Understanding Deductibles in Short-Term Rental Insurance
Short-term rental property managers have to have plans to account for the unexpected. Accidents and property damage are always looming possibilities. A commercial insurance policy is important to guard against liability and losses. However, a typical home insurance policy won’t be enough for short-term rental property managers whose units change tenants frequently.
Short-term renters insurance fits the bill. A rental insurance policy covers your property and limits liability when guests cause property damage or experience bodily injury. Some policies can be complicated, so getting to know how a deductible for short-term rental insurance works should be one of your main goals.
What is a deductible, and how can a rental property manager use it to set policy limits? Safely takes a closer look in this post.
What Is My Deductible?
In any insurance policy claim, the deductible is the amount of cash a policyholder must pay up front before the insurer kicks in for the rest of the coverage.
For example, suppose that one of your guests accidentally leaves their stovetop unattended. It results in a kitchen fire that causes $900 worth of damage. Your short-term renters insurance policy covers $1,000 in repairs and replacement with a $300 deductible. When you file the claim with your insurer, you have to pay $300 before your insurer contributes the remaining $600 to cover the claim.
The premium and the deductible for short-term renters insurance have an inverse relationship. A policy with a high premium usually has a lower deductible, while a low-cost policy probably has a higher deductible. For example, if you can afford to cover a $1,500 deductible on a policy claim, your insurer may charge $500 in premiums. But if you decide you can only afford a $1,000 deductible, the insurer might respond by charging $1,000 as a premium.
Factors to Consider When Setting a Deductible Amount
Property managers have a few factors to think about when settling on a deductible for short-term rental insurance, including the following.
Risk Tolerance
Can you comfortably cover a large deductible when a claim is filed? Or can you only afford a limited amount of cash up front? What you decide will impact how much you’ll have to pay in premiums.
Property Size and Number of Units
If you manage multiple properties, you might find it wise to opt for a higher deductible for short-term rental insurance. That’s because it’s relatively unlikely that all the units you manage will experience a claim at one time. What you save on premiums may offset the higher deductible you pay.
Expected Amount of Claims
Think about your property and the features it has. A swimming pool has unique risks and is more prone to accidents and damage. Your primary customer base may be more or less likely to file claims than others. Use your claims history in conjunction with these examples to determine how high your deductible should be.
Financial Situation
Cash flow is always a big concern for short-term rental property managers. Balance how much of a deductible you can handle with your budget for premiums to find a way to afford both.
Deductible vs. Minimum Claim Amount
Some people confuse policy deductibles with minimum claim amounts. Though it’s easy to see how that confusion occurs, the two figures represent very different things.
The minimum claim amount is the threshold at which the insurer will offer liability coverage — not what the policyholder will pay up front.
For example, suppose that the minimum claim amount on your renter’s insurance policy is $750. One of your guests breaks a window, causing $500 in repair or replacement charges. Your insurance won’t cover this at all, no matter what your deductible on the policy may be. You’re responsible for the entire $500 in damages.
How to Limit Your Short-Term Rental Insurance Deductible
There’s no bulletproof way for vacation and short-term rental property managers to cap their deductible amounts. However, there are some measures and steps you can take that could influence an agent’s decision to offer lower deductibles over time.
Pay a Higher Premium
If you can afford to pay higher upfront costs, you’ll likely have a lower deductible.
Prevent Losses
Making an effort to beef up safety and control losses is something insurers love to see from short-term rental property managers. You can install or upgrade security systems, charge guests deposits, and require guests to know house rules before they take over your accommodations.
Insurers look upon all risk management responsibilities favorably. By proactively upgrading your units and amenities to make them safer, you may be offered a lower deductible amount — or even a lower premium.
Bundle Policies
If you own other properties to go along with your short-term rental units, consider bundling the two coverages under one policy. Often, insurers will offer a discount on bundled policies because managing them together saves on administrative costs.
Shop Around
Insurers expect short-term rental property managers to look for multiple insurer quotes and compare them. Insurance companies that specialize in short-term rental insurance may be more in tune with your unique insurance needs and might offer a discount for certain coverages.
Don’t be afraid to get more than one quote and determine which company offers the best coverage for your budget.
Safely: Specializing in Short-Term Property Rental Insurance
Safely has a particular focus on short-term and vacation rental property insurance. We’ve seen the industry grow steadily in the last few decades. Our agents have seen great change in what property managers are responsible for and how the customer base has expanded. We focus on the minimum coverage our clients need and tailor each policy to each manager’s needs.
If you’re a short-term or vacation rental property manager looking for a commercial rental insurance property, contact our sales team online to set up a consultation.
