Vacation rental insurance FAQs (answers provided by Proper Insurance)
Since vacation rentals do not strictly fit into any one standard insurance category, it can be challenging to find insurance specific to short-term rental properties. Most insurance policies are designed to cover owner-occupied properties or second homes that will be used only by the family (or rented out long-term). Vacation rentals are rented monthly, weekly, and 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. As everyone’s circumstances vary, specific questions should be directed to your insurance agent.
Q: Does HomeAway provide or recommend any insurance products for my rentals?
A: HomeAway has partnered with experts in the insurance business to help you equip your U.S. vacation rental property with the coverage you need.
For comprehensive coverage, HomeAway has recognized Proper Insurance as its preferred vendor for property and casualty products in the U.S. The Proper Insurance program was custom written to protect against the specific hazards of your vacation rental business. The policy includes comprehensive coverage for your building(s), contents, income, and liability. It’s offered in all 50 states and we encourage you to learn more about Proper Insurance.
A separate $1,000,000 in liability insurance will be provided for all reservations processed through HomeAway checkout - at no additional cost to you. Learn more here.
Q: Should I verify my insurance coverage with my current agent?
A: Yes, it’s critical you are upfront and clear with your insurance agent about the exact use of your property. The challenge with vacation rentals is there is essentially triple use of the property. There are periods it’s rented to guests, there are periods of personal owner use, and there may be periods of vacancy. The Proper Insurance policy covers all three uses in one all-inclusive policy.
Q: My agent told me I’m covered, should I get something in writing?
A: Yes, most insurance agents do not specialize in vacation rentals, so it’s imperative you get confirmation in writing from the agent’s actual underwriter.
Q: Is my short-term rental considered a business?
A: Yes, standard insurance language states any activity resulting in more than $2,000 compensation during a 12-month period is considered business activity.
Q: Does a standard homeowner’s policy cover business activity?
A: No, a standard homeowner’s insurance policy specifically excludes business activities.
Q: How do I get business insurance for my vacation rental?
A: You purchase a business or commercial insurance policy. It’s cost effective to find a specialty commercial policy, such as Proper Insurance, that can replace your current homeowner’s or landlord policy, giving you both commercial and personal coverage in one.
Q: What if my vacation rental is also my primary residence?
A: Because the Proper Insurance covers triple-use, it is also designed for a vacation rental that doubles as a primary residence. There is full coverage in place when it’s being rented and when it’s being occupied by the owner.
Q: What is the difference between personal liability insurance and commercial liability insurance?
A: Personal liability insurance does not cover business activities, such as charging money for someone to stay at your vacation rental. Personal liability insurance is intended to cover you in the event that a liability claim arises out of the personal use of your property (e.g. a friend or family member is injured on your property and seeks damages). The type of insurance that a business carries and the type most experts will advise that 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.
Q: Does a personal umbrella protect over my vacation rental business?
A: A personal umbrella does not provide coverage for business activities. A personal umbrella will follow you anywhere you go in the world, but only for your personal liability. If additional insurance protection is needed to cover your vacation rental business, you should speak with your insurance agent about a commercial excess liability policy.
Q: Can I insure the income my vacation rental business generates?
A: Yes, Proper Insurance provides business income protection on an actual loss sustained basis. In the event of a covered loss, your lost business income is covered.
Q: Do I need to purchase additional insurance if my condo is part of an association that has a master insurance policy?
A: Yes, a master insurance policy for a condo association covers the common grounds and the exterior walls of the building. You are responsible for insuring the inside of your unit, your personal contents, liability and loss of business income, which is where Proper Insurance comes in as a comprehensive policy to cover you.
Q: I put my vacation rental under a Corp or LLC, is this OK?
A: Yes, seeing as your short-term rental is a business it’s not a bad idea to incorporate. Proper Insurance can write your policy with the named insured as an individual, partnership, LLC, Corp, or Trust.
Q: Is a vacation rental townhome or duplex insured the same as a home?
A: Yes, Proper Insurance covers single family homes, condos, duplexes, town homes, and more. It does not require to be defined as a vacation rental/short-term rental etc.
Q: What if I also live at the short-term rental, can I still purchase Proper Insurance?
A: Yes, you have the same business exposure. Proper insures every scenario imaginable. You live upstairs and short-term rent the downstairs. You live in the main home and vacation rent the guest house, etc.
Q: If my vacation rental has a swimming pool or hot tub, is there insurance coverage?
A: Yes, Proper Insurance comes standard with $1,000,000 of commercial liability insurance that extends over swimming pools and hot tubs. It also extends over bicycles, small watercraft, exercise equipment, golf carts, and more.
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. Most insurance experts recommend looking 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.
The Proper Insurance policy is underwritten by Lloyd’s of London which maintains and A rating with AM Best’s.
Q: Does Proper Insurance pay claims?
A: Insurance is a three-party transaction. There is the insured (you), the insurance agency (Proper), and the insurance company (underwriter). The insurance company pays the claims. The Proper Insurance policy is underwritten by Lloyd’s of London which is AM Best’s rated A. Lloyd’s has an excellent reputation for claims paid and is considered premier in the industry. They are the founding company of insurance over 325 years ago. Proper Insurance is proud to maintain an A+ BBB Rating.
Q: How can I protect against a traveler causing accidental damage to my property or contents?
A: Most vacation home policies insure against accidental damage by renters, subject to the policy deductible. Proper Insurance provides this coverage.
HomeAway has partnered with Generali Global Assistance to offer Property Damage Protection in the U.S., which is available for purchase by travelers. This coverage could pay the deductible on your primary home policy. There are three options: 1) $59 per booking for $1,500 in coverage, 2) $79 per booking for $3,000 in coverage, and 3) $99 per booking for $5,000 in coverage. Learn more here.
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 higher-risk areas. Standard policies include coverage for wind damage, although a separate deductible generally applies. Flood and earthquake are not covered under standard policies, so you should consider purchasing separate policies if you wish to cover your vacation home against these types of losses. Your insurance agent can help you determine appropriate coverages. If you are purchasing a vacation home, be sure to research this type of insurance before buying because it may affect your final decision on the exact location of your vacation home.
Q: Doesn’t HomeAway offer a free liability coverage up to $1M?
A: Separate $1,000,000 in liability insurance will be provided only for all reservations processed online through HomeAway checkout - at no additional cost to you. Learn more here.
**Last Updated June 26, 2018**