Thanks to the explosion of platforms like Airbnb, VRBO, and HomeAway, property owners have found new ways to make money, but it’s also raising important questions about the appropriate insurance coverage needed to protect these investments. Your investor client should keep in mind that when renting out a home on a short-term basis, a standard homeowners policy likely provides little to no protection for property damage or injuries sustained by a guest. Moreover, a homeowners policy almost always excludes coverage for those running a business in their home, especially if an insurer claims they are running a hotel or bed and breakfast in the home. For the same reason, many landlord insurance policies do not cover vacation rentals.
Types of Coverage Your Investor Client Needs
When renting out a property to short-term tenants, the investor should be sure they have the following coverage for that location:
- Structural: This covers damage to, or destruction of, the property itself that may occur while a guest is staying in the home.
- Liability: If a renter or guest is injured on the premises of a property your investor client owns, and they are sued, liability insurance will help cover legal fees and penalties.
- Contents: Unlike a traditional rental unit, a vacation rental is likely fully furnished by the property owner (your investor client). Contents coverage protects furniture, appliances and other belongings that may be damaged in a loss.
- Loss of Rents: This coverage reimburses the investor client after a loss for income they would have received while the property was uninhabitable.
REInsurePro offers coverage for vacation rentals through our Insurance Program. This option gives your investor client all the coverage they need, plus the benefits of our program: housing all of their properties on one schedule, monthly payment and reporting, and other endorsements such as Earth Movement, Equipment Breakdown, and Flood. It also allows access to aggressively priced liability coverage rated as a rental rather than a hotel.
Vacation rentals are a great way for your investors to earn steady income, build wealth through property appreciation, take advantage of tax benefits, and diversify real estate portfolios. However, it is critical that investor clients and their properties are properly insured against unexpected loss.
