What You Need To Know About Short-Term Rental Insurance

Posted on November 17, 2017

One of the most common objections to our business model, and actually the home sharing economy in general, is something along the lines of “I don’t want any strangers in my home.”

Honing in on the reason for this answer, we noticed that the single biggest concern is potential damages: Home owners are concerned that guests might "trash their place”, so to speak.

First things first: Let’s not forget that 99% of guests are really nice people, most of whom treat your property like their own. And while “nice” isn't a scientific term, what we mean by that is either guests don’t break things, or if they do they’ll tell you and offer to pay for it.

For example, “Hey I broke one of your wine glasses and left $10 on the counter” is a typical message our managers hear in most cases of damages. If that happens our manager simply goes out and replaces the glass. End of story.

However, there are guests who won’t tell – and issues $10 won’t cover. So let’s look at the types of financial challenges you’re facing when renting out your home.

Red wine stain on a white couch

An obvious one is damages caused by renters – anything from a wine stain on your white couch to a broken bed frame. Those damages tend to be small (90% of our renter-caused damages fall below $100.)

In theory a guest could forget to switch off the gas and turn your kitchen into a black hole. But that's unlikely to happen.

The other type of financial challenge you face then, which in the USA and especially in California can be somewhat daunting, is personal liability.

Say a guest slips on the bathroom floor, breaks a leg and sues the owner as a result. This can quickly become expensive, which is why it’s not uncommon to have $1M or more in liability insurance.

Back in 2012, Airbnb made a big splash when they announced their $1M damage protection guarantee. And while that sounds great, their terms and conditions reveal several exceptions, which make an actual claim really hard to push through (we’ve noticed).

Furthermore, Airbnb offers a $1M host protection insurance – which presumably made HomeAway start to offer their own $1M liability insurance in early 2017.

So – HomeAway covers liability (and minor damages through their partnership with CSA, where guests may be required to buy insurance), Airbnb covers both liability and damages (in some cases).

But what about the others, like booking.com or TripAdvisor? Nope – nothing. While both offer the option to charge a refundable deposit, they don’t offer any type of insurance whatsoever.

  Airbnb HomeAway TripAdvisor Booking.com
Liability $1M $1M $0 $0
Damages $1M (terms!) $5K (CSA) (deposit) (deposit)

 

Wait a minute, you could say – doesn’t my home owners insurance cover some of these things by default? That’s actually a dangerous misconception: In 99% of cases, the answer to that question is no.

Short-term renting is seen as a commercial activity by virtually every property insurance company, meaning they won't cover any damages or lawsuits resulting from such activity.

Where does that leave you, the home owner? We’ve found the most reliable solution to be a specialized short-term rental insurance like Proper Insurance.

They cover damages and liability regardless of the source of the guest, and unlike other short-term rental insurance that pile on top of your home owners insurance, Proper is a stand-alone product that completely replaces your existing insurance.

Keep in mind that with Proper, their lowest deductible is $1,000. So make sure to cover your bases for anything up to $1,000, either with making guests take up their own insurance (HomeAway) or asking for a refundable deposit where applicable.

And even if you don't want Proper's short-term rental insurance, many places now require landlords to carry $500K or more in liability insurance to even get a permit to rent out their property. I know, this might seem confusing to you.

Want to keep it simple? When you list your property with GoNitely, we’ll make sure you’re covered. We’ll take care of anything up to $1,000, and get you started on the claims process if anything above that should ever occur.

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About the Author:

Picture of Markus
Proud father and husband, humble leader. Currently revolutionizing short-term rental management with GoNitely. Living in beautiful California close to San Francisco.

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