Things to Consider When Choosing Short-Term Rental Insurance

If you have a short-term rental business (STR), having the appropriate insurance policy is essential in protecting your assets. The question is, how do you choose the right short-term rental insurance exactly? Well, there are a lot of things that you need to consider – from coverage to cost. Let’s jump right in to learn more!

Key Takeaways

• Short-term rental insurance is specifically designed for properties with frequent guest turnover and offers protections that standard homeowners and landlord policies often exclude.
• A strong short-term rental insurance policy should include property damage coverage, liability protection, guest-related incident coverage, and loss of rental income protection.
• Rental owners should carefully review policy exclusions, coverage limits, claims processes, and local Atlanta regulations before choosing an insurance provider.

What Is Short-Term Rental Insurance?

Through our experience in property services in Atlanta, we understand how important insurance is when it comes to protecting rental income businesses. And with the growing popularity of short-term rentals (STRs), including in Atlanta, there is a growing market and need for insurance policies specifically meant for short-term rental properties. But what is it exactly?

Short-term rental insurance is a type of policy that is specially designed for rental units that are only rented out for short periods at a time. Typically, STRs are rented for periods under 30 consecutive days, though definitions vary by insurer and local regulations.

This distinction is crucial as the unique operation of short-stay rentals and the associated risks that come with it make STR insurance unlike standard homeowners or landlord insurance policies (more on that later). Generally, the purpose of short-term rental insurance is to provide protection for aspects that STRs are at greater risk because of hosting different guests on a more frequent basis.

Now, depending on your insurance provider, you can get short-term rental insurance as an add-on to your current coverage or as a standalone policy. On top of this, there are options where you only pay for the days when you have guests staying in your short-term rental, effectively cutting costs.

Short-Term Rental Insurance Coverage

To better understand what short-term rental insurance is and how it works, it’s best to look at it in terms of its policy coverage and limitations. While coverage may vary depending on your insurance provider, here are the most common inclusions that you’ll find in short-term rental insurance policies:

• Property and Personal Property Coverage: Helps protect the physical structure of the rental property, while personal property coverage may help cover furnishings, appliances, and other belongings used in the rental.
• Guest Liability: Covers medical expenses, legal fees, and potential settlements in case you’re found liable for a guest’s injury on your short-term rental property.
• Theft and Burglary: Allows hosts to recover the cost of commonly missing items such as towels, electronics, glassware, and the like. Often, jewelry and cash are not included in STR insurance coverage.
• Loss of Income: In case the property becomes temporarily uninhabitable, you can recover lost rental income during the repair period. However, the cause of the loss of income must be a covered event (fire, heavy storms, etc.), which varies depending on the insurance provider.

Aside from this, some providers offer add-on coverage types, which can expand the protections your policy has over your short-term rental business. Some of the options may include excessive utility use, pest infestations (fleas and bed bugs), identity theft, unauthorized occupancy protection, and even liquor liability.

At the same time, short rental insurance policies have limitations on what they cover and what they do not. So, while this can differ from one insurance provider to another, here’s what is typically not covered in short-term rental insurance policies:

• Flood and earthquake damage
• Intentional damage to property
• Wear and tear
• Guest’s property protection
• Theft of valuable items (jewelry, artwork, cash, etc.)

Factors to Consider When Choosing Short-Term Rental Insurance

Now that you have a good idea of what short-term rental insurance is and why it is particularly important for short-term rental owners, let’s get into the key factors that you need to consider when it comes to choosing the policy for your STR business.

Coverage and Exclusions

As a short-term rental owner, one of the first things that you need to look at when choosing an STR insurance policy is its exact coverage and limitations. Simply put, not all insurance policies offer the same protection. So, what are you looking for exactly? Based on our experience in property management, we recommend finding a policy that offers the full replacement cost of your property in case of damage, as well as adequate liability coverage. Many STR owners choose liability coverage limits of around $1 million, though it ultimately depends on their property type, local requirements, and risk tolerance.

Special Provisions

Another factor to consider when choosing a short-term rental insurance policy is your property’s features, which may increase your liability exposure. For example, having swimming pools, balconies, or even high-end appliances and smart home devices may require additional coverage considerations or policy endorsements.

Frequency and Type of STR

One of the benefits of STR insurance is that it can offer flexible coverage for occasional hosting and full-time STR operations. Now, it’s important during this step to be clear and honest about how you operate your rental. After all, if your activity exceeds what your policy allows, it could affect your ability to file or receive approval for future claims.

Claims Process

Speaking of claims, it is also critical that you look into the process involved and how the insurance provider addresses payout requests. Specifically, ask about the average response and payout times, and their availability in times of urgent incidents. You’ll never know, but delays in claims processing can negatively impact your business operation, from disrupting bookings to extending vacancy periods while repairs are completed.

Cost

Aside from coverages and limitations, cost is another important factor that rental owners focus on. That said, it’s also important to look at insurance costs in terms of their value. Simply put, while cheaper policies can lower your expenses, this will often come with lower coverage limits, more exclusions, and even higher deductibles.

Homeowner vs Landlords vs Short Term Rental Insurance: Key Differences

At this point, you might be wondering, what is the difference between short-term rental insurance and your homeowner or landlord’s insurance policies? At first glance, you may even think that these three offer little to no difference to each other.

But the truth is that STR, homeowners’, and landlords’ insurance are designed for specific purposes depending on the setting. To give you a better idea, here’s a quick summary of homeowner vs landlords vs short term rental insurance:

Features	Homeowner’s Insurance	Landlord Insurance	Short Term Rental Insurance
Primary Use	Owner-occupied home	Long-term rental property	Short stays or vacation rentals
Covers STRs?	Typically, no	No	Yes
Policy flexibility for STR platforms	Very limited	Not suitable	Designed for it
Business activity coverage	Not included	Limited	Often included or available through endorsements
Guest liability	Limited	Covers liability risks associated with tenant-occupied rentals	Designed for guests
Loss of rental income	Generally not intended for STR-related income loss	Yes	Yes
Guest damage protection	Usually excluded	Limited	May be included depending on the policy
Property damage	Yes	Yes	Yes

 

So, what does this mean? For STR business owners, having homeowner’s insurance or landlord insurance is most often not enough, as these do not typically cover the risks associated with short-term rental businesses. This includes frequent guest turnovers, higher wear and tear, increased liability exposure, and the nuances of platform-based bookings. What the STR insurance policy does is bridge the gaps often left by homeowners’ insurance and landlord insurance coverage, providing you with better and more comprehensive protection for your rental business.

How Bay Property Management Group Can Help

As a rental owner, choosing the right insurance policy for your short-term rental is one of the most important decisions you have to make to protect your business. However, there are a lot of factors that you need to consider – from the covered protections to the claim’s process and costs. Now, this is where working with a professional property management company, like us at BMG, can make a difference. With our experience in the rental housing industry, we can provide you with critical guidance by identifying coverage gaps, coordinating with insurance providers, and more. Sounds interesting? Contact us today to learn more!