With the unprecedented growth of Airbnb & VRBO, even the brightest spot on earth is regulating and liability insurance seems to be a common theme. We can’t keep track of all the short-term rental ordinances popping up across local governments, but all the ones we find have this same $500,000 liability insurance requirement, why is that? Here is the Las Vegas Short-Term Rental Ordinance.
License Application Requirement, 3.H. ~ Provide proof of liability insurance coverage in a minimum amount of $500,000.
The irony in this requirement is it does not define what “type” of liability, and does not define what “proof” means. It’s a good idea to have an insurance requirement for Airbnb & VRBO property owners as they are essentially running a hotel out of a single-family or multi-family property, and they need to realize they are now subject to a higher level of care, but let’s actually help them, not confuse them.
Every short-term rental owner needs to understand they are running a business, and every insurance policy, HOA, bank, and any one else will agree. When the MGM Grands hotel occupancy goes down 3% because families are coming to Las Vegas and staying in a short-term rental accommodation, instead of the MGM, you better believe you are operating in a business world!
With liability insurance there are essentially three types one can purchase for a dwelling; personal liability, premise liability, and commercial general liability. The MGM carries commercial general liability, not personal or premise liability as found in a homeowner’s or landlord insurance policy. This means the short-term Airbnb rental owner also needs to carry commercial general liability, because it’s superior and covers business stuff, like slip and falls, pools, hot tubs, amenities, and most importantly extends off the premise. Coverage does vary between insurance carriers so don’t assume you are covered by reading this article, as a carrier may exclude animal/pet liability, liquor liability, and more, so check your policy.
Edit #1 to short-term rental ordinance is to define liability as “commercial general liability”.
Now let’s look at “proof” of insurance. I highly doubt you could walk into a real estate closing and provide an email from your insurance agents that stated, “you’re covered”, and the bank would lend you the $300,000 for your house, NO. There are standardized insurance forms for this, and proof of insurance is provided on what’s called a “certificate of insurance (COI)”. Every insurance company, every mortgage broker, and most other professional industries know and expect this.
Edit #2 is to define “proof” as require a certificate of insurance, COI, showing proof of coverage.
It’s great the city of Las Vegas is taking this relatively new concept of home sharing, Airbnb, VRBO, what ever you want to call it seriously; but let’s not mislead property owners here with a 1/2 attempt. Let’s call it what it is, a business, and let’s require business insurance. The corrected language in the short-term rental ordinance would read as such:
Edited: Commercial general liability insurance in the minimum amount of $500,000 and proof of such provided via a certificate of insurance, COI.
For more information on Airbnb & VRBO regulation in Las Vegas, Nevada, feel free to visit their website: Las Vegas Short-Term Rental Regulations.