Does Homeowners Insurance Cover Vacation Rental Properties?

A spare room, vacation home, or mother-in-law’s quarters have become more than extra square footage; thanks to vacation rental platforms, welcoming paying guests into your home has become more normal than ever. While renting out your property can help you earn significant extra income, becoming a Vrbo or Airbnb host comes with its own set of risks and responsibilities. Ensuring your property is adequately protected requires an understanding of the gaps in standard policies and the need for specialized vacation rental coverage. 

So, when unexpected accidents or incidents occur involving your guests, you need an insurance policy that is more equipped to respond to those risks.

Let’s unpack an essential question for vacation rental owners: Does Homeowners insurance cover short-term rental properties? Learn about standard Homeowners insurance, its limitations, and why specialized vacation rental insurance is often the smarter choice. Understanding what protections you need to look for and how to find the right coverage for your property can help ensure a protected, profitable short-term rental business.  

Blue and yellow chairs sit outside of a vacation rental home with amenities that come with risks, including a fire pit, kayaks, and a body of water, begging the question "Does Homeowners insurance cover vacation rentals?"

What is Homeowners Insurance?

Homeowners insurance is a safety net for residential property owners. At its core, Homeowners insurance covers the structure of your home, your personal belongings, your personal liability for accidents you may cause, and additional living expenses if your home becomes uninhabitable due to a covered loss. It’s designed to protect the place you call home—not necessarily an income-earning rental property.  

What Does Homeowners Insurance Cover and Not Cover? 

A standard Homeowners insurance policy usually includes the following areas of coverage for your primary residence (where you live, sleep, and receive your mail): 

  • Dwelling Protection: Pays to repair or rebuild your home after covered events like fire, wind, or hail. Typically, this amount is decided upon during the binding process with your sales agent. It’s common for insurance to be paid out based on “Actual Cash Value” meaning the amount you receive factors in depreciation like age, wear and tear, etc. 
  • Personal Property: Covers your belongings inside the home, such as furniture or electronics during a covered loss. 
  • Personal Liability Coverage: Protects you if someone is injured on your property or you injure someone personally while out and about (like running over someone’s toe at the grocery store with a cart) and the other party decides to sue you, an individual. 
  • Additional Living Expenses: Covers temporary living costs if your primary home is uninhabitable during repairs. 

But what happens when you decide to rent your home to paying short-term vacationers and Airbnb guests? That’s when your property becomes a business in the eyes of insurance, and major gaps appear through the policy.  

Once you have an active listing on a booking platform and receive payment from guests, major loopholes for even standard coverages and claims that do not involve your guest can now easily be denied based on a commonly seen “business activity exclusion” within a Homeowners policy. Airbnb Host Emily Richer found this out the hard way when a tree fell on her short-term rental property causing $120,000 in damage that was ultimately denied by her insurer

Does Homeowners Insurance Cover Airbnbs, Vrbos, or Vacation Rentals? 

Generally, no. Short-term rentals are not covered by Homeowners insurance, since typical Homeowners (HO) insurance policies have exclusions for business activity.  

Short-term rentals (like Airbnb and Vrbo) are viewed as a business activity because you’re actively marketing and earning income from your property. If you use your property as a vacation rental, even occasionally, it likely falls outside the scope of standard insurance coverage.  

If you’re a seasoned host or just looking to get into the Airbnb industry, you may be wondering, “Do I need Homeowners insurance for a rental property?”. However, Homeowners insurance for a short-term rental does not offer adequate, robust coverage for the risks of a rental property, whether a short-term, mid-term or even long-term rental property.  

If your property is being used as a long-term rental, you should switch to a Dwelling/Landlord policy (DP3). If your property is being used as a short-term rental, you should consider the robust coverage of a Commercial Homeowners policy. 

You should always aim to align your insurance coverage with the risks that you are facing. A standard Homeowners policy is built for primary homes, not passive or active income generating purposes.

Insurance Options for Short-Term Rentals

Understand the three options for insuring your vacation rental home.

A group of guests plays a board game outside of a loft apartment used as an Airbnb

Exclusions and Limitations of Standard Homeowners Insurance for Vacation Rental Properties  

Many policies explicitly exclude damages or liability arising from short-term rental activity. For instance: 

  • There could be no coverage for property damage. Damages at a property being used as a short-term rental business are often not covered by typical HO insurance, even claims that are not considered to be directly guest-related. The business activity exclusion gives the insurer the right to deny any claim at the short-term rental, even common homeowner claims like fire or storm damage. 
  • Any claim arising from your short-term rental could void your policy entirely, making you front the full cost out of pocket. Repeated and/or frequent short-term rental bookings can void your insurance coverage entirely. Many Homeowner policies even with an added endorsement or rider contain clauses on how frequently you can book your property as a short-term rental. Even if you are only renting your home for a special event that takes place in your area (like the Super Bowl or the Kentucky Derby), you should contact your insurer to make sure that your coverage will remain in place should something happen during that booking. 

Using your primary residence as a vacation rental without informing your insurer could leave you vulnerable to property damage to your dwelling and/or your contents, costly guest accidents or injuries, loss of income, and, in some cases, lead to policy cancellation. 

How to Know if Your Homeowners Insurance Covers Short-Term Rentals 

It’s better to inform your insurer about your change in occupancy and take the risk of being dropped by them than to not tell them at all, and find out you’ve been paying an annual premium for a policy that is voided at the time of a claim. 

The best way to inform them is by emailing your insurance agent a listing of your booking site, asking your insurer direct questions about your coverage and short-term rental property, as well as receiving their answers in writing. If you are eased by their answers, you’ll want to save those communications in the instance of a claim or even get a trusted second opinion from a short-term rental insurance expert.  

The proof is always in the policy. But we understand that policy language and insurance jargon can be hard to decipher, while nuance is important. Receive a free coverage consultation with a short-term rental insurance expert today to understand the gaps in your current coverage. 

Uncover The Gaps In Your Policy: Download The Guide

Learn 10 essential questions about short-term rental coverage to ask your insurance agent to better understand your policy’s gaps.

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What About Adding an Endorsement for My Short-Term Rental?  

Once you discover that your standard Homeowners policy isn’t adequate coverage for your short-term rental, your agent may offer you a short-term rental endorsement for your policy in hopes of keeping your business. 

While in some policies it may remove the business activity exclusion, in other policies it may only be amended slightly to limit or restrict the number of days you can rent and/or the income that you may generate annually. On top of that, a short-term rental endorsement fails to add any additional protection.  

Your base policy, a Homeowners policy, is still severely limited in scope for your short-term rental including a mismatched “loss of” coverage, liability coverage riddled with gaps, exposure to guest-related amenity injury lawsuits (bikes, hot tubs, pools…), and more.  

Plus, if your rental property doesn’t serve as your primary residence, adding a short-term rental endorsement likely isn’t an option.  

Both Homeowners insurance and Landlord insurance fall short of adequately protecting vacation rental owners. Short-term rentals (STRs) introduce unique risks, such as higher guest turnover, active income, and the likelihood of property damage to the dwelling and contents, which most Landlord insurance policies don’t fully address. This brings us to the need for a specialized solution: vacation rental insurance for owners. 

Specialized Insurance for Vacation Rentals: Why Homeowners Insurance for Short-Term Rentals Isn’t Enough 

If neither Homeowners insurance nor Landlord insurance provides adequate coverage, what can you do to comprehensively insure your Airbnb? Or if you have a rider on your Homeowners policy, how much protection do you truly have? 

The answer to clear-cut protection for you, your property, and your business is specialized vacation rental insurance. A specialized short-term rental policy is specifically designed to address the gaps left by traditional policies, providing comprehensive protection for owners of short-term rental properties. 

Reasons You Need Specialized Short-Term Vacation Rental Insurance Coverage 

Here’s how vacation rental home insurance stands apart from traditional Homeowners and Landlord policies: 

  • Guest-Related Liability: Expanded coverage for injuries sustained by guests on or off your property. 
  • Property Damage Protection: Whether caused by guests you entrusted your property to, or unforeseen weather events, provides superior coverage for damage to your property. This can even include equipment breakdown coverage
  • Income Loss Coverage: Compensation for lost rental revenue due to property damage that renders your rental uninhabitable. 
  • Additional Enhancements: Added coverage unique to short-term rental risks, such as liability for onsite amenities like hot tubs or pools as well as amenities that take your guest off premises like bicycles and kayaks, protection for bed bug and fleas extermination and loss of income, unique Airbnb squatters coverage, no limit on guest-caused damage, and more.  

Airbnb Host FAQ: “Does Airbnb Insure Against Damage?” 

While Airbnb may boast about AirCover, it is not adequate insurance coverage and isn’t the same as having your own personal insurance policy. Airbnb isn’t bound by legal commitment, it’s more of a blurred area, where payout comes at the discretion of the offering party. This leaves you, the host, in a precarious situation. Not only does Airbnb have the option to act on their policy, but your Airbnb AirCover policy can become void if you don’t abide by strict claim submission requirements. 

Vacation Rental Insurance Coverage & Liability Explained 

When renting to short-term guests, you face two primary risks: liability and property damage. Vacation rental insurance provides a safety net for liability and property damage. A clear understanding of your coverage ensures you’re not caught off guard by potential claims. Here’s how specialized vacation rental insurance addresses these risks: 

Short-Term Rental Liability Coverage for Vrbo, Airbnb & Vacation Rental Properties 

Imagine a guest is bitten by a neighbor’s dog, leading to medical expenses and legal action. Proper’s vacation rental insurance offers liability coverage to protect you in such scenarios, with coverage designed to meet your needs. 

Owning a vacation rental property comes with risks that standard Homeowners or Landlord insurance policies don’t cover. Specialized vacation rental insurance is not just an option—it’s an essential safeguard for protecting your property, liability, income, and peace of mind. 

Protect Your Property & Investment with Proper Insurance 

Relying solely on standard Homeowners insurance is a gamble many owners can’t afford to take. Understanding your insurance needs and finding the right policy are crucial steps in ensuring your investment is secure. Start by evaluating your current coverage and call Proper Insurance to discover if you’re misinsured

Don’t wait until it’s too late—get the protection your vacation rental property deserves.  

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About the Author

Justin Brodin

Justin Brodin is the Marketing Director at Proper Insurance, where he specializes in short-term rental insurance education. With six years of experience in the STR industry, Justin has developed a deep understanding of the unique needs and challenges short-term rental owners and operators face. He currently resides in Austin, TX, where he enjoys the warm vibes of the city and spends his free time on the water.

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