This article explains how vacation rental property insurance differs from your standard home insurance.
So that you can assess more easily what your current insurance plan does and does not cover when the property is rented out.
It’s always a good idea to understand risks and safeguard yourself and your property against damage or theft.
How does vacation rental insurance differ from home insurance?
Home insurance covers:
- Your primary residence.
- Cost of repairing or replacing the building and/or its content.
- Add-on options, like alternative accommodation while repairs are carried out.
Building insurance covers:
- Any damage to the structure of your property.
Contents insurance covers:
- Any damage to the furniture and to your belongings.
All of the above is normally only in the event of a natural disaster, fire, flood etc or theft.
Once your property changes from a residence into a vacation rental business, contact your insurer to update your policy.
Home insurance will generally not cover or compensate you for damage or theft that occurs when the property is rented out.
If you rent your property for short-term stays without updating your insurance, chances are that your standard home insurer will decline any claims.
Most home insurance companies also provide coverage options for vacation rentals. But if you haven’t updated your policy, you may be putting yourself at great financial risk.
Generally speaking, insurance companies have no obligation to contact you and find out if your circumstances have changed. It is your responsibility to keep them informed.
For this reason, aside from your building insurance, you must take out a dedicated insurance policy for your vacation rentals.
Most vacation rental property insurance companies offer tailored packages that combine the traditional building/content insurance with specific vacation rental insurance for owners, so that you are protected from every angle.
What about damage deposits?
Damage deposits are intended to cover small incidents. For example, needing to hire someone to clean the carpet after a spilt glass of wine.
They can give you peace of mind up to a certain extent. But, unfortunately, if significant damage occurs at your property, a deposit alone will probably not suffice to cover the repair costs.
Won’t the Airbnb Host Guarantee cover me?
While Airbnb can cover you for up to around $1m (i.e £706,440 or 818,725 € value) worth of damages, not all kinds of risk are included in their terms. This is why you should read their exclusion clauses very carefully.
Furthermore, Airbnb clearly state that the Airbnb Host Guarantee is not an insurance policy.
This means that since you do not have an insurance contract with them, they are under no obligation to pay you. Airbnb is also not regulated in the same way as an insurance company.
Here are some of the most important exclusions that Airbnb’s Host Guarantee may not compensate you for:
- A guest damages a common area in your building that was not part of the rented area
- A pet that is not classified as a service animal damages your property
- Theft occurs at your property while it is unoccupied
- An injury occurs at your property
Also note that Airbnb require you to attempt to resolve any issues directly with the guest within 14 days post-checkout. You do this by submitting a claim through the Airbnb Resolution Center.
If the issue is not resolved, you have 30 days from the date the damage was caused to submit a payment request form. With an insurance company, you will not have to resolve anything directly with the guest. The time frame to report and resolve issues is also typically much longer.
What about the Host Protection Insurance Program?
Airbnb do offer a Host Protection Insurance Program, which may protect your legal liability for situations where a guest incurs an injury or a loss while staying at your property. But again, they have specific terms detailing what is and isn’t covered.
Hosts in mainland China or Japan are not covered by this program, nor are hosts who offer accommodation through Airbnb Travel, LLC, or hosts of experiences.
The Airbnb Host Guarantee and the Airbnb Host Protection Insurance Program are both free.
If you are a vacation rental host, bear in mind that the guests who book stays in your property will be sent to you by many different agencies. So it is worth your while looking for the one insurance company that will give you the very best deal, regardless of the online agency that generated the booking.
Most travel agencies will insist that you exhaust all current policies before paying out anything, so you may find it easier to just work with one insurer.
What should a solid vacation rental property insurance cover?
Here are some factors you should consider when evaluating different policies:
- Damage to the common areas of your building caused by a guest
- Damage caused by a pet
- Wear and tear as a result of frequently hosting guests in your property
- Theft, whether caused by a guest or otherwise
- Property damage that is not covered by the Airbnb Host Guarantee
- Legal liability insurance in the case of physical harm incurred to a guest at your property
- Legal liability insurance in the case of physical harm incurred to a staff member at your property
- Loss of income if you are unable to take bookings due to property damage
- Loss of income if you are unable to take bookings due to a guest or staff member having been injured at your property
- Alternative accommodation costs for guests as a result of damage done to your property
- Damage resulting from your property remaining unoccupied for long periods of time, such as a broken pipe that went unnoticed
- Pools and/or out-buildings where relevant
Once you enter an insurance contract, the company will have the obligation to compensate you for any damage specified in their terms.
Insurance is a matter that is often overlooked by first time vacation rental hosts. We hope you found this article helpful and that you feel more confident in seeking out the right insurance policy for your business. To find out how to connect to multiple OTAs and manage all your bookings from one place, click here.