How Much Does Short-Term Rental Insurance Cost?

Whether it's a vacation home or a rental unit listed on Airbnb or Vrbo, owning a short-term rental property comes with specific risks that are not typically covered by standard homeowners insurance. To protect your investment, you will need a specific type of insurance policy designed for short-term rentals. Short-term rental insurance costs can vary depending on several factors, including the location of your property, how often you rent it out and the type of coverage you choose.

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Understanding Short-Term Rental Insurance

Short-term rental insurance is a type of insurance designed specifically for homeowners who rent out their property on a short-term basis, typically for days or weeks at a time.

Standard homeowners insurance does not typically cover the risks associated with renting out a property to guests, such as property damage caused by tenants or liability claims if someone gets injured on the property. Short-term rental insurance fills in these gaps, offering coverage for property damage, theft, loss of income due to cancellations and liability protection.

For example, if a guest accidentally causes a fire in the kitchen or damages furniture, short-term rental insurance would cover the cost of repairs or replacements. If a guest slips and falls on your property and sues you for medical expenses, liability coverage would protect you from potentially devastating legal costs. Without proper insurance, you could be left to cover these expenses out of pocket, which could quickly add up and potentially hurt your rental business .

Factors That Influence the Cost of Short-Term Rental Insurance

The cost of short-term rental insurance can vary widely based on several factors. According to the National Association of Short-Term Rental Management (NASTRM), the average premium runs between $2,000 and $3,000 per year .

However, the specific rate you pay will depend on several factors. Here are six to keep in mind:

• Location of the property. The location of your rental property plays a significant role in determining short-term rental insurance costs. Properties in high-risk areas prone to natural disasters such as hurricanes, floods or wildfires will generally have higher premiums. Urban areas with higher crime rates may also increase costs due to the higher likelihood of theft or property damage.
• Type and size of property. The type of property you rent out, whether it is a single-family home, apartment or vacation cabin, can affect short-term rental insurance costs. The value of the property matters, as more expensive properties will need higher coverage limits. Larger properties with more amenities, such as pools or hot tubs, may require more extended coverage, which can also increase premiums .
• Rental frequency. How often you rent out your property can impact your short-term rental insurance costs. If you rent your property year-round, your premiums will likely be higher than if you only rent it out for a few weeks or months each year. More frequent rentals increase the risk of property damage or liability claims, which is reflected in the cost of your insurance policy.
• Coverage limits and deductibles. The level of coverage you choose and the deductible amount you select will directly affect your premium. Higher coverage limits provide more protection but come at a higher cost, while choosing a higher deductible can lower your premium but means you will pay more out of pocket in the event of a claim.
• Security and safety features. Properties with enhanced security features like alarm systems, security cameras and smoke detectors may qualify for lower insurance premiums. These features reduce the likelihood of property damage, theft or injury, making the property less risky to insure.
• Personal liability coverage. Your premium will increase if you opt for higher personal liability coverage, which protects you from legal costs in case a guest is injured on your property. Though more expensive, this coverage is important for avoiding potentially high legal expenses.

What to Consider When Choosing Short-Term Rental Insurance

If you're thinking about getting short-term rental insurance, here are five general factors to consider when picking a policy:

• Coverage for property damage and liability: Make sure the policy you choose covers damage to the property caused by guests, as well as personal liability in case of injury. If you rent out the property frequently, you may want to opt for higher coverage limits to fully protect yourself.
• Loss of income coverage: Some policies offer loss of income coverage, which reimburses you for lost rental income if your property becomes uninhabitable due to a covered event, such as a fire or water damage. This coverage can be particularly useful if you rely on rental income to cover expenses.
• Guest property coverage: Consider whether the policy covers damage to or theft of guest property. Some short-term rental policies provide coverage for items guests bring with them, which can help protect your reputation as a responsible host.
• Additional riders for high-risk areas: If your property is located in a high-risk area for natural disasters, you may need to purchase additional coverage, such as flood insurance or earthquake insurance. Make sure your policy addresses any specific risks associated with your property's location.
• Host protection insurance: Some rental platforms like Airbnb offer host liability insurance, but it is often limited in scope. While this may provide some level of coverage, it is important to review what is and is not covered and supplement it with your own comprehensive short-term rental insurance if necessary.

How to Get Short-Term Rental Insurance

To get short-term rental insurance, you will first need to shop around. Be sure to compare policies from various insurance providers so you can be sure that you receive the most comprehensive coverage for the best price.

Some companies specialize in vacation or short-term rental insurance, while others offer it as an add-on to existing homeowners or landlord policies. It is important to compare coverage options, limits and premiums to ensure you are getting the best policy for your needs.

Bottom Line

Short-term rental insurance is essential for protecting your property and financial well-being as a rental owner. While short-term rental insurance costs can vary depending on factors such as location, property type and rental frequency, investing in the right policy ensures that you are covered in the event of damage, liability or loss of income. As you compare policies, consider your coverage needs and make sure the policy you choose provides adequate protection for both your property and your guests.

Tips for Real Estate Investment

• If you want to create or build out a real estate portfolio, a financial advisor can help you analyze and manage investments. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• To figure out your monthly mortgage payment, you can use SmartAsset's mortgage calculator to get an estimate that includes taxes, fees and insurance.

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