Does Homeowners Insurance Cover Vacation Rental Properties?

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.

Read More

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. 

• Liability claims are likely also excluded. Whether it’s a guest slipping on the front steps, a rash appearing after guests use your hot tub, or a child that fell from the top bunk that was not up-to-code, with each new group of guests comes a whole new set of risks. Liability is an Airbnb host’s most costly exposure, often reaching or surpassing $1M per occurrence. Many owners and hosts don’t realize that their personal umbrella policy will not extend to cover incidents at their short-term rental property. 

• 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. 

• No loss of income coverage. Homeowner policies do not have loss of income coverage, that’s because the home should not be generating an income. That’s the business activity exclusion we’ve been talking about, remember? A Homeowners policy does provide “loss of use” coverage which is very different than loss of income or loss of revenue coverage.  

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. 

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.