Most vacation rental owners do not fully understand the potential liability of owning a vacation rental. With over 40,000 vacation rental policies issued now, Proper Insurance® has become the nation’s leading expert in vacation rental liability claims. If you have not yet had Proper perform a comprehensive coverage review and comparison, we highly suggest you do so.
#1 – $1,000,000 in commercial general liability minimum
Most vacation rental owners carry $300,000 – $500,000 in liability coverage, which is not enough. In today’s world, your policy limit needs to be $1,000,000 minimum and we suggest you bump up to $2,000,000 if you can afford it. Serious injuries and deaths do happen at vacation rentals, and when they do, you need bullet proof coverage and big limits. Besides driving your car, your vacation rental property is your single biggest liability exposure.
#2 – Don’t count on a personal umbrella policy
There is a misconception that a $1,000,000 personal umbrella will extend over your vacation rental property. This is simply not true for two reasons.
First, your underlying policy limit must be fully exhausted for an umbrella to kick in, and many vacation rental owners simply do not have the correct underlying insurance, so the claim never gets to the umbrella.
Second, if a claim did exhaust your underlying policy, all personal umbrellas have a “business activity” exclusion, meaning they will not respond to any claim involving a business. Personal umbrella carriers consider “regularly” short-term renting a property for financial compensation a business. In other words, your vacation rental property is a business.
#3 – Make certain your liability extends off-premise
Far too many vacation rental owners carry a dwelling landlord policy, which offers premise liability, not commercial general liability. Premise liability DOES NOT extend off the property premise, period. Here are some examples of liability claims that could happen off your property premise, that could be tied back to your vacation rental business.
- Small watercraft such as a kayak or canoe
- Dog bites
- Assault & Battery
- Sexual molestation
- Invasion of privacy
#4 – Beware of bed bug liability
Not only are bed bugs a nuisance with regards to property damage and extermination, but they pose a huge liability risk. If a guest was to get bitten by bed bugs at your vacation rental, they could ultimately hold you liable and sue. These claim settlements quickly get into six figures. The problem is many insurance carriers have a total exclusion for “infestation” which bed bugs would fall under. You must make certain you do not have this exclusion.
#5 – Liquor liability coverage
Liquor liability is a standard exclusion with most all insurance policies. Most vacation rental owners do not furnish liquor, beer or wine for guests, but it’s not that simple. Guests regularly drink on vacation and often leave behind unconsumed beverages. During the post stay inspection, all alcohol must be entirely removed the rental, otherwise it’s now been furnished for the next guests. If they consume the alcohol and get injured, they can now claim the vacation rental owner liable. Either make certain you never furnish alcohol or make certain you have liquor liability coverage such as Proper offers.