Protecting Your Short-Term Rental Condo: Navigating Insurance Options

If you're renting out your condo on a short-term basis, it's important to make sure you have the right insurance in place. Standard homeowners insurance policies typically don't cover short-term rentals, especially if you're generating consistent income from your property. This is because renting out your home is considered a business use, which standard homeowners insurance doesn't usually cover.

To protect yourself and your property, you'll need to purchase short-term rental insurance, which covers your property and your potential liabilities while renters are staying in your home. This type of insurance can be purchased as an endorsement to your existing homeowners insurance policy or as a standalone policy from specialist providers.

Short-term rental insurance typically covers guest liability insurance, property insurance, and theft and burglary. It's important to note that short-term rental insurance doesn't cover all problems, and you may need additional coverage for things like flood and earthquake damage.

Guest liability insurance

Additionally, guest liability insurance provides protection against damage caused by guests to common areas, such as building lobbies and nearby properties. This coverage extends beyond the boundaries of the rental property, offering a comprehensive safeguard for hosts.

When considering guest liability insurance, it is important to review the specific terms and conditions of the policy. While it covers a range of scenarios, there may be exclusions or limitations. For example, guest liability insurance typically does not cover intentional damage caused by renters or damage to the host's property.

To summarise, guest liability insurance is an essential component of short-term rental insurance, offering financial protection and peace of mind for hosts. It safeguards against guest injuries, accidental damage to others' property, and damage to common areas. However, it is important to carefully review the policy details to understand any exclusions or limitations.

Property insurance

Most standard homeowners insurance policies exclude coverage for "business use", which includes renting out your property to paying guests. Therefore, it is essential to obtain short-term rental insurance or an endorsement/rider to your existing policy. This type of insurance is designed specifically for situations where guests are paying to stay in your condo for a short period.

The property coverage portion of short-term rental insurance typically includes protection against theft and burglary. It reimburses you for any losses incurred due to break-ins or theft by renters during their stay. Additionally, it covers damage caused by guests to your condo or personal items. This could include accidental damage, such as a spilled drink on your furniture, or more extensive damage, like a kitchen fire.

When obtaining short-term rental insurance, you can choose between purchasing a separate policy from specialised companies or adding an endorsement/rider to your current homeowners insurance policy. The endorsement/rider option adds coverage for short-term rentals to your existing policy. This may be a more convenient and cost-effective solution if you already have homeowners insurance.

It is worth noting that short-term rental insurance does not cover all scenarios. For instance, it typically excludes intentional damage by renters and may have limited coverage for certain high-value items in the event of theft. Additionally, it usually does not cover loss of income if you are unable to rent out your condo due to damage.

When considering short-term rental insurance, it is important to compare quotes from different companies to find the best coverage and price for your needs. Some companies to consider include Proper Insurance, Allstate, CBIZ, Farmers, American Modern, and American Family. These companies offer various benefits, such as comprehensive coverage, affordable rates, and endorsements from well-known vacation rental companies.

Theft and burglary

To ensure you have adequate protection against theft and burglary, it's recommended to review your policy carefully and understand any exclusions or limitations. You may also want to consider adding endorsements or riders to your policy for additional coverage. Additionally, taking steps to secure your home, such as installing deadbolts or security systems, can help deter theft and may even qualify you for discounts on your insurance premiums.

• Reimbursement for Stolen Items: If a renter steals something from your condo during their stay, your short-term rental insurance will reimburse you for the value of the stolen item, up to your policy limits and after meeting your deductible.
• Protection Against Break-Ins: In the event of a break-in, your insurance will cover the cost of repairs to your condo, including damage to doors, windows, or other structures.
• Coverage for High-Value Items: While standard policies may have lower coverage limits for items like jewellery, you can often add endorsements or riders to your policy for additional protection. This ensures that you will be reimbursed for the full value of these items if they are stolen.
• Protection for Off-Premises Items: Some short-term rental insurance policies also cover theft of items outside your condo, such as luggage stolen from a hotel room while travelling.
• Loss of Rental Income: If your condo is burglarised and you need to cancel bookings or make repairs, your insurance may provide coverage for lost rental income.

Commercial business liability

• The biggest liability exposure for condo owners is typically auto insurance, followed by short-term rental damage.
• When renting out a condo to travellers, owners open themselves up to significant liability risks. If a guest sustains an injury, the owner may be held liable and face a lawsuit.
• Most commercial general liability insurance policies offer a $500,000 limit per occurrence, but in today's litigious society, $1,000,000 in coverage is recommended as a minimum.
• Endorsements or simple additions to a homeowner's policy are often insufficient for short-term rental liability. A separate commercial general liability policy is necessary to ensure full protection from damage claims.
• Not all liability plans for short-term rentals are equal. Some platforms, like Airbnb, offer free liability coverage, but this often comes with extensive exclusions, leaving owners vulnerable.
• Commercial liability insurance is essential because short-term rentals are considered business or commercial transactions. Homeowner's insurance policies typically exclude business activity, so damage claims could be denied.
• A business insurance policy with commercial general liability provides the most comprehensive coverage, extending beyond the premises of the condo.
• When obtaining commercial liability insurance, consider a policy that includes building, contents, and business income coverage to protect your investment fully.
• Commercial liability insurance is especially important if you host guests through platforms like Airbnb or Vrbo, as these rentals are considered commercial activities.
• When shopping for commercial liability insurance, compare prices and coverage options from different providers. Ensure the policy includes protection against damage, theft, and liability claims.

Business revenue protection

When choosing a short-term rental insurance policy, it is essential to consider business revenue protection, especially if your property is your primary source of income. This type of protection ensures that you will not suffer financial loss if your property becomes unrentable due to covered causes.

• Actual Loss Sustained Valuation: This valuation method determines the payout you will receive based on the actual loss of revenue you incur due to covered causes. It ensures that you are adequately compensated for the income you would have earned if not for the covered loss.
• No Time Limit on Payout: Unlike some other types of insurance, business revenue protection for short-term rentals typically has no time limit on the coverage payout. This means that you will continue to receive reimbursement for lost revenue until your property is rentable again, regardless of how long the repairs or restoration take.
• Coverage Limits: When selecting a policy, pay close attention to the coverage limits offered. Choose a policy that provides sufficient coverage based on your expected rental income. The limits you choose will determine the maximum amount you can receive in the event of a claim.
• Covered Causes of Loss: Understand what constitutes a covered cause of loss under the policy. Typically, this includes events such as fire, wind damage, water damage, or guest vandalism. Make sure you are clear on any exclusions or limitations to ensure you have adequate protection.
• Endorsements and Add-ons: Some insurance companies offer endorsements or add-ons to their policies, allowing you to customize your coverage. For example, Proper Insurance offers business revenue protection with no occupancy restrictions and coverage for the entire premises, not just the condo unit.
• Claims Process: Familiarize yourself with the insurance company's claims process. In the event of a covered loss, you will need to file a claim to receive reimbursement for lost revenue. Understand the steps involved, the documentation required, and the timeframe for processing claims.
• Cost of Coverage: The cost of business revenue protection will vary depending on the insurance company and the coverage limits you choose. Be sure to get quotes from multiple providers and compare the cost along with the features and benefits of each policy.

Frequently asked questions