Vacation Rental Insurance: Cost, Coverage & How It Works

Vacation rental insurance protects your home from risks associated with renting it to others. The policy is similar to a homeowner’s, providing coverage for the structure, contents, and liability while also providing income loss. Vacation rental policies can range from $1,500 to $2,500 a year.

For a quick quote, tailored for your specific property, consider Proper Insurance. Proper Insurance is the nation’s leading carrier in vacation rental properties and is the preferred insurance provider of VRBO. Visit Proper Insurance today for your free quote.

Proper Insurance

Factors that affect vacation rental insurance cost include:

• Replacement cost: The more expensive the property is to rebuild, the more expensive it will be to insure.
• Amenities: Does the home have a pool? Is it on the water with a dock? These amenities, while attracting renters, will also drive up the cost of the premium.
• Rental frequency: If the home is your primary residence that you rent out several times a year, the cost will be less than if you rent it out regularly.
• Special events: If the home is in a scenic venue with lots of space, do people rent it out to host a wedding or party?
• Sleeping quarters: Does the home have bunk beds or a ladder to a loft to create more sleeping accommodations? These risk factors translate into a liability for the insurer and can impact the cost.
• Average rental term: Generally, short-term rentals have a higher premium than long-term rentals because this means more people are staying at the home.
• Location: The property’s location, such as in Miami or Tucson, Arizona, impacts the premium because of the risk of natural disasters in that area.

While this list isn’t exhaustive, keeping the nature of the rental property and your goal in mind when determining what policy is right for you is essential. Are you renting your home when you occasionally travel for business, or have you invested significantly in your property to turn it into an event venue? When determining what coverage is best for your needs, ensure you disclose as much information as possible to the insurance carrier.

Why You Need Vacation Rental Insurance

Vacation rental insurance is a policy that you purchase for your home that protects your property and any lost income you may suffer if you’re unable to rent your home. The policy also provides liability to protect you from any risks you may face if your guests get hurt while staying in your home. If a renter, while sleeping on the top bunk in your home, rolls over and falls out of bed, breaking a lamp and their arm during the fall, rental insurance is the coverage that protects you.

Many standard homeowner carriers consider renting your home out multiple times a year a business use. Therefore, your typical homeowner’s policy may not provide the coverage you need when renting out your property. In that case, you may want to consider shopping for a designated commercial policy to make sure you get the right coverage.

The four primary areas of coverage provided by vacation rental insurance are:

• Liability coverage: This covers personal injury to your renters, their guests, and anyone else at your property
• Structure coverage: This covers the building in the event of fire damage, theft, and over events
• Contents coverage: The items that aren’t a part of the building, such as furniture or electronics, require separate coverage
• Lost income: If, as a result of damage to your property, you cannot rent it, the policy will reimburse you for the lost income

What Type of Policy Is Best?

The National Association of Insurance Commissioners (NAIC) describes the growing trend of people renting their homes as the “sharing economy.” Because the sharing economy is evolving and changing, so are the options you have to insure your property.

Short-term Rental Insurance

Depending on the frequency of renting your home, some major carriers offer a rider. A rider is adding additional coverage to your homeowner’s policy to provide coverage when your home has become a business due to being rented out. This type of policy is the best option for you if you don’t rent your home out very often. Before shopping for a vacation rental insurance policy, ask your agent if a rider is an option.

Landlord Insurance Policy

This policy provides coverage for your property and liability for the guest’s protection if they stay on your property. A landlord insurance policy is something you should consider if you’re renting out a room in your house, even if only for the weekend. A situation like that is a landlord-tenant relationship, so this specialty policy is for those situations.

Service Provider Coverage

Some rental service provider vendors, such as Airbnb, offer insurance if you list with their platform. If you’re listing your property through a provider, check to see if they provide insurance and, if so, what it covers.

Homeshare Insurance

Many carriers offer homeshare insurance as a policy. Homeshare insurance provides coverage when you rent your home regularly through a provider service, such as Airbnb, VRBO, or a similar vendor. If you have a job where you travel regularly and have decided to rent your home out to generate passive income while traveling, this policy is best for you.

Vacation Rental Damage Insurance

Also known as traveler’s insurance is coverage that the renter should consider purchasing. If you’re renting someone’s home and damage their personal property, after their policy pays for the damage, that carrier will send you a bill for reimbursement.

Ways To Get Vacation Rental Insurance

For vacation rental insurance, first choose a provider that offers the best coverage for your needs, serves your geographic area, and has a competitive price. Some providers, such as Proper Insurance, will provide an online quote while others in the rental insurance space will require you to answer many questions and then have an agent follow up with you.

Be prepared to answer questions about the home, such as:

• Age: What year was the home built?
• Square footage: How big is the home, and how many floors does it have?
• Construction materials: Is your home brick and mortar or is it a wooden frame?
• Angle of the roof: Is it a pitched roof, gabled, or something else?
• Roofing material: Do you have metal roofs, composite shingles, or something else?
• Amenities: Does your home have a pool or a trampoline?
• Rental frequency: Will this be throughout the year or just a few times?
• Rental service provider: Will you use a vendor to list your rental property?
• Insurance policy: Is the home currently insured elsewhere?
• Security system: Does the home have a security system including cameras?
• Fire suppression system: Is there a fire suppression system or extinguishers?

Most insurance providers can provide a conditional receipt immediately upon taking the application and payment. The application is submitted to an underwriter, who then confirms all data and finalizes the premium.

Bottom Line

Renting your home can be an excellent way to earn passive income and an entryway into becoming a small business owner. Whether you own a second home or are thinking of buying one for your vacations and renting it out the rest of the year for others to enjoy, you should consider this type of policy. People take a vacation to relax and having the right insurance gives you and your guests peace of mind.