RENTAL ARBITRAGE INSURANCE
You don’t own the building—but you own the risk. With a revolving door of guests and multiple agreements in play, the two biggest threats are guest-caused damage, a guest accident or injury, and lost rental income when a covered loss shuts you down. Proper’s policy is designed for Airbnb arbitrage with the only comprehensive insurance solution on the market for the landlord and the arbitrageur so that one incident doesn’t derail your operation.
What is Rental Arbitrage?
If Hotels are Your Competition, Insure It Like a Business
A revolving door of paying guests make this a business, not an add-on to a renters, Homeowners, or Landlord policy. When you lease a place to host on Airbnb/Vrbo, you’re competing with brands like Hilton and Marriott for lodging dollars—so guests expect hotel-level safety, and that you carry business liability.
That’s why our policy’s backbone is Commercial General Liability (CGL) built for hosting—with protection for bodily injury, lost business revenue, property damage claims, and endorsements that are tailored for amenities and guest use.
Airbnb Host FAQ: “Is rental arbitrage legal?”
Yes, Airbnb arbitrage is legal because all that is involved is a landlord renting a property to a tenant who then sublets it temporarily to another person. As far as we are aware, this kind of leasing activity is not prohibited by any municipal, state, or federal legislation.
However, local ordinances regulating Airbnb and other short-term rentals are being passed at the local, county, and even state levels across the United States. Most communities fall somewhere in the middle, needing a specific permit, registration, a required set of regulations, and insurance. Some areas are pro-short-term rentals, and others are opposed to them. It’s crucial to research local and state laws on short-term rental legality before investing time, effort, and resources to become an Airbnb arbitrageur.
Ask your Proper agent about the rules and regulations that may apply to your Airbnb arbitrage location since Proper is familiar with the most significant legislation as we insure properties in all 50 states and the District of Columbia.
Understanding Proper’s Airbnb Arbitrage Insurance Policy
If insuring Airbnb rental arbitrage properties were simple, every insurance carrier would have a product. While some insurance companies promise to provide coverage, only Proper truly does it thoroughly and correctly. Let’s dissect a few pieces of rental arbitrage insurance because details are everything in insurance.
Damage Caused by a Guest When You Don’t Own the Property
When an Airbnb arbitrageur rents a property short-term on Airbnb or Vrbo, the host and the landlord need to know that the property’s structure and contents are insured against accidental and intentional damage from a guest. The Proper Policy provides no limit on damage caused by a guest; it’s only subject to the policy limits chosen by the insured, in this case, the arbitrageur.
When landlords hear this, it’s often the clinching argument for them to allow rental arbitrage at their property. In addition to providing coverage for damage caused by an Airbnb guest, Proper provides rental arbitrage theft coverage. There is no sub-limit, so full personal property or contents coverage limits apply.
Lost Business Revenue in a Rental Arbitrage Business Model
Any business that depends on the operation of the property to generate income from short-term rentals knows that entering into a long-term lease is a significant commitment. What if, through no fault of your own, a water pipe burst, and the subsequent water damage rendered the property unrentable for three months?
Without any rental income being produced, the Airbnb rental arbitrage property would go out of business. In this scenario, the arbitrageur could submit a claim for lost business rental revenue under Proper’s special business revenue coverage, as water damage from a broken pipe is one example of a covered loss under the business revenue coverage form. There is no time restriction, and the payment is based on the actual loss sustained value.
$1M of Business Liability Built to Protect Rental Arbitrageurs
If you are in the business long enough, at some point, a guest will get injured at your property and may claim you liable and sue. While some consider Airbnb’s AirCover a decent backup plan, it’s critical the arbitrage operation has a minimum of $1,000,000 in business liability. Due to Proper’s ability to add the landlord as an additional insured, this safeguards both the arbitrageur and the landlord. The landlord’s worries about prospective liability cases are also eased thanks to this protection.
Real Review of Proper’s Arbitrage Coverage
“Rikki was outstanding to work with. She was incredibly prompt, thorough, and responsive; well above average in all three areas. She helped me secure excellent coverage at a very reasonable price for a short-term rental arbitrage project. I felt fully supported throughout the process and highly recommend working with her if you want expert guidance and top-tier service.”
– Pat J.
Airbnb Rental Arbitrage Insurance FAQs
How risky is rental arbitrage?
Rental arbitrage would be seen as “high risk” because you are signing a long-term rental agreement without having received any Airbnb short-term bookings. Your lease is effectively the biggest startup expense for your business operation. But as with every business, there is a chance for huge returns with high risk. There are lots of margins to become extremely profitable because the rent difference between a long-term and short-term rental is sizable.
Does Airbnb allow rental arbitrage?
Airbnb terms of service do not contain the word “arbitrage”, which implies “Yes”, Airbnb allows for rental arbitrage on their platform. There is no set of property ownership guidelines or requirements that would prohibit rental arbitrage.
Is insurance required for Airbnb rental arbitrage?
Most jurisdictions with short-term rental regulations have a minimum liability insurance requirement of at least $500,000 in order to obtain a permit. Also, Most landlords who run long-term rentals insist that their occupants get renters insurance, sometimes referred to as an HO-4 policy. Almost all renters insurance policies include both personal liability and personal property coverage.
But BUYER BEWARE, as a renters insurance policy, will not respond to nor cover any short-term rental activity as it’s not business insurance. It only covers the tenant’s personal items and their personal liability, should they have a personal pet, for example. It’s written with the intent to cover a tenant who lives at the rental.
What is the cost of rental arbitrage insurance?
The cost is highly affordable because the arbitrageur’s insurable interest is limited to guest-caused damage to the building and its contents, commercial business liability, and lost rental revenue. Since it’s crucial to safeguard your business with insurance, particularly the liability component, we always urge our rental arbitrage clients to include our insurance cost in the proforma from the start.
Does renters insurance cover Airbnb arbitrage?
No, renter’s insurance does not include coverage for rental arbitrage. Consider it this way. You decide to rent a property while saving money for a down payment because you do not own a home. You agree to a one-year lease and provide a security deposit. Your landlord will require you to show evidence of your HO-4 policy or renters insurance to rent to you.
You get a cheap policy online since it’s easily accessible from all the leading insurance providers, and it covers personal property and at least $100,000 in personal liability. All done. Once you move in, you build furniture in your garage and launch a handmade furniture company.
One day a customer comes to your garage to pick up a wooden chair you manufactured, but they trip over a broom and fall in the driveway. The client suffers a severe injury, and their health insurance company later sues you for their medical costs on the grounds that you failed to maintain a safe environment despite having a legal obligation to do so.
Then, you make a claim against your renter’s insurance, which has a $100,000 minimum personal liability limit and covers bodily injuries for which you may be held personally liable. However, the insurance provider rejects the claim since the accident or physical harm occurred while conducting business (in this case, selling furniture), not while engaging in personal activities.
In the view of 99% of insurance providers in the U.S., operating an Airbnb arbitrage property is a business. Business insurance is necessary if you want to protect your enterprise.
What if the damage is not caused by a renter?
This question is one of the main justifications for buying the Proper Rental Arbitrage Insurance Policy. According to the business revenue coverage, the policyholder is qualified to file a claim for lost business revenue if a covered loss under the coverage form causes a disruption of operations. A good illustration is broken water pipes. Let’s say the landlord files a claim with their insurance company for water damage due to broken water pipes at the property, and the restoration will take three months. So, yes, the Arbitrageur could submit a claim with Proper for the lost rental income for three months.
Why is liability insurance so important for rental arbitrage?
If you work in the Airbnb or short-term rental industry long enough, someone will eventually get hurt at one of your properties. If this happens, there is a good chance you will be sued because personal injury lawyers in this country are waiting to file lawsuits, even if they are frivolous, because they know there may be insurance to collect. Even frivolous lawsuits cost money to defend since they need an attorney whose typical hourly rate is above $300. Rest easy, though, as Proper’s rental arbitrage liability coverage includes legal defense in addition to covering a possible $1,000,000 payment.
Slip-and-fall accidents are the most frequent liability claim because they may occur almost anywhere. Still, Proper has also seen and defended cases involving invasion of privacy, carbon monoxide poisoning, dog bites, and everything in between. The best course of action is to operate reasonably, make every effort to maintain a safe property and invest in quality insurance like the policy offered by Proper Insurance.
What is the difference between rental arbitrage and subleasing?
While rental arbitrage may sound similar to subleasing a property, they are quite different in practice. Rental arbitrage has the sole purpose of making a profit between the difference in the price you are renting the property from the landlord and the amount that you are short-term renting the property to guests. When subleasing, you are simply handing over the rental contract to someone else usually without any profit motive.
In Airbnb rental arbitrage, the individual is responsible for both the lease with the landlord and the management of the property for guests, including covering the rent regardless of occupancy. In subleasing, the original tenant remains liable to the landlord for the lease terms and any issues that arise from the subtenant.
How do I ask my landlord about Airbnb arbitrage?
To help pitch your landlord on the concept of Airbnb arbitrage, it may help to focus on addressing the typical concerns a landlord would have about it, particularly around risks and insurance.
You can start by assuring the landlord that you will have specialized and comprehensive rental arbitrage insurance from Proper Insurance which includes the landlord as additional insured on the policy. Reassure the landlord that as part of your agreement you will consistently pay rent, regardless of occupancy status of the Airbnb property. Outline any local and state short-term rental regulations in the area and acknowledge your compliance with the operation of the short-term rental property. Lastly, highlight the win-win situation for you and the landlord — you get to run a profitable short-term rental business and the landlord gets reliable rent and a well-maintained property.
What is a master lease in rental arbitrage?
A master lease is your main agreement with the property owner that authorizes short-term subletting. You pay fixed rent; you run the STR business. Many master leases request a COI and may ask the owner to be added as Additional Insured. (We only provide those documents when you ask—we don’t “notify” your landlord on our own.)