Home insurance companies view the short-term rental of your home through services like Airbnb and Vrbo as a business venture. Therefore, a standard home insurance policy may not protect you if your home or belongings are damaged by a paying guest in your home. Fortunately, you can purchase an add-on policy to cover you in these instances. This article will cover:
- What is short-term rental insurance?
- Is short-term rental insurance required?
- How much does short-term rental insurance cost?
- Where do I get short-term rental insurance?
- Alternatives to a short-term rental policy
What is short-term rental insurance?
Short-term rental insurance is an endorsement to a standard homeowners insurance policy. It offers personal property and liability coverage if you lease your home on a temporary, short-term basis. Standard home insurance does not cover business activities, which renting your home — or even just a room — falls squarely under.
What is a short-term rental? While the time limit may vary between insurance providers, many companies consider a home rented out for two months or less to be short term. Some home insurance companies offer coverage for one-time temporary rentals of your home with proper notification. However, this is of little use if you plan to use your home for short-term rentals on a consistent basis.
It should be noted that short-term rental insurance is only required if guests pay to rent your home. If you let friends or family stay for free, it’s not necessary.
Short-term rental insurance usually includes these coverages:
- Personal property: if a guest damages or steals your belongings during a stay, your short-term rental insurance can pay for their repair or replacement, up to your policy limits.
- Liability: in the event of a guest getting injured on your property during their stay, short-term rental insurance can help cover medical bills and legal fees.
- Loss of income: if your home is damaged by a covered peril and you are unable to rent it out, your policy can compensate you for the income you should have generated, up to the policy limit, while repairs are made.
- Excessive utility usage: should a guest overuse your utilities, such as leaving a bathroom faucet or the air conditioner running, your coverage could help with the additional utility cost.
- Identity theft: if a guest steals your credit card, Social Security card or other information that compromises your identity, identity theft coverage can help with the cost of restoring your identity and credit status.
Do I need short-term rental insurance?
Neither state law nor mortgage lenders require you to carry short-term rental insurance. However, it may be an excellent investment since homeowners insurance doesn’t cover many of the problems that can occur with guests in your home.
Furthermore, many homeowners insurance policies have a clause regarding termination of coverage if your home becomes a rental property. Having short-term rental insurance can protect you from that.
How much does short-term rental insurance cost?
The price of a short-term rental insurance policy may vary among providers. Factors that can affect the cost of your policy include:
- Your home or apartment's size
- Duration of coverage
- Crime rate in your area
- The age of your house
- Your personal insurance history
Our study found that the average cost of home insurance is $1,735 per year in 2021. Short-term rental insurance policies are usually cheaper, since the stays are shorter.
How to get a short-term rental insurance policy
The best way to get a short-term rental insurance policy is to talk with your homeowners insurance company first. If they do not sell it, now is an excellent time to compare quotes from multiple home insurance providers. You can get the short-term rental coverage you need and maybe even save some money on your homeowners insurance premium in the process.
Companies that sell short-term rental insurance include:
Other short-term rental coverage options
Short-term rental insurance is the best choice if you will be renting your home out for short periods. However, there are other options to consider to supplement a short-term rental insurance policy, or for more suitable coverage if you’re renting for longer periods of time.
As part of their service packages, hosting services such as Airbnb, Vrbo and Flipkey offer host protection that covers damage to your belongings and liability protection. These packages are often considered primary coverage. This means they will provide coverage up to the host protection limit, even if you have other short-term rental insurance. Some hosting services even offer property damage coverage that extends to your neighbors if your guest is responsible.
If guests rent out your home beyond the time limit of your short-term rental insurance, landlord insurance is a better coverage option. Landlord insurance usually costs 15% to 20% of your annual home insurance premium. For example, if your annual home insurance premium is $800, you’ll probably pay an additional $120 to $160 a year for landlord insurance.
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