The Most Common Short-Term Rental Insurance Claim
Ensuring your short-term rental property is adequately protected against potential damage is crucial. This article explains the most common claim filed by short-term rental property owners and how your insurance policy should respond to such incidents. Learn preventative measures to avoid Airbnb water damage claims and the importance of choosing the right insurance for your vacation rental property.
TL;DR: Sewer back-up and other non-weather water damage account for more than 20% of all short-term rental property insurance claims, with the average claim running around $18,000. Proper has paid real claims on exactly this kind of loss, including $130,000 for guest-caused water damage in Newburyport, Massachusetts, and over $50,000 for a burst pipe on a vacant, never-listed property—while a business activity exclusion on a standard Homeowners policy has denied claims like $120,000 in tree and roof damage for at least one short-term rental host.
The Top Claim Year-Over-Year at STRs
The most common claim short-term rental hosts file is sewer back-up: water damage caused when a stopped sewer or drain line forces water back into the home instead of draining away. It’s the same top claim traditional homeowners file nationwide, and short-term rentals see it just as often — guests don’t think twice about what they flush.
A sewer back-up claim can range from minor damage, like a stopped sink warping wood flooring, to major damage, like a toilet overflow ruining drywall throughout a room. Any time water is forced back into the home instead of draining out, the result can escalate quickly.
Understanding and Managing Water Damage Claims for Short-Term Rental Properties
By the numbers, water damage and freezing account for 22.6% of all Homeowners insurance claims, according to the Insurance Information Institute’s most recent data—the second most common claim category after wind and hail.
Odds are, you’ll see this claim at some point with your short-term vacation rental. The question is, will your insurance policy cover it? Provided your policy doesn’t carry a “business activity exclusion,” you likely have sufficient coverage for such a claim, but you’ll want to verify this with your policy underwriter. Here are a few items to note when doing so:
Understand Your Policy’s Coverage Limits
Since sewer backups are so common, most policies have a maximum limit they will pay out for these claims, called a sub-limit. You need to make sure you’re aware if your policy has a sub-limit for water damage, as this would be the most your insurance company would pay for any damage caused by water backing up into your home.
To put this into perspective, the average sewer backup claim for a short-term rental property in 2024 is $18,000, not including the loss of income you stand to lose while you’re unable to rent the home.
Proper Insurance has removed the sub-limit for this type of claim entirely. This means that damages caused by water backing up into your home from sewers and drains will be covered up to the policy limits rather than being capped at a lower amount.
Understand Your Policy’s Water Damage Deductibles
Once you understand the max limit your insurance company would pay for the claim, you’ll want to identify what your out-of-pocket cost for such a claim would be. Managing this risk isn’t only about what happens after a claim, it’s also about reducing the odds you ever have to file one.
The Proper Policy applies the standard policy deductible to all non-weather-related property claims, including sewer back-up. So if you select a $1,000 property deductible, a sewer back-up claim would only cost you $1,000 out-of-pocket, just as it would for theft, vandalism, fire, and others.
Real Water Damage Claims Proper Insurance Has Paid
A property manager in upstate New York filed a claim after a burst pipe caused over $50,000 in damage. It’s one of several real claims Proper has paid on guest-caused and property-related water damage.
Engage in Water Damage Prevention with Automatic Shut-Off Valves
Sewer back-up can be impossible to predict and can get expensive quickly, but what if you could avoid it altogether? The best devices we’ve found are automatic water shut-off valves from companies like Phyn and Flo. These devices install directly to the main water line in your home and use WiFi to alert you of any irregularities in water activity. You can then remotely shut off your water from your phone or set the device to turn off the water automatically if a leak or overflow is detected.
Automatic shut-offs can save hosts thousands of dollars in remediation costs and lost income. In fact, they work so well we’re able to offer a discount on your insurance premiums if you have such a device installed in your home.
Understand Water Damage Insurance for Short-Term Rentals
Sewer back-up is a high-frequency cause of water damage—but it’s not the only one. See how The Proper Policy responds to burst pipes, appliance failures, and guest-caused water loss in Proper’s full guide to water damage insurance for Airbnb and short-term rentals.
Upgrade Your Vacation Rental Insurance with Proper
Sewer back-up may be the most popular claim, but it’s certainly not the only thing to look out for. With so much at stake with your short-term rental, you want to hope for the best but plan for the worst. This starts with making sure your insurance company understands how you’re using the property and that you understand how they would respond in the event of a claim. For more real, paid-out examples, see real short-term rental insurance claims and what they cost.
If you have questions about your current policy, potential claims, or are curious how the Proper Insurance policy can better protect your home and business, give us a call at 888-631-6680 or request a quote online today. Our expert agents are happy to answer any questions you have or explore how Proper’s short-term rental insurance policy responds to claims like these before you request a quote.
