What is Short-Term Rental Insurance and Why do you need it?
Short term rentals aka short term vacation rentals are gaining popularity. Over 1 million homes and rooms are being rented out short-term in the U.S. This rapidly growing industry gives homeowners a way to earn some extra income and provides travelers with alternatives to traditional hotels but, it leaves homeowners with some questions about insurance.
The biggest question that comes up is whether a traditional homeowners policy will you when you are renting out your home short-term. More often than not, the answer here is no. Most homeowner’s policies carry a “business activity exclusion” This means that any claim involving “business activity can be denied. For example, a windstorm causes a tree to fall on your home, damaging the roof and the entire interior of the living room. During the claims investigation, the adjuster discovers that your home (the same address whereby the tree fell) was listed on AirBnb and VRBO. The claim is denied, citing the ‘commercial use’ exclusion on your homeowners policy. Another traditional example, albeit common, stems from the liability associated with a slip and fall within your home. Even in the event that a guest of yours falls down the stairs breaking their arm, the pursuant investigation will dive into whether or not your home is listed on any short-term vacation rental websites. If so, the carrier reserves the right to deny coverage.
A short term rental policy is basically a business insurance policy. It covers your business property (which consists of your rental home and the contents in it), business liability, and the business income generated from renting out your home.
Why AirBnb’s Host Protection isn’t Adequate
Although AirBnb does provide short-term rental owners with some form of coverage, there are many gaps. It serves more as a backup plan in certain circumstances, even Airbnb does not recommend relying on this plan alone. The host protection provided by Airbnb does not cover malicious damage or assault, which are serious issues that should be insured against. The host protection also has a low reimbursement cap, which means that you could still be paying out of your pocket. On top of that, there are extensive exclusions and requirements included in the host protection provided, which makes it difficult to receive adequate coverage needed for short-term vacation rentals.
Choosing The Right Partner
There are only a few carriers out there that adequately replace the property owners current homeowners policy or landlord policy for the property they are renting out as short-term vacation rentals. You will need a written business policy which you with comprehensive coverage for the building(s), contents, commercial business liability, and business income associated with your short-term vacation rental. It will also need to include personal liability when the short-term rental doubles as the owner’s primary residence. You essentially need a homeowners policy, a landlord policy, and a business policy all wrapped in one
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