We ended February by discussing the current short-term rental liability insurance requirement in Des Moines, IA, where hosts are required to provide proof of $500,000 liability insurance upon applying for a short-term rental permit. Kansas City may have a less strict regulation with $300,000 rather than $500,000, but they are on the same page with understanding the unique risks of short-term rentals and the need for insurance – especially sufficient liability insurance.
Hosts in Kansas City must provide proof of liability insurance to the city planning and development director when applying for a permit. The City spent several years studying how to balance the rights of property owners and neighbors alike, to rent their properties and to preserve the character of their neighborhood. The City defines short-term rentals as rentals for a period of less than 30 days.
What do hosts need to know about short-term rental liability insurance?
With the explosive growth of short-term rental properties found on websites such as Airbnb and Vrbo, communities are struggling to find common ground regulation. Many communities have passed ordinances and laws with which all have some type of insurance requirement. The concern is most are inadequate and often misleading.
While the City may require proof of liability insurance to obtain a permit, the type of liability is not defined therefore causing confusion for hosts. There are three types of liability coverage hosts can purchase for a short-term rental.
This type of liability is found in all homeowner’s insurance policies and protects the insured against claims of bodily injury or property damage arising from business activity. Most insurance policies define a business as something that results in more than $2,500 of financial compensation during the 12-month policy period. If a short-term rental produces more than $2,500 compensation, then personal liability would not respond to any short-term rental claims.
This type of liability is found in dwelling insurance policies, or landlord policies, and protects the insured, typically a landlord, against claims of bodily injury or property damage they could be found legally liable. It also excludes business activity, coverage is limited to the premise only, and it does not provide coverage for personal and advertising injury (i.e. slander or invasion of privacy). Premise liability is ultimately limited in scope.
Commercial general liability
This type of liability is found in business insurance policies and protects the insured against claims of bodily injury or property damage they could be found legally liable. It does not exclude business activity and extends beyond the premise (i.e. dog bite off premise). Unless excluded, it also provides personal and advertising injury. It is ultimately the most comprehensive liability insurance hosts can purchase.
What’s the next step for short-term rental hosts?
First, hosts need to do their due diligence to determine what type of liability insurance is the best for their short-term rental business. Next, how should they provide the City with proof of insurance? In the insurance industry, all carriers use a standardized form called a certificate of insurance or COI to show proof of insurance to various interested parties, including banks and mortgage lenders, etc. This form is exactly what the City needs for the host to meet their insurance requirements.
The insurance policy Proper Insurance offers meets and exceeds these requirements. Proper Insurance offers a commercial package policy with coverage for building, contents, liability, and income. Including coverage for theft and damage caused by a renter, and extended liability coverage for common amenities such as pools, hot tubs, exercise equipment, bicycles, and more. Hosts should have peace of mind knowing they can hand their keys over to a paying short-term rental guest and have appropriate coverage for any accidents that may occur at their property.