With the growth in the vacation rentals thanks to the explosion of platforms like Airbnb and HomeAway, property owners have found new ways to make money – but its also raising important questions around the appropriate insurance coverage needed to protect these investments.
Keep this in mind: When renting out a home on a short-term basis, a standard homeowners policy likely provides little to no protection for property damage or injuries sustained by a guest. Moreover, a homeowner’s policy almost always excludes coverage for those running a business in their home, especially if an insurer claims you are running a hotel or bed and breakfast in the home. For the same reason, many landlord policies do not cover short-term rentals.
Types of Coverage You Need
When renting out a property to short-term tenants, you should be sure you have the following coverage for that location:
- Structural: This covers damage to, or destruction of, the property itself that may occur while a guest is staying in the home.
- Liability: If a renter or guest is injured on the premises of a property you own, and they sue you, liability insurance will help cover your legal fees and penalties.
- Contents: Unlike a traditional rental unit, a vacation rental is likely fully furnished by you, the property owner. Contents coverage protects your furniture, appliances and other belongings that may be damaged in a loss.
- Loss of Rents: This coverage reimburses you after a loss for income you would have received while the property was uninhabitable.
NREIG is now able to offer coverage for vacation rental properties through our residential Insurance Program. This option gives you all the coverages you need, plus the benefits of our program for investors: housing all of your properties on one schedule, monthly payment and reporting, and other endorsements such as Earth Movement and Flood. But it also allows you access to aggressively priced liability coverage rated as a rental rather than a hotel.
Vacation rentals are a great way to earn steady income, build wealth trough property appreciation, take advantage of tax benefits, and diversify your real estate portfolio. But it is critical to ensure you and your investments are properly insured against unexpected loss.