Property Management Insurance for Vacation Rentals: Coverage Explained

You may be wondering why you need vacation rental insurance if you already have a homeowners policy in place, as well as protection like AirCover for Hosts. Also, you might have doubts over what is and isn’t typically included in property management insurance for short-term rentals (STRs).

In this article, we’ll walk you through the key benefits of having a separate insurance policy for your STR business, plus explain what vacation rental insurance does and doesn’t normally cover. 

You’ll see examples of dedicated STR insurance solutions and learn about other ways to add protection to your units and business as a whole—which is beneficial to you, your homeowner clients, and your guests.

Why buy vacation rental property management insurance?

Most homeowner insurance policies don’t provide cover for properties that are being used for commercial purposes. So, if one of your vacation rentals suffers structural damage (or damage to any of its contents) during a guest stay, any protection that the homeowner has is unlikely to be valid. Therefore, for reservations taken from your direct booking site, the vacation rental and its contents will be unprotected. 

Meanwhile, though some of the online travel agencies (OTAs) where you list might provide some form of protection, usually their primary focus is to provide a positive user experience to guests. As a result, they aren’t specialized in processing claims or managing disputes, and they often don’t pay out unless the guest accepts liability.

Specialist STR insurance fills the gap: It provides the protection that typical homeowner insurance doesn’t, and it’s designed to process claims fast, often even when the guest doesn’t accept liability for the damage they caused.

As we’ll see, this doesn't only have implications for home and contents coverage—guests, homeowners, and STR property managers and their businesses can all enjoy peace of mind from vacation rental insurance that they’d otherwise be without. This includes:

• Liability protection as the property manager
• Protection for your STR business
• Protection for the homeowner, which therefore makes it a selling point for prospective homeowner clients
• Protection for the guest, which therefore makes it a selling point for them, too

Vacation rental property management insurance: What does & doesn’t it cover?

STR insurance providers tend to provide coverage for the same kinds of risks with similar limitations. Below we look at what they generally do and don’t protect you for.

What STR insurance normally covers

Here are some of the areas where vacation rental insurance provides protection for you, the homeowner, and guest:

• Structural property damage
  Repair or replacement of windows, doors, flooring, and walls because of damage caused during a stay by accident, theft, or vandalism will normally be covered by STR insurance policies.

• Property contents damage or loss
  Likewise, damage to appliances, furniture, and belongings during a stay are normally included in vacation rental insurance plans.

• Bodily injury caused by negligence
  If your guest suffers injury due to an accident or negligence—for example, because of a fall on a wobbly step or a slip due to a puddle in the washroom—this can be covered with comprehensive STR insurance, ensuring compensation for the guest.
• Infestations
  ‍If you experience an infestation of bed bugs or fleas, some STR insurance policies will cover you for the cost of extermination and loss of income.

• Squatter eviction
  Some plans are designed specifically to cover you for the legal costs and loss of income associated with managing the eviction of squatters, which can be a greater risk with mid-term stays or in certain regions, like Spain.
• Management liability
  If you're faced with a claim of mismanagement or professional negligence—for example, because you failed to ensure maintenance was carried out as per the terms of your property management agreement—you’ll be protected for legal defense costs and potential damages.

• Loss of income
  If one of your units becomes uninhabitable or unavailable for rent—for example, because of a party, smoke damage, or an infestation—you can be compensated for the lost rental income during the repair or restoration period, up to the limits of the policy.

What STR insurance normally doesn’t cover

Here are some areas where vacation rental insurance doesn’t typically protect you, the homeowner, or guest:

• Wear and tear
  As with most home insurance, flooding your bathroom because you left the tap running is an accident that’s covered, but if old, rusty, leaking pipes cause the ceiling to fall through, you’re unprotected. Similarly, when guests spill wine on the carpet, you’re likely covered, but damaged furniture and flooring because of age is not normally accounted for in your policy.

• Natural disasters
  Storm damage, a branch crashing through a window, sinkholes, or earthquake damage will not normally be covered.
• Damage to guest belongings
  Most vacation rental insurance covers the contents of the unit—like furniture, carpets, electrical appliances, sheets, lamps, and glasses—but this doesn’t include what guests bring into the property during their stay.
• Bodily injury that’s not the result of negligence
  Normally an injury that results because of the health or condition of your guest is not included in STR cover—for example, a back strain or other muscular complaint. Instead, the guest would need to seek compensation via their personal medical insurance plan.

Examples of vacation rental insurance providers

There are plenty of vacation rental insurance providers you can research and choose between. To help get you started, here’s a short selection of notable services (ordered alphabetically):

• CBIZ: CBIZ offers STR insurance for property (including amenities), building, and contents replacement and repair, plus commercial general liability coverage and business income protection.

• Proper Insurance: Proper Insurance offers all-inclusive STR insurance that’s backed by Lloyds of London and endorsed by Airbnb and Vrbo.
  

• Safely: Safely's STR insurance is offered through On Demand Insurance Agency, LLC and automatically attaches cover to each stay for structural damage, content replacement or repair, and bodily injury.

• Superhog: Superhog’s Know Your Guest (or Guardhog in the UK) offers protection for guest damage and theft, including contents and shared areas damage.

Beyond vacation rental insurance: How to mitigate risk with STR software

Vacation rental insurance can be an important asset in protecting you, your business, and your customers, but you don’t have to stop there in your efforts to keep your properties safe. These insurance policies are especially valuable when used in combination with these other short-term rental solutions.

Automated guest screening

Manually guest screening guests is inefficient, not scalable, and could even bring about accusations of discrimination. Tools like Autohost, Safely, and Superhog run non-invasive checks on guests so you can make an informed choice on whether to proceed with a booking.

This provides you with an extra layer of protection and can be a reassuring feature of your service to homeowners.

Noise monitoring

Vacation rental noise monitoring provides you with a privacy-safe way to: 

• Avoid unauthorized parties
• Prevent disturbances for neighbors (and related complaints)
• Keep your business compliant with local noise ordinances

With Minut’s standalone sensor and mobile app, you’ll have access to a historical log of reporting on noise that you can use as evidence in a dispute. Also, you can use Minut to automate guest messages to request that they keep the noise down if you receive an alert.

Cigarette smoke detection

Guests smoking in your units can cause extensive damage and result in costly cleaning that cuts into your profits. But despite it creating issues for homeowners and future guests, it’s very difficult to prove. 

A vacation rental smoke detector alerts you to cigarette smoke as soon as it's detected and provides you with evidence you can use in a claim.

Minut’s cigarette smoke detection for STRs is easy to set up (you simply activate it using the toggle in the app), and you can use it as a compelling selling point to prospective property owner clients.

Occupancy monitoring

Vacation rental occupancy monitoring helps you minimize the risk of property damage from a stay that got out of hand. It also provides reassurance to homeowners that their properties and belongings are safe, plus helps you stay compliant with local STR laws.

With Minut’s crowd control, you can customize the maximum occupancy per unit, which the software reports on in real-time by analyzing the number of personal devices present within a property.

Alongside Minut’s other features, like noise monitoring, cigarette smoke detection, temperature and humidity monitoring, window breakage detection, and alarm detection, this gives you visibility across your entire portfolio and the ability to manage property protection from a user-friendly mobile app.

Property management insurance for short-term rentals

Most homeowner insurance policies aren’t valid for homes when used as vacation rentals, and the protection provided by many OTA platforms doesn’t match the comprehensive coverage or service of a dedicated STR insurance provider.

At the same time, there are inherent risks to managing vacation rentals that mean you could suddenly be liable for an accident or have to take on the costs of damaged or lost items, which adds up over time. With STR insurance coverage, though, you can be protected against many of those risks. 

To further strengthen your protection—and to build greater trust with your homeowners and guests—you should consider scalable solutions like automated guest screening and a home protection device like Minut, which monitors noise, occupancy, cigarette smoking, and more.