What Claim Are You Most Likely to Encounter at Your Short-Term Rental?

The Top Claim Year-Over-Year

The number one claim filed by traditional homeowners across the nation stands true for short-term rental properties as well. It turns out guests don’t give much thought to what they flush down your toilet.

Back-up of sewers and drains claims, or simply “sewer back-up”, is a specific cause of water damage and that accounts for incidents in which water is trapped inside or forced back into your home as a result of a stopped sewer or drain pipe. Small examples of this would be damage to wood flooring caused by a stopped sink, or drywall damage due to a toilet overflow, but as you can imagine, any time there is free-flowing water in your home the result can be disastrous.

Understanding and Managing Water Damage Claims for Short-Term Rental Properties

By the numbers, non-weather related water damage losses account for more than 20% of all property insurance claims. 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:

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.

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.

A policy such as we offer at Proper Insurance 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.

Water Damage Prevention

Sewer back-up can be impossible to predict and can get expensive quickly, but what if you could avoid such an event 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.

Upgrade Your Vacation Rental Insurance

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.

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 provide a detailed coverage comparison by request. Please take a minute to read our BBB reviews.