Understanding Vacation Rental Insurance for Owners

Vacation rental insurance for owners should include protection for both personal and commercial use of the property. These properties are often used personally by the owner or family and then regularly rented as a short-term vacation rental on Airbnb or Vrbo as well. There may even be times when the property is unoccupied. Add up the multi-use of the property, and you have big gaps in traditional homeowners or landlord insurance coverage.

The Proper vacation rental insurance policy for property owners is essentially three policies in one. It has components of a homeowners policy, coverage found in a landlord policy, and the foundation of a commercial business policy. Because of our trademarked vacation rental insurance endorsements, we can claim the title as the most comprehensive vacation rental insurance for owners on the market.

Vacation Rental Insurance for Owners Highlights:

  • Designed to replace a homeowners or landlord insurance policy
  • Underwritten by Lloyd’s of London or Concert Specialty
  • Accepted by all major U.S. lenders
Vacation Rental with wrap around deck. Needs Specialized Insurance For Owners
Vacation Rental Home on the beach

Upgrade Your Vacation Rental Home Insurance

The foundation of a great vacation rental home insurance policy is the coverage form. As with any type of home insurance policy, you have three options, which are basic, broad, and special, aka ‘all-risk’ or exclusions-based.

Proper provides a special form ‘all-risk’ coverage on all its vacation rental home insurance policies. This enhanced exclusions-based form states that every peril is covered unless specifically excluded. Then you add in our unique vacation rental home insurance endorsements for damage caused by a guest, liquor liability, and more, and you have the most complete insurance product a vacation rental homeowner can purchase.

Vacation Rental Home Insurance Highlights:

  • Special form “all-risk” or exclusions-based coverage form
  • Replacement cost valuation for the building(s) and contents
  • Commercial liability protection that extends off the premises

Vacation Rental Home Insurance Enhancements

Homeowners, landlords, and even commercial insurance policies were never intended to cover the scope of a vacation rental home. The key to a comprehensive vacation rental home insurance policy is in its enhancements, better known as endorsements or upgrades.

An insurance policy endorsement is when a carrier re-writes a section of the insurance contract, typically to provide a unique or niche coverage. With vacation rental homes, you either need to re-write the entire contract, or start with a commercial policy as Proper did, and then create specific endorsements tailored for vacation rental home insurance.

A great example of a vacation rental home insurance enhancement is damage caused by a guest. Virtually all vacation rental home insurance policies on the market have a limitation or outright exclusion for property entrustment, meaning when you entrust your property to someone, there is no coverage for damage caused by that person.

Proper’s unique enhancement or endorsement re-writes this section to state that there is no limit on damage caused by a tenant or guest. You are only subject to the building(s) and contents limit in your policy.

More Vacation Rental Home Insurance Highlights:

  • Replacement cost valuation on roofs
  • No sub-limit on water damage claims
  • No cosmetic damage exclusion
Vacation Rental home door knob

Vacation Rental Property Insurance

As the owner of a vacation rental property, your first thought regarding protection should be vacation rental property insurance. This is the asset itself, what you can touch and feel, such as the building or structure, and the stuff inside, such as furniture, linens, decor, or what insurance calls contents.

Great vacation rental property insurance will not only cover perils such as fire, broken water pipes, wind, and hail but also offer protection for backups of sewers and drains, theft, ordinance or law, and more. With vacation rental property insurance, the devil is in the details, and you must have an agent you trust who can answer the tough questions. You want to know exactly what vacation rental property insurance you have purchased.

A component of vacation rental property insurance that often gets overlooked is loss of rental income or lost revenue. Depending on your insurance policy type, you may carry a loss of rent, income, or revenue, which is unique only to Proper.

When you have a covered insurance loss at your vacation rental property, such as water damage from a broken pipe, you often need time for repairs, resulting in canceled Airbnb or Vrbo bookings. This loss of rental revenue falls under property coverage, so speak with your Proper agent as we recommend 24 months’ worth of protection in your vacation rental insurance policy.

Vacation Rental Property Insurance Highlights

  • Mechanical breakdown protection
  • Backup of sewers and drains coverage with no sub-limit
  • Ordinance or law protection

Vacation rental interior

Vacation Rental Property Insurance Upgrades

As we continue to look at insurance enhancements or upgrades, vacation rental property insurance is no different. You’ve worked hard to turn your vacation rental business into an income-producing asset, so great vacation rental property insurance should be at the top of your mind. This often comes down to the enhancements or upgrades in your policy.

Earlier, we discussed loss of rents versus what Proper offers, which is loss of revenue. Let’s deep dive into how this little detail could make all the difference when a vacation rental property insurance claim is filed, such as a total loss fire.

No vacation rental homeowner wants to imagine their vacation rental catching fire and burning to the ground; but the unfortunate reality is it happens more than think, especially if you are in a forest fire area, which is virtually anywhere there are trees! And then there is the occasional guest-caused fire, electrical fire, and unknown fire. This is when you want comprehensive vacation rental property insurance.

It can take 24 months or two years to fully rebuild the vacation rental property, and your typical loss of rent policy only pays for 12 months and pays what’s called ‘fair market value,’ which is the average of all rentals in the area. Fair market value is inferior Vacation rental property insurance.

Proper pays what’s called ‘actual loss sustained’, which is your actual loss, and we have no time limit, so you are only subject to the loss of revenue you choose to put on your policy. Our vacation rental property insurance is far superior to our competitors.

More Vacation Rental Property Insurance Highlights:

  • Loss of business revenue with no time limit
  • Loss of business revenue reimbursed with actual loss sustained
  • Loss of business revenue is only subject to the limit you choose

Vacation Rental Insurance Policy

A vacation rental insurance policy is created with three distinct sections: property coverage, liability coverage, and loss of income coverage. What type of coverage forms, enhancements, and endorsements you have makes all the difference in the quality of your vacation rental insurance policy.

The property coverage section of your vacation rental insurance policy is going to protect your building(s) and contents, sometimes called personal property, from perils such as fire, wind, hail, water damage, vandalism, lightning, and more. It’s important to note that earthquake and flood are separate policies and not included in a vacation rental insurance policy.

The liability insurance found in your vacation rental insurance policy is arguably the most important section to know and understand as liability is your single biggest exposure, should a guest get injured at your vacation rental. Proper is unique in that we offer $1,000,000 of commercial liability insurance on all our vacation rental insurance policies and encourage clients to upgrade to our $2,000,000 option.

Some might argue that lost income is often overlooked and equally important as liability insurance because there is no vacation rental business without vacation rental income. When an insurance loss happens, the bills and mortgage must still be paid, so you must have appropriate business income or revenue limits of protection built into your vacation rental insurance policy.

Vacation Rental Insurance Policy Highlights:

  • $1,000,000 of commercial general liability
  • $2,000,000 of commercial general liability available
  • Liability extends to amenities such as bicycles, hot tubs, and small watercraft
Vacation rental with damage

Vacation Rental Insurance Policy Endorsements

A few unique vacation rental insurance policy endorsements Proper offers are bed bug, fleas, and squatters coverage. These coverages were first-to-market and the result of Proper listening to the needs of the vacation rental industry.

After years of selling the best vacation rental insurance policy, one of our insureds asked about bed bugs and said that would be a coverage she would be willing to pay for. We worked with Lloyd’s of London to create the coverage form and what we ended up with was a $15,000 limit, that included the cost of extermination and the lost revenue from canceled bookings.

Then, we added fleas to the coverage enhancement as we have many policyholders that have pet-friendly properties, and fleas were something that should be included within the same $15,000 limit.

During the Covid-19 pandemic, many short-term rentals or vacation rentals transitioned into mid-term rentals, and squatting became a concern. To be the broadest vacation rental insurance policy, you must think outside the box and deliver new coverages. We came up with squatters, put a $15,000 limit on it, and included protection for legal fees to remove the squatter and the lost revenue as a result.

More Vacation Rental Insurance Policy Highlights:

  • Bed bug and flea extermination and lost revenue
  • Legal fees and lost revenue from a squatter
  • Liquor liability coverage

Vacation Rental Damage Insurance

The proper policy is the most comprehensive vacation rental damage insurance product as it carries no sub-limit on damage caused by a tenant or guest.

When you hand over the keys to your property to a guest, you are entrusting that property to them, and most of the time, there is no damage, but if you are in the vacation rental business long enough, at some point you will need bullet proof vacation rental damage insurance.

Another aspect of vacation rental damage insurance is the security deposit, or entirely replacing it with a damage protection product. Since Proper and all home insurance contracts carry a deductible, you need to fill that deductible gap about damage caused by a guest.

Our sister company, Waivo, has a damage protection product that will pay from the first dollar and end at your Proper insurance deductible.

Vacation Rental Damage Insurance Highlights:

  • No sub-limit on damage caused by a tenant or guest
  • No sub-limit on theft from a tenant or guest
  • Damage and theft coverage are only subject to the limits you choose
Roof of a house burned and collapsed needs vacation rental property insurance

Vacation Rental Damage Insurance Improvements

When we think of complete vacation rental damage insurance, we think of guest damage and theft. This could be as simple as a guest breaking a chair, to as serious as an out-of-control party leaving six figures of property damage.

To sleep well at night as a vacation rental owner, you want vacation rental damage insurance that would respond to guest -caused damage, and include no sub-limit, meaning you are only subject to your building and contents limits on your policy.

The same logic applies to theft. Most insurance policies do not cover theft from a guest, but Proper believes theft is a big exposure and should be included in a vacation rental damage insurance product. Proper not only covers theft but has no sub-limit on theft as well.

More Vacation Rental Damage Insurance Highlights:

  • Replacement cost valuation for damage caused by a guest
  • Replacement cost valuation for theft
  • Excellent in-house claims administration

Vacation Rental Insurance FAQs

What kind of insurance do I need for Vrbo?

As a vacation rental by owner, you need a comprehensive home insurance policy that covers both personal and commercial use of the property. You need building, contents, business revenue, and commercial liability coverage. You would want the policy to provide replacement cost valuation and carry an exclusions-based coverage form.

Do I need vacation rental insurance for Airbnb?

Yes, as an Airbnb host, you are competing against Hilton and Marriot for travel lodging dollars and are subject to the same business hospitality laws they are. Comprehensive vacation rental home insurance is a must-have. By nature, Airbnb properties have more foot traffic, therefore more potential for property damage and liability claims.

Why do insurance companies not like Airbnb?

Properties that are rented on Airbnb carry a greater risk of both property damage and liability claims. They are very difficult to underwrite as each week there is a new guest or vacationer in the property with the potential to cause significant property damage and the potential for a slip and fall type business liability claim. This makes rating the property and charging the appropriate premium very difficult. Verus a traditional home or rental property that has hundreds of years of actuarial data.

Do Airbnb owners need special insurance?

Yes, when you list and rent your property on Airbnb and accept short-term rental stays for less than 30 days, this is considered a business transaction under most insurance definitions. You likely have no property or liability protection if you do not switch to specialized insurance. Thankfully, Proper Insurance developed a specialized home insurance policy in 2014 and has been insuring Airbnb hosts ever since.

What insurance do I need for Airbnb?

Most Airbnb hosts purchase a business insurance policy, which is what Proper Insurance sells. The business policy would replace the existing home policy and protect the building(s), contents, income, and liability. Depending on the occupancy of the property, there might be slight changes to coverage; for example, if the rental doubles as a primary residence, then both commercial and personal liability is needed.

Does Airbnb require homeowners insurance?

We have found no documentation online that states Airbnb requires hosts to maintain homeowners insurance. However, there is plenty of documentation from Airbnb to verify your home insurance is adequate for short-term rental activity, as Airbnb knows most insurance carriers deem short-term renting a business transaction.

What does vacation rental damage insurance cost?

If you have Proper Insurance, then vacation rental damage insurance protection is included in your policy, and you would only be exposed for your deductible. If you do not have Proper Insurance, then you would need to purchase separate or supplemental vacation rental damage insurance.

What insurance does Vrbo use?

Vrbo exclusively endorsers Proper Insurance as its comprehensive vacation rental insurance provider. This endorsement is a testament to the exceptional service and coverage Proper provides.

What does vacation rental home insurance cost?

The cost of vacation rental home insurance depends on the coverage provided and the limits chosen. For an average U.S. house not on the coast and a policy that includes comprehensive protection for the building, contents, income, and liability, it would be between $2,500 and $4,000 annually.