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FAQ: Insurance for Vacation Rental Homes

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Created on: Sep 29, 2009 3:36 PM by community-editor - Last Modified:  Feb 26, 2014 3:14 PM by community-editor

insurance for vacation rental properties Since vacation rentals do not strictly fit into any of the standard insurance categories, it can be challenging to find insurance for short-term rental properties. They are not primary residences, or second homes, and they are not simply real estate investments. Most insurance policies are designed to cover owner-occupied properties or second homes that will be used only by the family (or rented out year round.) Vacation rentals are rented monthly, weekly, or even nightly - so how do you know which is right insurance to protect your rental? Here are some frequently asked questions about vacation rental insurance to help shed some light:


Q: Does HomeAway provide or recommend any insurance products for my rentals?

A: HomeAway Assure™ is a CBIZ Insurance Program tailor-made to protect against the specific hazards of your vacation rental business. You’ll find the most comprehensive coverage at a good price. You can find more info on HomeAway Assure here.


Q: How is my insurance affected if my property is non-owner-occupied vs. owner-occupied?
A: Everyday property insurance or casualty insurance on your primary policy is not meant for short-term rentals. That means if you run into an incident with a renter staying in your home, your insurance provider may not allow claims since the home was not occupied by you. Plus, they may even cancel your coverage. It is best to be up front about the uses of your home in order to protect your home and obtain the proper coverage.

Q: Can I tell my insurance agent that I'm not renting my property in order to obtain insurance?
A: No, you should not misrepresent facts about your vacation home because if it is discovered or you have a claim, your insurance carrier could drop you and void your coverage.

Q: Do I need to purchase additional insurance if my home or condo is part of an association that has a master insurance policy?

A: If your association has a master insurance policy or a blanket policy, it likely covers the common grounds and the exterior walls of the building. If your condo building is covered by this insurance, your mortgage company will probably not require you to purchase separate insurance, but it is still wise to purchase an additional policy to cover everything inside your condo.

Q: Should I consider purchasing flood, wind damage or hurricane insurance?
A: Since many vacation properties are located near bodies of water like oceans or lakes, the insurance can be a little more expensive because these are considered high-risk areas. Still, if the location of your vacation home is prone to natural disasters, it is wise to invest in this type of insurance. If you are purchasing a vacation home, be sure to research the cost of this type of insurance before buying because it may affect your final decision on the exact location of your vacation home.

Q: Do I need personal liability insurance in addition to homeowners or property insurance?
A: You should consider purchasing personal liability insurance on top of your homeowners insurance. Many homeowners insurance policies offer this option as a rider policy, making it an extension of the liability on your second home. This type of insurance is used to protect you in the event a renter gets hurt on your property, claiming it was caused by a problem at your home.

Q: How much liability insurance should I purchase?
A: It is recommended to get at least $1 million dollars of liability coverage. A million dollars is likely the most you'll be able to get with an individual insurance policy. If you would like additional coverage, you can purchase an umbrella policy, which should only cost a couple hundred dollars and will add more protection.

Q: Can I add an umbrella policy to my current homeowners policy?
A: Your first step is to talk to your existing agent to see just how far an umbrella policy will go in covering you above and beyond the assets you own. However, you need to confirm that it will also cover short-term rentals because many insurers view short-term rentals as a business and not as personal exposure.

Q: Do I need to purchase rental insurance?
A: Rental insurance is a specialized policy that could cover your property in the event of loss of rental income due to natural disasters. This type of insurance is pretty expensive and, for many owners, the cost is too high to justify it. However, if you feel more comfortable with additional coverage, this type of insurance is available.

Q: What if the insurance company asks the name of the property manager but I'm a rent-by-owner?
A: What the insurance provider is trying to find out is the name of someone who will be on the premises or handling weekly property maintenance. They're trying to make sure that the property will not sit unoccupied or that your guests will not be checking in and checking out with no one looking after the property. So while you might not think of your housekeeper as your property manager, he/she serves as your eyes and ears on the premises and can be listed in this case.

Q: If I run my vacation rental business as a Limited Liability Corporation (LLC), does that affect my insurance coverage?
A: Most insurance companies do not have the ability to provide liability insurance for a residential property that is also a business entity, like an LLC. Some insurance companies are starting to offer products to meet this need, but in general, it will not be offered by your traditional insurance agent.

Q: What is a surplus line insurance company?
A: When the licensed insurers from your state will not accept the risk of insuring your home because it does not meet their guidelines, you may need to look to a specially-licensed insurer called a surplus line company. Their special license allows them to procure policies from other insurers outside of the state. Keep in mind, though, that they are not regulated by your state the same way that regular licensed insurers are regulated. While this is helpful in designing a flexible policy that works for your vacation rental, you should realize that if this insurer goes bankrupt, there is no guarantee of your protection. Because they are not backed by your state, there is no bailout program. So, make sure to really investigate their financial status before settling on a provider. Also remember that their premiums are usually due up front, and if you sell your property or want to cancel your insurance, they will likely withhold a good portion of your premium and impose other penalties for cancelling.

Q: How do you check the financial status of an insurance company?

A: Using sites like, you can review financial ratings, history of the company, how long they've been in business, etc. You should look for an A-rated company.

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