Vacation Rental Insurance

Vacation Rental property ownership is booming.  Entire resorts are being created around this concept.  Services such as VRBO, and  HomeAway have turned this property use into a thriving market in certain areas.

When investors and homeowners purchase these properties, proper insurance for the intended use is often overlooked.  Often an owner simply informs their insurance agent that they are purchasing a new home to rent out and need insurance on it.  What they don’t know is that the vast majority of insurance companies will not knowingly write insurance policies on homes that are being used for short-term or vacation rentals.

Some agents simply insure the property with a landlord policy or homeowner policy either without the knowledge of the intended use or without disclosing the use to the insurance company.   While the property may be “insured” there are exclusions in these policies for “business use” and “vacancy,” among other gaps in coverage.  When you operate a vacation rental property you are operating a business.  With a standard landlord or homeowner policy, virtually any claim could be denied.  It is very likely that if the insurance company discovers the specific use of the property, they will cancel the policy immediately.  Only a select few insurance companies will write an insurance policy for a short-term rental property, and several of those policies still have the exclusions.

Whether you are a real estate agent, vacation rental manager, or property owner, it is important that you understand this.  To properly insure a vacation rental, one should obtain a Commercial Liability policy..  There are specific commercial policies designed to protect a vacation rental property and the associated liability.  The best type of policy has no exclusion for business use, no exclusion for vacancy, and adequately reimburses you for lost income should the property suffer a loss.

Alternately you can go with a less expensive personal policy that is intended for vacation rental properties, however these policies are still limited in what they will cover.

If you decide to simply insure your property through a standard insurance company, we recommend obtaining a written statement from the insurance company in answer to the following question: “If I regularly entrust my property/home to a paying vacation rental guest for a period of fewer than 30 days, and that guest damages property, steals something or is injured on my property, do I have property and liability coverage?”

Owning a vacation rental property can be profitable, but not insuring it correctly can easily negate the benefits.  For more information, or to discuss with an expert, call us at 435-656-4586 and ask for Jeremiah or Jacie.  You can also send an email to jeremiah@lmx180.com.  We’ll be happy to give you guidance on the matter and provide options for insurance.