What is vacation rental insurance?
Vacation rental insurance protects your property from unexpected circumstances. Even so, many short-term rental owners wonder if it’s worth shelling out the extra money.
Online travel sites don’t require homeowners to have insurance. In fact, platforms like Airbnb, Vrbo, and others offer basic policies of their own. The key word there: “basic.” Really, nothing matches the comprehensive security offered by an actual insurance provider.
Your vacation rental is a business, so protect it like one! Beyond just being a smart investment, having insurance is also a legal manner. When you start earning money with your rental, legally, it crosses the line from second home to business endeavor—so standard homeowner insurance no longer applies. With that in mind, let’s address a few more common questions.
Is vacation rental insurance worth it?
Yes! Next question!
What’s the difference between vacation rental insurance and second home insurance?
First, it’s important to know that even if you only rent your property on occasion, you should still invest in rental insurance. Why? Because if your current insurance isn’t specifically constructed for vacation rentals, and your rental is damaged during a stay, the subsequent claim you submit could fall through—and you’ll be left footing the bill.
It’s also critical to understand the difference between “Vacation Rental Insurance” and “Second Home Insurance,” so let’s quickly break it down:
- A second home is exactly what it sounds like. It’s a residence that isn’t your primary home, but also, it doesn’t generate income as a vacation rental. Your coverage for a second home is similar to your standard homeowner’s insurance.
- A vacation rental, on the other hand, is a second residence that you rent out for more than 14 days in a year. Insurance providers regard that as a business activity, because, well, it is a business activity.
The central differentiator between these two types of insurance: guests. Let’s face it, renting a property to total strangers can be a risky venture! Opening the door to your second home puts more liability on your shoulders. And while it’s unlikely that something unfortunate happens to a visitor or to your property, you need proper protection should that dilemma arise.
How much does vacation rental insurance cost?
The inherent risk of a vacation rental is unfortunately, but not unsurprisingly, reflected in the cost of insurance coverage. On average, rates on vacation rental insurance are two to three times higher than homeowner plans. Costs typically land in the $2,000 to $3,000 range annually, but that number goes way up for rentals in tourist destinations such as Florida.
Aside from location, the cost of vacation rental insurance also hinges on your:
- Rental Frequency
- Amenities (Pool, Fireplace, etc.)
- Replacement Costs
What does vacation rental insurance cover?
Ultimately, the ideal insurance plan includes the following:
1. Liability Coverage: Accidents happen. It’s a fact of life. No matter how safe you think your home is, your insurance plan should provide coverage in case a guest is injured during a stay.
2. Property and Its Contents Coverage: Weird stuff happens. That’s another fact of life. Make sure your plan covers replacement or repair costs if something unexpected pops up, such as fire, damage, or theft.
3. Rental Income: A solid insurance plan doesn’t just protect your home—it protects your income. Unpredictable events (like, say, a pandemic) could cause potentially substantial losses; a plan with full or partial income coverage can help keep you afloat.
4. Additional Coverage: This is especially necessary for properties located in areas with natural disasters. Tornadoes, floods, and earthquakes don’t care about your business, but you can at least safeguard against their wrath.
What are the best vacation rental insurance companies?
This is a big question, and at the end of the day, only you have the right answer. Because it truly boils down to your needs—what type of property you own, whether you want a customizable plan or a prepackaged one, and so on. However, to get the ball rolling, here are some providers that are highly regarded by the industry: CBIZ, Allstate, Farmers Insurance, Nationwide, Proper Insurance, SafelyStay, Superhog, and Rental Guardian.
Each provider brings different assets to the table. And now that you know that vacation rental insurance is, without a doubt, worth the investment, you’re ready to do a little homework on your own and protect your property with the coverage it deserves.