Some folks have learned the hard way that their vacation rentals are NOT covered by homeowners insurance. This is often because renting out your property constitutes a business activity, which either needs a separate policy or a rider to your standard one. But why do you need STR insurance anyway? Let’s talk about it.
What Does STR Insurance Protect Against?
Obviously vacation rental insurance is there to protect your property in case of bad behavior from a guest, or to protect a guest in case they suffer some kind of injury, or even to protect your income should something unforeseen happen. Examples include:
- Excessive use of utilities
- Insect or pest infestation
- breakage/theft by guests
How is the Premium Determined?
STR Insurance is underwritten using a lot of the same fundamentals as homeowners’ insurance. Things like:
- Condition of the home
- Proximity to fire stations
- Crime rate
- Types of materials used to build the home
A lot of your big carriers have STR insurance policies, like Allstate, Farmers, and Progressive. But you’ll also find carriers who have a real focus on this space, like Proper, Safely, and RentalGuardian.
Doesn’t Airbnb Have Coverage for Hosts?
Yes, they do, but they are at specific pains to claim that it is NOT insurance. This is for a couple reasons, including:
- Insurance is a highly-regulated industry and it’s not one that Airbnb currently wants to get involved in
- Airbnb has a policy in which it is the named beneficiary but that policy has a cap on total claims in a calendar year, allowing Airbnb to make strategic choices about what and how much it will pay out.
AirCover for Hosts does offer $1M liability coverage for bodily injury or property damage, as well as damage by guests to common areas, like lobbies. But you shouldn’t think about it as a primary insurance policy, not just because Airbnb specifically states that it isn’t one (“it is not a substitute for personal homeowner’s or liability insurance that may cover you all the time.”), but because it can’t offer the protections a regular policy might, like loss of income.
Questions to Ask
Speaking of loss of income, when getting a quote for your vacation rental(s) you need to ask how you will be compensated, specifically regarding confirmed reservations or forced vacant nights.
As with all insurance policies, you’ll also want to consider what kind of deductible you want on your policy.
You carry insurance for lots of other things that you value just for you and your loved ones. You need to extend that same level of care to your guests to protect yourself and your investment. Even if nothing ever happens, a lot of times insurance is just paying for peace of mind, and that’s worth a whole lot.
This content originally appeared in our twice-monthly Guest Book newsletter.
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