You can’t rely on your homeowners insurance to do what only a vacation rental policy can. Why? Because renting out your home for short-term stays is considered a business activity, and business activities are excluded from most homeowners insurance coverage.
Without commercial general liability coverage, which is the best option for running a vacation rental business, you might be forced to foot the bill if someone is injured during their stay or they cause damage to your property. Homeowners insurance simply isn’t designed to cover these types of risks.
Website Host Liability Policies
Vacation rental listing websites such as Airbnb and Vrbo as well as other home-sharing platforms typically offer peace of mind with free or low-cost host liability policies. But you can’t rely exclusively on these either. Many of these policies are free or low-cost for a reason – they’re riddled with fine-print exclusions that leave you exposed to risks you’d never have imagined.
For example, host liability policies generally limit coverage to personal and legal liability while excluding or limiting coverage for property damage. While a host liability policy may cover you if someone holds you accountable for their injuries, your home and its contents may still be left unprotected.
Another coverage option you may have encountered is pay-as-you-go insurance. Pay-as-you-go insurance gives you coverage only for the nights you have renters, which means you only pay per night of coverage. While this type of policy may seem attractive, especially to homeowners who only rent their spaces a handful of times a year, other issues could arise.
For one, you could be facing gaps in coverage in between tenants. If something were to happen to your property while vacant (such as an electrical fire or a burst pipe), you might be forced to pay out of pocket for the damages.
As your vacation rental business grows, you’ll also discover that pay-as-you-go coverage will not be as cost-effective as having comprehensive coverage for the entire year. Generally, the total cost of an annual vacation rental insurance policy is much less overall.