Since vacation rentals do not strictly fit into any one standard insurance category, it can be challenging to find insurance for short-term rental properties. They are not typically 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 the right insurance to protect your rental? To help shed some light, here are some frequently asked questions regarding vacation rental insurance.
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 information on HomeAway Assure HERE.
Q: Is short term renting a vacation home considered a business activity?
A: When you collect money to allow someone to stay at your property for a short period of time, this is a business transaction. It is not “occasional”, nor is it the “residence” of your renter.
Q: Does a regular homeowner’s policy cover business activities such as a vacation rental?
A: Regular homeowner’s insurance specifically excludes business activities.
Q: What type of liability coverage does a regular homeowner’s policy carry?
A: Personal liability.
Q: What is the difference between personal liability and commercial liability?
A: Personal liability coverage will not respond to business activities, such as charging money for someone to stay at your vacation rental. Instead, personal liability is intended to cover you in the event that someone claims that you have caused them bodily injury or damaged their property as a result of your personal actions. What businesses carry and what you need for your vacation rental business is commercial liability coverage (business liability). This is because commercial liability is specifically designed for business activities like your vacation rental and therefore, does not exclude coverage for such things.
Q: What if my vacation rental is also my primary residence?
A: HomeAway Assure™ provides both personal and commercial liability when the rental is a primary residence. It is designed to fully replace a homeowner’s policy.
Q: Do I need two separate policies; one for when I’m renting my place, and one for when I’m not?
A: HomeAway Assure™ is designed to fully replace a homeowner’s policy. It is not supplemental coverage to a homeowner’s policy. The coverage extends to the property whether it’s unoccupied, or occupied by a guest, friend, family, or the owner.
Q: Does a personal umbrella protect over my vacation rental business?
A: A personal umbrella will not follow business activities. A personal umbrella will follow you anywhere you go in the world; but only for personal negligence. You would need a commercial umbrella for protection over your vacation rental business.
Q: Can I insure the income my vacation rental business generates?
A: HomeAway Assure™ provides business income protection on actual loss sustained. In the event of a covered loss, business income is triggered.
Q: Can I insure multiple vacation rental properties on one policy?
A: HomeAway Assure™ allows up to three separate premise addresses per policy. However, it’s always suggested to separate them out as all three premises would share the same liability limit.
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 that 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: If my agent tells me I’m covered, am I covered?
A: Everyone is subject to the language in their insurance policy. Always ask your agent to show you in the language where you are covered or not covered.
Q: Can I tell my insurance agent that I'm not renting my property in order to obtain insurance?
A: You should never misrepresent facts about your vacation home. If it is discovered that you’re renting and you have a claim, your insurance carrier could deny the claim and/or drop 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. This leaves the inside of your unit, your personal contents, liability and loss of business income for you to cover, which is where HomeAway Assure™ comes in.
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: How much commercial liability insurance should I purchase?
A: It is recommended to get at least $1 million dollars of liability coverage per occurrence. 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 always purchase excess commercial liability through HomeAway Assure™.
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. HomeAway Assure™ on the other hand, is specifically written to cover vacation rental businesses. Therefore, it does not cost any additional premium to have the policies written under the name of your LLC.
Q: How do you check the financial status of an insurance company?
A: Using sites like www.ambest.com, 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 as anything less may not have the financial backing to pay out claims in the event of a large loss.