Do You Need Short-Term Renters Insurance?
If you're using your home as a short-term rental, this article will help you determine what kind of insurance coverage you need.
If you want to use your home or condo as a short-term rental, homeowners insurance doesn't provide much in the way of coverage for you or your guests. Fortunately, insurance providers have started to offer short-term renters insurance to homeowners who lease their homes to short-stay vacationers. Short-term renters insurance offers coverage that would otherwise be unavailable with only standard homeowners insurance.
This article will cover:
- What is short-term renters insurance?
- Is short-term renters insurance necessary?
- Other short-term coverage options
Short-term rental insurance defined
If you're making your home available to others on a temporary basis, short-term rental insurance is an endorsement that you can add to your home insurance policy. Short-term renters insurance provides coverage including personal property and liability insurance for covered perils that don't fall under standard homeowners insurance. Homeowners insurance providers consider leasing your property a business activity. Since home insurance excludes a lot of coverage that a home business needs, this puts such renting outside the parameters of your coverage.
The exact limit may vary from insurer to insurer, but most home insurance providers consider homes rented out for a month or less to be short-term rentals. Some homeowners insurance companies provide coverage for a one-time temporary rental if you notify them ahead of time.
What does short-term rental insurance cover?
Short-term renters insurance endorsement coverage often includes:
- Personal property
- Loss of income
- Excess utility usage
Short-term rental insurance excludes dwelling and additional living expenses, which are typically covered under your home insurance policy.
How much does short-term rental insurance cost?
The cost for short-term rental insurance can vary from provider to provider and by duration of the policy. Some insurance companies offer short-term renters insurance over a set period of time, while others offer coverage only for nights you're renting your home out.
If your home insurance policy doesn't offer the short-term insurance coverage you need, take this opportunity to compare quotes from other home insurance providers. On top of being able to get the coverage you need, there's a likelihood you may be able to get a better yearly premium than what you currently pay.
Do I need short-term renters insurance?
Short-term renters insurance isn't required by state law, nor is it often required by mortgage lenders the way they require home insurance. While not legally required, it remains a good investment. Having renters in your home for set periods of time can nullify your home insurance, leaving you in a dire financial position if something goes wrong while you're renting.
Other short-term rental coverage options
There are other options for coverage if you're looking to rent out your home or condo on a non-permanent basis. It should be noted, however, that not all of the options provide coverage equal to what short-term rental coverage has.
Hosting services offer various liability and coverage packages for their hosts. Airbnb and Vrbo, two popular hosting services, have host protection insurance coverage programs that provide liability coverage for injury or legal fees up to $1 million per third-party claims resulting from a short-term rental stay. This also provides coverage for damages to your property by guests. These two host services offer this coverage to hosts as part of their service, so it doesn't cost you extra. Host protection is considered "primary coverage". This means it will cover you up to its limit regardless of other insurance you have.
If you don't have liability coverage through an insurance source, host protection liability will activate first in the event of a claim against you. If you do have liability coverage already, host protection will be added to what your insurance provides in the event of a claim.
HomeAway, another popular hosting service, also provides hosts with $1 million in primary liability coverage per claim. Furthermore, it provides coverage if a guest damages the property of a third party, such as one of your neighbors.
If you're looking to let people live in your home for a large chunk of the year, you could find yourself in a position where short-term rental insurance is inadequate. If you're using your home as an intermittent rental past the time limit short-term rental insurance providers offer, landlord insurance may be your best option.
Landlord insurance on average will cost you 15% to 20% of your annual home insurance premium. For example, if you pay $800 a month for home insurance, you can expect to pay between $120 to $160 a year for landlord insurance.
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