Vacation Rental Insurance 101

Congratulations! You’ve done everything you can to make your property the perfect vacation rental for a lucky guest. The furniture is perfectly placed, the atmosphere is suitably cozy, and you’ve even written the ideal ad for your favorite vacation rental websites. In fact, about the only thing you might not have given much thought to is the issue of insurance.

“That’s okay,” you’re probably thinking to yourself, “My homeowners insurance will cover it, right?”

Not necessarily, say executives at Proper Insurance, a company that specializes in selling insurance for vacation rentals.

It all depends on how you run your rental. Part of the challenge vacation rental owners face in finding answers to what coverage they need is because the industry is so relatively new. As a result, many older companies don’t have specialized policies meeting owners needs. Some allow add-ons, however, that will extend coverage.

STRUCTURE

This coverage for the home itself should run the range from simple claims like a tree falling on the structure to more unexpected risks including fire, theft, and destruction. Homeowners insurance might work if you only rent out the property a few nights a year or for a special event like the Kentucky Derby, for example. A landlord policy might also make sense if you have one tenant for an extended period. Proper sells its clients a commercial package policy that covers business use of the home as a rental.  

CONTENTS

This part of the policy typically covers everything inside the structure other than appliances. Think of it as covering anything you can throw in a U-haul truck, Massey says.

Although it’s estimated that 30% of the claims he hears about are water related due to plumbing issues, damage and theft are also covered. That could mean the loss of a valuable painting or a guest’s dog ripping up your $10,000 sofa. If you have replacement value coverage for your contents, you’ll receive a payment to cover what it would cost to buy the item new. Cash value coverage pays a percentage of the value of your contents. Exclusions vary from company to company and policy to policy. Be sure to ask your insurance agent exactly what the policy will cover.

LIABILITY

While most people think about liability just covering someone slipping in the tub or falling down the stairs, it can extend far beyond your home’s interior, depending on your amenities. Swimming pools and watercraft mean more places for people to get hurt. There are times when the injury is small enough that your guest is less interested in litigation and more interested in getting their treatment expenses covered. That’s where medical billing coverage comes in. Although it’s typically included in liability coverage, it never hurts to double check and make sure.

NATURAL DISASTERS

One of travel’s great ironies is that some of the most attractive destinations are also the most prone to natural disasters. In Florida, it’s hurricanes. In California, it’s earthquakes. In New York, it’s snowstorms. Because they’re a known but unpredictable risk, they often aren’t covered in most homeowner or vacation rental policies. Since you can’t move your property to avoid the risk, you should consider buying add-on coverage because post-disaster cleanup quickly gets costly.

Ask your agent for their recommendations for policy add-ons based on which natural disasters your region is prone to. The best way to determine what your coverage is and what you might need is to review what you already have.