Home Insurance and the Sharing Economy: What Homeowners Need to Know About Vacation Rentals 

What if you ruined your easy money-making opportunity before it even started? 

In the current economy, more and more homeowners are realizing how much money they can make renting out their homes to those looking for a place to stay. On paper, this is a great way to turn your biggest expenditure (your mortgage) into a simple way to make money. But without good vacation rental protection, you might be putting your most lucrative asset in serious danger because neither homeowners insurance nor landlord insurance will properly cover you. Sadly, many who rent their home out like this do not realize the need for rental insurance until it is too late. 

Are you thinking about renting out your home to vacationers, or maybe you are already doing so? Then it is time for you to get some much-needed peace of mind. Keep reading to discover everything you need to know about home insurance for vacation rentals. 

Understanding Home-Sharing in Today’s Market 

You have probably noticed that renting out homes has become more and more popular. To understand why, it is important to delve into what the sharing economy is and why that economy has flourished in the current market. 

Basically, the sharing economy is a peer-to-peer model in which individuals exchange goods and services with each other rather than going through major corporations. For example, vacationing used to require a person to book a single room through a hotel chain. Now, the rise of services like Airbnb and Vrbo has made it easy for individuals looking for a place to stay to rent out everything from a single room to an entire home. 

This model has become even more popular as the economy has worsened — hotel prices and everything from gas to groceries have become expensive. To afford a vacation, people may be looking for ways to save, and renting from an individual allows them to get the best of both worlds — more space at a lower price. 

Why Vacation Rental Hosts Need Insurance 

While vacation rental sites make it easier for you as a homeowner to rent out your property, you should look into your options for Airbnb insurance or Vrbo insurance. This coverage is especially important because most standard homeowners policies do not offer enough protection for homes with a steady stream of guests the owner does not really know. 

While a homeowners policy covers things like damage to the building and theft or damage, it is not designed to cover properties used for business purposes. The policy will likely not pay out for problems caused by renters, so if you rely solely on your standard policy, you may be left with major out-of-pocket expenses after rowdy guests end up damaging your house. 

Incidentally, landlord insurance is designed for long-term renters rather than short-term renters. So while you should have landlord coverage if you have anyone with a long-term lease, it is important to consider rental policies for short-term stays. And as a property owner, take the time to learn more about the role of landlord insurance in real estate investment. 

Navigating Homeowners Insurance vs. Home-Sharing Coverage 

If you are still on the fence about getting vacation rental protection, it is likely because you think your homeowners policy will be sufficient. In order to understand the importance of getting Airbnb insurance, Vrbo insurance, or some other additional policy, you need to know more about the differences between your existing coverage and home-sharing insurance. 

Homeowners insurance policies: 

• Repair or replace your home after a covered peril, including damage caused by natural disasters 

• Protect personal property, helping you repair or replace damaged items in the event of theft or vandalism 

• Offer liability coverage in case any of your guests get injured 

Home-sharing coverage: 

• Covers personal property, repairing or replacing items damaged by your guests 

• Offers liability coverage in the event any of your tenants get injured 

• May cover loss of income if covered perils affect your ability to rent out the property 

Depending on your carrier, your existing policy may not cover damage caused by people renting out your home. And even if it nominally covers their stay, visitors might cause certain kinds of damage that are not covered. For these situations and more, it is important to have separate home-sharing insurance. 

Deep Dive into Vacation Rental Insurance 

Even if your existing home policy covers those renting out your home, you are better off getting separate home insurance for vacation rentals, which offers a number of specialized protections your home deserves. These include the following protections: 

• Guaranteed coverage against theft or vandalism caused by tenants 

• Guaranteed coverage of medical bills and court costs related to tenant injuries 

Insuring a vacation rental means you have enhanced protection against theft, vandalism, and more. And should some type of damage render your home uninhabitable, this coverage will typically protect against a sudden loss of income. This ultimately provides some much-needed peace of mind to real estate investors. 

Types of Coverage Unique to Vacation Rentals 

Short-term rental insurance provides protections not covered by your homeowners insurance, which does not protect a home used for business purposes. When you use a dwelling for business purposes, it needs some form of commercial rather than personal coverage. 

For example, while a standard home policy protects against thieves who break into your home, it will not cover damage caused by a tenant you willingly allow into the house. Short-term rental protection also provides liability coverage that your standard policy may not — a regular home policy includes liability coverage, but it is designed with guests rather than tenants in mind. 

Remember, “short term” is something of a misnomer because you can cover both shorter and longer stays when insuring a rental property. For example, short-term coverage is a great option if your guests are staying six months or less. This is different from a homeowners insurance policy that will likely last at least one year and will not offer many (if any) protections against damage caused by guests. 

Ready for Guests? Steps to Insure Your Short-Term Rental 

The first step in protecting your rental property is to find the right carrier. If you rent out your property through third parties like Airbnb and Vrbo, they may offer coverage options. Alternatively, you can speak with your current carrier to see if they have any special riders you can add to an existing policy. There is no time like the present to shop around for a new carrier that can offer the protection you need. 

Once you have selected a carrier, review the coverage before insuring your vacation rental. That way, you will not be taken by surprise about what is not covered — you may be able to supplement that coverage with special riders. If you have the option to customize your policy, you may be able to add additional protections against things like bed bugs, squatting, identity theft, and more. 

Get the Right Insurance for Your Rental Property 

Now you know about the importance of vacation rental protection. This includes what it covers and what specific protections you get to protect yourself and your home. But do you know who is here to protect you whether you need insurance for renting out a room or even the whole house? 

At InsureOne, we offer coverage of all stripes, including robust homeowners policies, landlord policies for long-term tenants, and everything in between. Ready to experience the best in protection at prices you will have to see to believe? In that case, it is time to get a quote online. You can also pick up the phone and give us a quick call at 800-836-2240. Finally, feel free to find an InsureOne office near you.