But if a tree falls on the roof and damages it while the home is vacant, your homeowner’s policy would cover it.
How much does short-term rental insurance cost?
The average annual cost of short-term rental insurance ranges from $2,000 to $3,000. The cost is roughly two to three times the cost of standard homeowners’ policies, which usually don’t cover short-term rental damages.
What factors affect the cost of short term rental insurance?
The price of short-term rental insurance will depend on multiple factors such as where your property is located, the age of the property, and your service provider.Design a custom policy that fits your budget. Get a quote from Safely today!
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