Your standard homeowners insurance policy will rarely provide coverage for short-term rentals—even those connected to your primary residence—as they are considered business ventures. In most cases, this means you will need to purchase short-term rental homeowners insurance.

Thanks to companies like Airbnb, renting on a short-term basis has become extremely popular, and homeowners have more questions than ever regarding how to best insure their short-term rental properties. Let us help.

We know insurance can be difficult to understand, but

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rental insurance

entails, what it covers, and who sells it.

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What is short-term rental insurance?

As the name suggests, short-term rental insurance is the policy type most recommended for homeowners who wish to rent out a vacation home, cabin, or portion of their primary residence on a short-term basis. In general, insurance providers define this timeframe as a house being rented for two months or less, capping out at around 60 days.

This type of insurance provides homeowners with liability and personal property coverage if paying guests injure themselves or damage the home at some point during their stay.

Subleasing as a renter

If you are currently renting, it may be possible for you to sublease either the entire unit or a portion of it, as long as your landlord does not prohibit you from subletting the property. To verify whether you are allowed to sublet as a renter, speak to your landlord and/or consult your rental agreement.

If you find that your current rental agreement allows it, and you wish to host paying guests, you’ll need to consider purchasing short-term rental insurance.

Who does short-term rental insurance apply to?

In general, you will only ever need short-term rental insurance if you have guests that are paying to stay in your home (or a part of your home) on a short-term basis, for no more than 62 days out of the year. If you are renting out your home to a paying tenant on a longer timeframe or year-round, you will need to purchase landlord insurance instead.

In most cases, you will never need short-term rental insurance for guests, friends, or family members who are staying with you for free, as the majority of all homeowners insurance policies will provide coverage for non-commercial guests.

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What do short-term rental policies cover?

As with any rental property, there will always be risks to renting out your house or vacation home on a short-term basis. Fortunately, most short-term rental insurance policies provide coverage for common threats, such as excessive use of utilities by a renter, insect or vermin infestation, identity theft, etc.

We’ve highlighted some of the more serious risks below:

Theft

In the case of theft of personal items by a guest—or even in the event of a burglary while a guest is renting the property—a short-term rental policy will provide coverage for the replacement of certain items if they are stolen while under the lease.

Damage

While a short-term rental policy will not provide coverage for the normal damages a house incurs over time (e.g nail or tack holes, flaking paint, degraded weather-stripping), it will cover any excessive damages caused by the renter while living in the rental property (e.g. they break a window, knock a hole in the wall, etc.).

If you wish to protect yourself further against potential damages, you might consider requiring guests to pay a security deposit at the start of their rental period. If the damages they cause are fairly minor, a security deposit should cover the cost of repairs. If the property is left in good condition, they will receive their deposit back.

If the security deposit fails to cover the cost of damages caused by a guest during their stay, your short-term rental insurance should prevent you from having to pay for the damages yourself.

Loss of income

Should your rental property be damaged by one of the

perils

—natural or manmade—that is covered by your insurance and cannot be rented out, your short-term rental policy can compensate you with the projected amount you would have made until repairs are finished.

Key Takeaway: Your short-term rental insurance should cover theft, loss of income, damages, liability, and excessive utility usage.

How much does short-term rental insurance cost?

Unfortunately, there is no standard cost-projection for short-term rental insurance, as numerous variables influence how much a company will charge for your premium. You can expect many of the same conditions used to determine the premiums for homeowners insurance to factor into determining your short-term rental’s premium.

These include the condition of the rental property itself, as well as its location. Knowing these allows insurance companies to gauge the risks posed by the rental property’s proximity to emergency services, the area’s crime rate, and even the materials used to build the home.

Whatever premium a company charges you will largely be based on these perceived risks specific to your short-term rental property.

MORE:

How to decipher home insurance quotes

Who offers short-term rental insurance?

If you’ve determined that short-term rental insurance is the best fit for your current situation, you’ll need to start comparing quotes from different providers to find the coverages you need at an affordable price.

It is recommended you speak with your current

homeowners

insurance provider first. Some common providers of short-term rental insurance include

, and more.

Alternatives to short-term rental insurance

While it is not recommended, you do have the option of purchasing landlord insurance to protect your short-term rental. For the most part, however, this policy type is reserved for long-term rental properties where the guest is living there for months or years at a time.

There is also the possibility of finding an insurance policy that provides coverage for both your home and short-term rental property at the same time. Companies who offer these types of policies will usually attach short-term rental insurance as an endorsement or rider onto your existing homeowners policy, rather than as an entirely separate plan. This may actually help you save money in the long run.

Host insurance

If your short-term rental property is available to be booked through a site like Airbnb, Flipkey, or Vrbo, you have some automatic protections, albeit with less coverage than most traditional short-term rental insurance policies. In any case, host service packages will usually provide coverage for liability protection and damage to personal belongings.

Key Takeaway: Alternatives to short-term rental insurance include hybrid policies and host insurance.

Finding an insurance policy that works for you

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renters insurance

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FAQs

Does homeowners insurance cover short-term rentals?

Generally speaking, most homeowners’ insurance policies will not cover short-term rental properties, as they are considered business ventures and are likely not occupied by the owner of the house for the majority of the year.

That being said, some companies offer insurance policies that provide coverage for both your home and short-term rental. This is usually done by tacking on short-term rental insurance as a rider or endorsement to your current homeowners policy.

How much does short-term rental insurance cost?

While there is no standard cost for a short-term rental policy, you can expect to pay less annually than you do for your homeowners insurance. Most insurance providers calculate the cost of your premium based on the perceived risks associated with the rental property.

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