The 2024 Vacation Rental Insurance Outlook

As a result of inflation, climate events and other challenges, the vacation rental insurance market is in a taxing position going into 2024. However, while the hard insurance market is expected to continue in 2024, property owners may be able to optimize their investments, maintain optimal coverage and limit relative price increases by understanding the influencing factors resonating from months and years past along with the trends and patterns expected to impact future conditions.

Inflation’s Impact Still Felt Across Vacation Rental Insurance

Although inflation decreased from its 9% peak in mid-2022, the homeowners and vacation rental insurance markets continued to be affected by these in 2023. Estimated costs for rebuilding or repairing homes continued to be high due to elevated prices for building materials and construction labor. Many of these issues began during the COVID-19 pandemic and never fully subsided, as supply chain difficulties still impacted pricing in some sectors at the end of the year.

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In addition, the 2023 insurance market saw an uptick in social inflation, which refers to the cost of claims outpacing that of economic inflation; this is often fueled by more frequent litigation and increasing settlement amounts. Settlements are often referred to as “nuclear verdicts.”. While these claims are most common among businesses, the ripple effects have also been felt in the personal insurance market, namely through premium increases.

Climate-related Losses Abound

According to government data, natural disasters and severe weather continued to be a significant cause of home- and property-related losses in 2023; there were 28 severe weather events with estimated costs ranging from $1 billion to $10.5 billion.

Along with hurricanes, wildfires and tornados devastating the country, Swiss Re reported that severe thunderstorms emerged as a significant contributor toward weather-related losses. Paired with high rebuild costs, increased catastrophic weather events contributed to substantial losses for insurance companies in 2023. Due to the potential severity and frequency of claims, homeowners in certain areas may find affordable insurance difficult to find in 2024.

What to Expect for Vacation Rental Insurance in 2024

Since many of the primary factors that affected the vacation rental insurance marketplace in 2023 have not been alleviated, it should be no surprise that the market is expected to remain hard, and premiums are forecasted to increase or stay elevated in the near future. Further, insurance companies may be more meticulous when assessing home conditions and risk levels.

Vacation Rental Insurance Buying Tips

While most major factors, such as weather conditions, climate change and economic inflation, are out of the control of vacation rental owners, there are still steps policyholders can take to mitigate rising premiums and unearth potential savings. Retaining adequate insurance protection — even during challenging times — is vital for financial security.

Consider the following strategies that may help limit rising vacation rental insurance rates:

• Weather protection: Property owners may be able to reduce perceived risk levels and, as a result, premiums by installing and implementing protection from the elements. This may include upgrading a home’s roof, installing storm shutters, trimming or removing trees and brush, and using nonflammable building materials.
• Security upgrades: By protecting their property from potential criminal acts, owners may also be able to reduce their perceived risk levels and access lower coverage costs. Installing smart technology, such as fire alarms and security cameras, could help lower premiums.
• Coverage changes: The details of a vacation rental owners insurance policy play integral roles in determining premiums. To combat rising rates, policyholders may want to revisit various features of their coverage.
• Credit score improvement: Many insurance companies have made credit scores an increasingly important factor when quoting rates. By keeping up with bills, limiting debts and balances, and maintaining a diverse credit portfolio, owners may enjoy lower premiums.

We’re Here to Help

By familiarizing yourself with the factors that may impact your vacation rental insurance costs and working with a qualified insurance professional, you can understand market conditions, identify optimal policies and secure appropriate coverage at a fair price.

Failing to carry an adequate policy could leave even the most responsible and diligent owners without the financial means to repair or otherwise manage the aftermath of unexpected and challenging times. If you’re relying solely on your homeowners insurance, landlord insurance or a host liability policy to provide coverage, you could be exposing yourself to serious risks. There are a variety of factors to consider to ensure your vacation rental is properly insured. Connect with a CBIZ Vacation Rental Insurance team member today and request a free quote.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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