- Short-term rentals have become popular since Airbnb launched in 2007, but hosting short-term guests can be risky.
- Most homeowners and renters insurance policies don’t cover paying guests.
- Short-term rental insurance is usually more expensive than a homeowners or renters policy, but it will protect your property from guest damage, medical or legal bills and natural disasters.
If you’re one of the 4 million hosts on Airbnb, or one of the many others on similar short-term rental sites, you have likely considered worst-case scenarios even if you haven’t actually experienced them yourself. Whether the thought of theft, damaged property like a ruined carpet or a guest medical emergency keeps you up at night, short-term rental insurance could be the answer.
What is short-term rental insurance?
Short-term rental insurance is insurance that covers your property when you have guests paying to stay there. It also includes liability coverage for those guests. Renting out a house or part of your home to short-term guests could require one of two insurance coverage options:
Insurance add-on: Some insurance providers may allow you to cover a short-term rental with your existing homeowners or renters insurance policy, as long as you discuss it with them in advance. Others might offer an endorsement or rider to the policy to provide the coverage you need. This is a better option if you’re not planning to rent to guests very frequently.
Business insurance policy: If you’re doing a more traditional Airbnb rental, your insurance provider may want you to take out a hotel or a bed and breakfast policy.
Landlord policy: This is another option that would protect you and your guests if you’re regularly renting. These would offer liability coverage, coverage for property and physical damage and loss of use insurance that could help you recoup lost rental income if your property is damaged and unable to be accessed.
The National Association of Insurance Commissioners recommends asking your insurance agent these questions before renting your home:
Will my policy cover property damage caused by paying guests?
Is my property covered if I hire someone to help with cleaning the unit?
What if a guest steals or damages my personal items?
Why do I need short-term rental insurance?
Even if you have homeowners insurance and are renting out a room in that home, many homeowners policies don’t cover guest injuries or property damage. You should have coverage specifically for the damage or injuries paying guests might cause or sustain.
Airbnb has host liability insurance as well as host damage protection, but you’ll want to carefully review those policies to ensure that they’ll offer you adequate coverage.[4,5] For instance, their policies don’t cover natural disasters or intentional damage or injury.[4,5]
How much does short-term rental insurance cost?
This depends on many of the same factors that influence the price of homeowners or renters insurance: the location of the property, its condition, and other factors. An estimate from American Family Insurance puts the cost around $2,500 annually—not cheap.
This is not only because of the added risk of a revolving door of guests, but also because often short-term rental properties might sit unused for periods of time, leaving them more vulnerable to damage from things like water leaks or burglars.
How to shop for short-term rental insurance
Looking for the best short-term rental insurance is similar to any other type of insurance shopping—you’re looking for the best price for the coverage you need. Weigh these aspects of insurance policies when comparing:
Premium: This is the price of the insurance itself. While obviously a top concern, price should not be the main concern. Skimping on insurance could mean that you’re making payments every month and still not getting enough coverage to help you recover when the chips are down.
Coverage: How much will your provider shell out and for which events? Does it cover stolen property, damage of all kinds and liability for your renters?
Deductible: This is how much you’ll have to pay out of pocket. Make sure it’s an amount you have on hand in case the worst happens.
The company itself: Is the insurance company solid, reputable and customer-friendly? Do they have a reputation for fast and easy claims processes and payouts?
Examples of short-term rental insurance providers:
|Allstate||Allstate’s HostAdvantage home-sharing insurance offers protection from theft and damage from a large and reputable insurer with an easy claims process|
|Farmers||Farmers offers a prepackaged coverage bundle for seasonal or vacation homes, as well as bundling discounts for multiple policies|
|Nationwide||An insurer with a solid financial footing, Nationwide offers the options of adding a rider to a homeowners policy with them or getting a business liability policy.|
|Proper||Proper offers policies custom-made for the purpose of Airbnb-style rental homes, offering no limits on damages caused by a renter and underwritten by the well-established Lloyd’s of London|
|Safely||Safely is another bespoke Airbnb-style rental insurance option, boasting an average of 3.8 days to pay claims and complimentary guest background checks|
Generally speaking, most of your short-term renters will be excellent guests and their stays will go smoothly, or with easily remedied hiccups. But when you get that one nightmare guest—or something outside of both of your control happens—short-term rental insurance will help you navigate next steps.