Vacation Rental Liability: What Every Owner Needs To Know [Updated 2023]

$1,000,000 in Commercial General Liability Minimum

Most short-term rental owners carry $300,000 – $500,000 in liability coverage, which is not enough. In today’s world, your policy limit needs to be $1,000,000 minimum and we suggest you bump it up to $2,000,000 if you can afford it. Serious injuries and deaths do happen at vacation rentals, and when they do, you need bulletproof coverage and big limits. Besides driving your car, your vacation rental property is your single biggest liability exposure.

Don’t Count On a Personal Umbrella Policy

There is a misconception that a $1,000,000 personal umbrella will extend over your rental property. This is simply not true for two reasons.

First, your underlying policy limit must be fully exhausted for an umbrella to kick in, and many short-term rental owners simply do not have the correct underlying insurance, so the claim never gets to the umbrella.

Second, if a claim did exhaust your underlying policy, all personal umbrellas have a “business activity” exclusion, meaning they will not respond to any claim involving a business. Personal umbrella carriers consider “regularly” short-term renting a property for financial compensation as a business. In other words, your vacation rental property is a business.

Make Certain Your Liability Extends Off-Premise

Far too many vacation rental owners carry a dwelling landlord policy, which offers premise liability, not a commercial general liability. Premise liability DOES NOT extend off the property premise, period. Here are some examples of vacation rental liability claims that could happen off your property premise, that could be tied back to your vacation rental business.

• Bicycles
• Small watercraft such as a kayak or canoe
• Docks
• Dog bites
• Assault & Battery
• Mugging
• Sexual molestation
• Invasion of privacy

Beware of Bed Bug Liability

Not only are bed bugs a nuisance with regards to property damage and extermination, but they pose a huge liability risk. If a guest was to get bitten by bed bugs at your vacation rental, they could ultimately hold you liable and sue. These claim settlements quickly get into six figures. The problem is many insurance carriers have a total exclusion for “infestation” which bed bugs would fall under. You must make certain you do not have this exclusion. Proper Insurance has listened to its policyholders and delivered a first-of-it’s-kind endorsement, bed bug insurance coverage.

Liquor Liability Coverage

Liquor liability is a standard exclusion with most all insurance policies. Most vacation rental owners do not furnish liquor, beer, or wine for guests, but it’s not that simple. Guests regularly drink on vacation and often leave behind unconsumed beverages. During the post-stay inspection, all alcohol must be entirely removed from the rental, otherwise, it’s now been furnished for the next guests. If they consume the alcohol and get injured, they can now claim the short-term rental owner liable. Either make certain you never furnish alcohol or make certain you have liquor liability coverage such as Proper offers.

Verify Your Insurance Coverage Today

It can be tough to know what your policy covers without going through each possible scenario but that’s why insurance professionals are here to help. For these particular claims, a good place to start is with your current insurance agent. Send them these questions and see what they have to say, just make sure they’re getting the answer in writing from the underwriter of your policy.

If you still have questions or would like to compare your current policy to the custom short-term rental policy offered by Proper Insurance, give us a call at 888-631-6680 to receive a comprehensive coverage comparison or visit our website to submit a 5-minute online quote request today!