Why You Need Vacation Rental Insurance

Why you need vacation rental insurance

The information contained herein is for general information purposes only. Haustay, Inc. (“Haustay”) does not make any warranties of any kind about the completeness or accuracy of this information.  Any action you take upon the information contained herein is strictly at your own risk.  It will be your responsibility to direct any specific questions you have regarding obtaining insurance to an attorney who specializes in insurance or a qualified insurance representative.

When on-boarding new clients, we meticulously review their current property insurance policy to make sure both our clients and Haustay, Inc are protected.  After reviewing many insurance policies we have found a common trend.

The majority of the insurance policies property owners carry do not cover short-term vacation rental stays.

Most of the insurance policies that we’ve reviewed covered rentals, but not specifically short-term vacation rentals. It’s good that we are able to catch this small but very important detail before it becomes a problem for our clients. Without specifying that the home is used as a short-term vacation rental, the insurance carrier would not pay out if a guest filed a lawsuit against the property owner or there was an event at the property like fire. Making sure our clients have the correct insurance policy will protect both them and their property.

Short-term vacation rental insurance is not as common as your typical homeowners insurance, so we have often run into situations where even the insurance representative or underwriter believed that our clients would be covered in the event of a claim when indeed they would not be covered. It took us asking them to put, in writing, that our client would be covered as a short-term vacation rental for them to dig deeper into their own policies and realize that they were giving false information.

The takeaway? Make sure that your policy explicitly covers Short Term Vacation Rentals, not just long term rentals.

Some Insurance Companies Won’t Cover STVRs

While doing our due diligence we have learned, unfortunately, many insurance companies won’t cover short-term vacation rentals at all. For example, we know this to be true for State Farm’s current Rental Dwelling insurance policies.

Insurance Policies That DO Work

Our clients have been able to obtain successful coverage of their short-term vacation rentals through Foremost, Mercury, American Modern, Proper Insurance and CBIZ. We also direct many of our clients to a trusted broker who is there to answer questions and shop around for the best rates. Using a broker with knowledge about insuring short-term vacation rentals is key.

What About Airbnb’s Host Protection Insurance?

One of the great things about Airbnb is that they do offer Host Protection Insurance in the rare event someone gets hurt or your property is damaged. They protect the host up to $1,000,000.00. This is at no additional cost to the host and we have had first hand experience filing a claim through this program. You can read the crazy story of why I filed a claim in our blog post “5 Ways To Avoid A Vacation Rental Scam“.

While Airbnb’s Host Protection Insurance is great, not all bookings for your vacation rental will come in through Airbnb. Some will come in through other channels and some will be direct bookings through Haustay. For those other (non-Airbnb) bookings, you want to make sure you are covered, and you will need your own vacation rental insurance policy to cover you for any unfortunate events.

Why Property Managers Such As Haustay Require Additional Insured

While Haustay carries both a Commercial General Liability (CGL) Insurance Policy and an Errors & Omissions (E&O) Insurance Policy, neither policy can guarantee to protect Haustay from claims concerning the property itself. This is why Haustay (and any property manager who fully understands risk and exposure) requires that they be listed as Additional Insured on the property insurance policy. By being listed as additional insured it protects the property manager against:

  • Any injuries that may occur on the property
  • Damage to the property caused by fire or smoke
  • Vandalism or damage caused by a tenant
  • Theft or burglary
  • Water leaks

From the property owner’s standpoint, listing the Property Manager (i.e. Haustay) as an Additional Insured will help make any potential claims or litigation process easier. With one policy extended to both the homeowner and the property manager, both parties are able to present a unified defense, with one insurance company representing both parties.

The process to add your property manager as additional insured is easy. Just contact the insurance provider or trusted broker and provide your property manager’s company name and their mailing address. In the event the insurance provider will not accommodate your request, it is time to switch to another insurance company.

Understand that Additional Insured & Additional Interest Are Not The Same

Sometimes we request to be added as Additional Insured and instead we are provided a policy where we are added as Additional Interest. This is not the same.

Additional Interest does not extend the insurance coverage to the additional party. Instead, it simply notifies that party if there are changes to the policy (such as cancellation or renewal).

Additional Insured (written by some companies, like Mercury, as “Liability Extended To Others”) with your property manager specifically listed is the only way to securely have your property manager covered under your insurance policy.

IN SUMMARY

  • Most vacation rental homeowners are not currently carrying the correct insurance policies.
  • Rental coverage is not the same as short-term vacation rental coverage
  • Some insurance companies will not cover short-term vacation rentals. Haustay or a trusted broker who is experienced in short-term vacation rental coverage can point you in the right direction.
  • Airbnb’s Host Protection coverage is not sufficient as it will not cover off-platform bookings.
  • Adding your property manager as Additional Insured is in the best interest of both owner and manager.

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