Vacation Rental Insurance

The insurance industry has yet to catch up with the “sharing economy.” In particular, Airbnb has made the home and rental insurance picture more complicated for both insureds and insurers. There is a definite need for agents and brokers to ask whether an insured intends to use a property for short-term rentals. If they don’t ask, insureds may not disclose—and this can have big consequences later on. Insurance companies consider Airbnb hosts to be in business—and expect to cover them that way. The law is just starting to catch up with this view, although slowly; for example, in San Francisco, a law just passed requiring property owners who rent short-term to carry at least $500,000 in liability insurance.

Here are some tips for addressing vacation rentals

J.E. Brown is proud to partner with American Modern and other A rated carriers to tackle this exposure. We are able to handle many varieties of vacation rental, including VRBO.

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Here are some highlights:

  • Admitted, Direct bill, & Online policy processing
  • No home value limit (admitted up to $1M)
  • Extended replacement cost coverage
  • Liability limits to $1M (admitted up to $500,000)
  • Rental Condo coverage available

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There is no one-size-fits-all insurance option for Airbnb hosts. Airbnb hosting and VRBO are short-term rental activites. Insurers consider anything under a 30-day stay a short-term rental situation, and these are higher risks than long-term leasing. It can sometimes be difficult to find the right policy or insurer to cover the risk.

Many hosts are renting rooms in their primary homes through Airbnb, which further complicates things. Homeowners policies don’t cover business activity in the home or fully compensate insureds for loss of income if something renders the property unrentable. While some homeowners policies will cover hosts who rent rooms in their homes out on a very occasional basis, this isn’t a good solution for anyone who does it regularly or earns a significant amount of income this way.

Some insureds buy landlord policies, but these are designed for long-term rentals and usually have an exclusion for business activities as well. Others might look into business policies designed for bed and breakfasts or hotels, which can also be problematic—as homes are generally not designed to function as hotels. For instance, a residence may not have the fire alarm systems and safety features a hotel is required to have.

Airbnb offers a Host Guarantee, which will cover up to $1 million in property damage. It’s by no means comprehensive, however. The Airbnb website states explicitly that the coverage “is not insurance and should not be considered as a replacement or stand-in for homeowners’ or renters’ insurance.”

Check out our vacation rental insurance Sales Piece — and talk with us about the best way to cover your clients who rent through Airbnb and other sites. Get in touch today.