Homeowner’s insurance is a necessity for your personal property. It’s there when you need it. If you’re lucky, you won’t ever need it! But, what if you begin renting that property to vacationers and other short-term guests on sites like Airbnb or Vrbo? Is that same homeowner’s insurance policy going to cover you and provide liability for each and every person who stays in your property?
Once you begin earning income from that property, your insurance company is going to view this property differently than before. It is now a commercial property and not covered under your traditional homeowner’s policy. Your insurance policy likely has a “business exclusion” written in it somewhere that will nullify coverage for a commercial property.
As laws around short-term rental properties continue to evolve, cities like Chicago are putting tight regulations into practice which include requiring homeowners to carry short term rental policies. Other cities are sure to follow.
So, what kind of insurance do you need?
For starters, any short-term rental insurance that you purchase should cover you for commercial liability and property damage. Commercial liability insurance is for instances where a renter makes a claim against you for something that happened on your rental property. Let’s say someone falls down the stairs and they are injured. They sue you for reimbursement of their medical bills plus damages, lawyer fees, etc. That adds up quickly! Insurance should cover you on this claim. Property damage coverage is also important. If a guest damages your property by, for example, crashing a vehicle into your garage by accident, your commercial insurance will cover these costs.
Homeowners vs. landlords vs. renters insurance
The main difference between homeowner’s insurance, landlord’s insurance and short-term rental insurance all comes down to risk. Think of it this way: if it’s just you and your family living in the home, there aren’t as many variables as far as who’s coming and going, the damage that could potentially happen, etc. Even in a long-term rental situation, it’s one set of renters, and therefore, lower risk. But, when you start talking about a new group of strangers coming into a property potentially once every week, that’s a way different scenario. Each new group of people represents a new set of risks for damage and injury.
What is the cost of vacation rental insurance?
Typically, short-term rental insurance is about 2-3 times what you would pay for homeowner’s insurance. This goes back to the amount of risk that is involved in insuring a property with a revolving door of occupants. Although the cost might seem like a tough pill to swallow, you will be glad you have it if a claim against you ever arises. Finding an insurance provider to fit your situation shouldn’t be difficult. Many providers can provide various levels of coverage. This list should help you get started.