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What is short-term rental insurance?

Short-term rental insurance, also known as host insurance, is a set of coverages designed to protect property owners who rent out their homes or rooms on a short-term basis through platforms like Airbnb or Vrbo.

Unlike standard home insurance, which often excludes commercial activities, this policy covers the specific risks of hosting paying guests. It provides financial protection against property damage, liability claims and loss of income, helping safeguard your rental business.

While Airbnb and Vrbo both offer free liability and damage protections to their hosts (such as Airbnb's AirCover for Hosts coverage), the safer option is to purchase short-term rental insurance. It offers a greater variety of coverage options, in addition to letting you set higher coverage limits. This is especially vital if you rent out your property regularly, since doing so increases the likelihood of injury, damage or theft.

What short-term rental insurance includes

A standard short-term rental insurance policy typically covers:

• Commercial property: Commercial property protection covers damage to your building and its contents (like furniture and appliances) from insured events such as fire, severe weather, vandalism, or theft. This could include damage caused by guests, though you should confirm this with your provider.
• Commercial general liability (CGL): General liability protects you if a guest is injured on your property or if you are held responsible for damage to their property. For instance, if a guest slips and breaks their leg on your floors, you might get held liable for it and sued as a result.

Recommended add-ons for short-term rental insurance coverage

To enhance your protection, consider these valuable add-ons:

• Business interruption: Also known as ‘loss of income’ or ‘rental income’ coverage, this reimburses you for lost rental income if your property becomes uninhabitable due to a covered claim, helping you maintain financial stability. This is frequently included within commercial property coverage.
• Cyber liability: This shields you from financial losses related to data breaches or cyberattacks, especially if you store guest information electronically.
• Loss assessment: If you’re renting out a condo, this will protect you in case a customer makes a claim against the condominium association, and it happens to exceed its insurance policy limit. Such claims are made for issues occurring within your condo building’s common areas, such as a fitness centre or swimming pool, not the condo itself.
• Contingent unit: If you’re a condo owner, this coverage is good to have regardless of whether you rent out your unit or not. It covers you in the event your condominium corporation does not have insurance or lacks the funds or coverage to fully protect your condo. Given that the risk is higher when you rent out a condo, adding this coverage could prove beneficial.

Common types of short-term rental insurance claims

While short-term rental insurance claims are not overall frequent, when they occur, they can be extremely costly, especially for your average homeowner. Here are some examples:

• Slip-and-fall accidents: If a guest slips on a wet floor and sues you for medical expenses, commercial general liability can cover the costs. Thanks to commercial general liability, you can pay off those costs.
• Theft: After a party, you discover that valuable electronics and decor have been stolen. Commercial property coverage can reimburse you for replacement costs, minimizing financial losses.
• Income loss: A burst pipe floods your rental unit, making it impossible to host guests for several weeks and resulting in lost income. Your business interruption or loss of income coverage will reimburse you for any financial losses you may undergo.

How much does short-term rental insurance cost?

The cost of short-term rental insurance can vary widely, typically starting at around $700 per year. Several factors influence your premium, including:

• Type of coverage: Basic policies with standard coverage will cost less than comprehensive policies with multiple add-ons.
• Coverage amount: Higher coverage limits will increase your premium and vice versa.
• Location: Properties in high-risk areas may have higher premiums. Some of the biggest risks affecting homeowners include crime rates, severe weather and flooding.
• Property characteristics and features: From property size to age, to the kind of security systems it has, all of these can influence your premiums. For instance, if your home has a robust fire alarm system, there is a lower chance of severe fire breaking out, which could lower your rates. On the flipside, if you have a wood stove, your rates could be higher as it poses a greater risk.
• Rental frequency: How often you rent out your space plays a role in determining risk.
• Claims history: A history of frequent claims can lead to higher insurance rates.

How to get the cheapest short-term rental insurance rates

If you’re looking to lower your insurance premiums, here are some actions to consider:

• Bundle policies: Combine your short-term rental insurance with other policies, like your primary home or auto insurance, to qualify for discounts.
• Increase your deductible: Opting for a higher deductible can lower your annual premium, but ensure it's an amount you can comfortably afford to pay out of pocket.
• Maintain a good record: A good record demonstrates that you are a low-risk client, which insurers often reward with better pricing.
• Ensure safety: Ensure your property is as secure as possible. For example, adding lighting to poorly lit areas can reduce the risk of trips or falls.