Updated September 2023
If you are a landlord or property owner who is thinking of renting out your property on a short-term basis, it is important to understand the risks involved and take out appropriate insurance.
While most standard home insurance policies will cover some elements of short-term rentals, they are often not comprehensive enough to give you full protection. For example, many policies exclude or limit coverage for damage caused by intentional acts, such as vandalism.
There are a number of specialist short-term rental insurance policies on the market that will give you more comprehensive coverage. These policies are designed specifically for properties that are rented out on a short-term basis, and they can cover a wide range of risks, from damage to the property to liability for injuries suffered by guests.
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Airbnb Laws in Missouri
The Airbnb market also made significant strides in Missouri as popularity has grown for reservations and stays at Short-term Rentals rather than hotel lodging facilities. An article from 2017 indicated that over 75,000 guests had scheduled stays within the city and the revenues totaled $7.7 million for Kansas City hosts alone (www.bizjournals.com). Statewide totals were exceeded $28 million, and services were provided to approximately 289,000 guests throughout the year. As was expected, St. Louis patrons numbered 88,500 guests and $9 million in host income (www.bizjournals.com). Since 2017, both the number of guests and the number of hosts have continued to rise amid a trend toward these types of accommodations for lodging.
In examining the growth of the market there is also evidence that there are concerns for the risks associated with having a different type of traffic and population in residential areas of the city. Some of the less common but noteworthy risks include:
Renting to Squatters – In opening a residence to others for lodging, there is a risk that it might be much more difficult to get the renter out if they should choose to illegally take up residence. Even though the squatter has no legal right to be on your premises past the contracted time, the process of having them removed is much more time consuming and expensive as there are certain legalities to be followed, including eviction processes which provide written notice and allows a notification period before an individual might be removed.
Regulatory Changes – During the Short-term Rental market expansion, municipalities are also becoming familiar with the necessity of regulation. There may be more regulation and stipulations brought to bear for the property owner who wishes to operate and Airbnb. Zoning, Development, and Government oversight will likely increase as the market grows, so property owners must weigh the costs associated with meeting legal demands and the possible income opportunities.
Negative Impact on Property Values – Many property developers and real estate brokers warn home buyers and property owners living in areas where growth is occurring in the Short-Term Rental market that property values may be dropped because of the transient nature of rentals and the expectation that someone who rents short-term will be less concerned for long-term property maintenance priorities. (www.igms.com, 9-27-2018)
This is not an all-inclusive list but offers a few examples of the concerns of future home buyers, current property owners, and new entrepreneurs in the Airbnb market. With these risks in mind, people who are looking to engage in Short-term Rental businesses should consider the best insurance coverage to mitigate the hazards associated within the industry.
What is the Best Short Term Rental Insurance?
Short-term rental insurance is a must for any landlord or property owner who is renting out their property on a short-term basis, such as through Airbnb. There are several different types of short-term rental insurance policies available, and it can be difficult to know which one is right for you.
In this article, we will provide an overview of the different types of short-term rental insurance available and explain how to choose the right policy for your needs. We will also give you some tips on what to look for when comparing different policies.
Using Airbnb's AirCover Insurance: Is It Good?
Since its inception, Airbnb has been mired in controversy surrounding the company's business model and impact on cities. In response to these criticisms, Airbnb has launched a new product called AirCover, which is designed to help hosts comply with short-term rental regulations. AirCover is currently available in a handful of cities, and it will be rolled out to more cities in the coming months.
Critics argue that Airbnb's business model is inherently flawed and that the company is simply trying to salvage its reputation by introducing products like AirCover. What do you think? Is Airbnb's business model flawed, or is the company taking responsible steps to mitigate its impact on cities?
VRBO Damage Protection for Short-Term Rentals
Damage protection is an important consideration for anyone renting out their property, whether it’s for a short-term rental or not. VRBO offers damage protection for property owners who list their homes on their website. This protection can help cover the cost of damage that may occur during a rental period.
VRBO’s damage protection is not automatic – property owners must opt in to the coverage. The coverage is also not free – there is a small fee for each reservation that is covered. Property owners can learn more about VRBO’s damage protection and how to sign up for it on their website.
What Should Short-Term Rental Insurance Cover?
For anyone who has ever rented their home on Airbnb or another short-term rental platform, short-term rental insurance is a must. But what does short-term rental insurance actually cover? In short, it provides protection for you, your guests, and your property in the event of an accident or damages. That includes things like medical expenses, property damage, and even personal liability. In other words, it's there to help you out if something goes wrong.
The specific coverage of a short-term rental insurance policy will vary depending on the insurer, but in general, you can expect it to cover most common risks associated with short-term rentals. That includes things like unintentional damage to your property by guests, theft or vandalism, and even injuries that occur on your property. Some policies will also provide coverage for loss of income if you have to cancel a reservation due to damage to your property.
While short-term rental insurance is not required by law, it is highly recommended by both Airbnb and other short-term rental platforms. That's because it can provide you with peace of mind knowing that you and your property are protected in the event of an accident or damages. So if you're planning on renting out your home on Airbnb or another short-term rental platform, be sure to get short-term rental insurance to protect yourself from any potential risks.
Renters Insurance and Short-Term Rentals
If you're renting out your home on a short-term basis (think Airbnb), you might be wondering if your landlord insurance will cover any damages that occur from renters. The good news is that, in most cases, it will.
Most landlord insurance policies cover damages caused by tenants, regardless of the length of the rental agreement. If your tenant accidentally starts a fire or causes a flood, you should be covered, depending on the policy language and what hazards are covered. This is where you should rely on your agent for expert assistance in making sure you have Broad Perils or Special Forms coverage to take care of losses.
However, there are some things that might not be covered by your landlord insurance, like damage caused by pets or theft. And, of course, your policy will only cover up to the limit of your coverage. Again, having an agent look at your property and make a determination as to Replacement Value for your structure is vital to having adequate coverage at the time of damage.
What Does Homeowners Insurance Cover for an Airbnb?
Homeowners insurance is a type of insurance that helps protect your home and belongings in the event of damage or theft. It can also help cover expenses if you're liable for someone else's injury on your property. Most homeowner’s insurance policies have four main types of coverage: dwelling coverage, other structures, personal property, and liability.
Dwelling coverage helps protect your home's physical structure, like the walls, roof, and foundation. Other structures coverage helps protect detached structures on your property, like a shed or fence. Personal property coverage helps protect your belongings inside your home, like furniture, clothing, and electronics. And liability coverage helps protect you from financial damages if you're found responsible for someone else's injury or property damage.
There are also a few types of coverage that are typically excluded from homeowner’s insurance policies, like flood damage and earthquakes. But most agencies will have availability of products to help with both Flood and Earthquake coverage should you be in areas that have a high risk of those losses.
Umbrella Policies and Short-Term Rentals
As the name suggests, an umbrella policy for rental property covers or lies on top of any existing insurance policies. An umbrella policy provides landlords with additional liability protection against business and owner liability, injuries of tenants, guests, or vendors, and libel and slander.
To obtain an umbrella policy, a landlord must have one or more underlying liability policies, such as a landlord insurance policy. Coverage from the umbrella policy begins when the limits of all policies underneath the umbrella policy have been exhausted.
Additional Information
Summary
To protect your property when renting it out on a short-term basis, you may need to purchase specialist short-term rental insurance. Landlord type coverage is typically a Commercial policy that will offer the property owner both property and liability coverage. There is also limited coverage for some items associated with Short-Term Rentals in the homeowner’s policy. Whatever your need in having adequate coverage, you should always reach out to your agent for guidance and understanding of the necessary coverage available for purchase. At Loomis Insurance, we are happy to assist you in protecting your investment. Call us today!