Prince George County currently requires short-term rental hosts to obtain a license to operate their business, and included in the number of documents needed to process the license application, hosts must provide proof of a current and valid short-term rental liability policy of at least $1,000,000.
Details needed to obtain the MD short-term rental license ($150 annually) include:
- Photos of installed smoke detectors and carbon monoxide detectors and photos of the required fire extinguishers.
- Photos of the required emergency contact information showing it is conspicuously posted in the interior of the rental.
- A copy of current and valid liability insurance of at least $1,000,000
By requiring hosts to maintain short-term rental liability insurance, the County can rest easy as insurance underwriters will essentially be vetting/underwriting the properties on behalf of the County. Commercial general liability of at least $1,000,000 is widely available in the open market and reasonably priced.
What type of short-term rental policy do hosts need?
Most insurance agents are not experts in the short-term rental industry and have a plethora of carriers to choose from. Some carriers offer a “rental endorsement,” which only allows for the occasional rental of a property, other carriers offer a dwelling landlord policy branded as short-term rental insurance, and some offer actual commercial insurance.
Coverage hosts should have on their policy include:
- Replacement cost valuation; building and contents
- No limit on theft or vandalism
- No limit on property damage from a guest
- Liability continued over amenities
- Liability continued off-premise
- Lost business income for repairing damaged property
Ultimately a commercial general liability insurance requirement is good for owners and good for the County. It creates a barrier to entry which eliminates non-professionals and it comes with stricter insurance carrier underwriting requirements, which may include property inspections, smoke alarms in all bedrooms, fire extinguishers, chimney cleanings, type of wiring, railings on all stairways, and a general higher level for standard of care.
Other hospitality entities including bed and breakfasts and hotels carry commercial general liability. Short-term rental properties should be no different.
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