Having a vacation property is enjoyable. Warm weather in the winter months, cool weather in the summer months, and access to your favorite parts of the world are all made possible with vacation properties. There are several benefits to owning a vacation home, but there’s a big downside.
When you’re not on vacation, you’re paying for a property you’re not using.
Multiple websites have capitalized on this problem, offering an easy way for you to rent your vacation home to short-term tenants. But you’ve checked with your homeowners association and read through local regulations. You’re good to go.
Or are you?
One common mistake rental owners make when listing their properties as short-term vacation rentals is failing to have vacation rental property insurance before renting them out. The reality is that accidents happen, often leading to damage, and if you’re not properly insured, you could be held liable for the damage, whether it was your fault or not.
What Is Vacation Rental Property Insurance?
Vacation rental property insurance is an insurance product designed to help cover expenses associated with damages that take place at your vacation rental. These damages can be to your property, your tenants themselves, or even guests your tenants invite to your property.
Vacation rental property insurance is designed for a wide range of property types, including single-family homes, condos, apartments, townhouses, and even mobile homes. If you have a nonresidential property that you rent to short-term tenants, there’s likely a short-term rental property insurance plan for you.
How Much Does Vacation Rental Property Insurance Cost?
Short-term rental plans are offered by a wide range of providers, each with its own coverage limits, covered damages, and annual costs. In most cases, vacation rental property insurance plans come with price tags ranging from $2,000 to $3,000 per year, but they can be far less, or far more, costly.
The most important factors that play a role in the cost of coverage include:
- Property value: Vacation rental property insurance plans cover the property itself from damages, much like homeowners insurance. So the value of your property will play an integral role in the cost of the plan, with higher-value properties costing more to cover than lower-value properties.
- Environmental risk: Insurance companies have actuaries who use complex equations to determine the level of risk different factors pose to insured properties. One of the biggest risks they consider is the environmental risk. For example, is your vacation rental in an area that’s known for frequent hurricanes, tornadoes, or wildfires? If so, chances are that you’ll pay more for insurance than you would if the property weren’t in an area known for these environmental threats.
- Liability risk: Multiple factors play a role here. One of the biggest is how often you rent the property to short-term tenants. If nobody’s on the property, there’s no third-party liability to be concerned with. So if you rent your property out for only one weekend per month, you’ll pay less than someone with a similar property who rents it out for three weeks out of the month.
- Property hazard risk: Some additions to your vacation property may increase its value from a rental-income standpoint but also increase its risk from an insurance standpoint. For example, if your vacation rental has a pool in the backyard, you’ll pay more for insurance than a rental owner who doesn’t have a pool, because there’s no drowning risk when there’s no pool.
- Your credit: Insurance companies often use creditworthiness as a risk factor. So if you have excellent credit, you may qualify for discounted insurance premiums.
What Does Vacation Rental Property Insurance Cover?
Every vacation rental property insurance plan is unique and will come with different coverage for different risks. However, most plans cover:
- Guest injuries: Things happen on vacation. A guest may be mopping the floor on their way out of the rental and slip, resulting in an injury. If this happens, you’re on the hook for that injury unless you have vacation rental insurance to help you with the cost.
- Damage to guests’ property: Let’s say your gas fireplace malfunctions, and a fire ensues. Thankfully, your guests evacuated the property safely, but the fire got to their luggage, where all of their cash and valuable travel possessions were stored. You may be on the hook to replace those items if you don’t have an insurance plan.
- Damage to your property: What happens if a guest has one too many drinks and leaves the stove on? Soon, the kitchen is ablaze, and thousands upon thousands of dollars in damages rest on your shoulders. That is, unless you have a rental property insurance plan to help you cover the cost.
- Damage to an adjacent property: In the example above, say you live in a condo, and your kitchen is attached to your neighbor’s. The fire doesn’t destroy just your kitchen; it destroys your neighbor’s as well. Your short-term rental insurance plan will help cover the cost of your neighbor’s damages as well.
- Relocation expenses: Some emergencies will force your guests to relocate during their vacation. When they do, the relocation costs are yours to pay. Many plans help cover these expenses as well.
Common Myths About Vacation Rental Property Insurance
Myths are part of human nature. When we don’t understand things, we tend to fill the holes with what we believe to be the case to make those things make sense. While most myths are playful, some can be damaging. That’s especially the case when it comes to myths about financial products like insurance plans. Some of the most common and damaging myths about vacation rental property insurance include the following.
My Renters’ Health Plans Cover Accidents
Ninety-one percent of Americans have a health insurance plan. So chances are that your renters will have one too. These plans do cover some accidents, but they’re covered only when the liability is the renter’s to carry. If you are legally liable for damages, your tenant’s health insurance coverage may should cover them, but they may try to deflect the costs to the property owner.
Moreover, while 91% of Americans have a health insurance plan, 9% don’t. So even if the damages are covered by some health plans, they may still fall on your shoulders when the renter is uninsured.
The bottom line is that your tenants may suffer injuries on your property, and when they do, it’s best to make sure you’re covered.
My Homeowners Insurance Has Me Covered
If you own a home, whether it’s your primary residence or a vacation property, you should have homeowners insurance. These plans do cover guests and their property when they’re in your home.
However, in the insurance world, there’s a difference between how the property is occupied. Your primary home where you regularly reside can be covered on a homeowners policy. A rental property that is frequently used by others is not eligible for a homeowners policy.
I Rent for Only 3 Months Out of the Year, so I Don’t Need Insurance
Even if you rent for only one day out of the year, you never know when an accident is going to happen. No matter how often you rent your vacation home, you should have insurance for unexpected events.
How Do You Get the Best Vacation Property Insurance?
There are countless vacation rental property insurance plans available from countless providers. So how do you find the best plan for your property?
One of the best ways is to contact the team at Torian Insurance. Founded in 1923, Torian is one of the most well-established insurance companies in the U.S., representing happy customers for nearly an entire century.
Click here and fill out the form to get in touch with our team. When you do, we’ll give you a call and talk about:
- Your property: We’ll need to know a bit about your property to find the best plan for you. We’ll ask questions about the home or condo and the land to decide on reasonable coverage in case your property is damaged.
- Your renting frequency: Some providers are best for people who rent their properties regularly, while others are best for renters who have the sporadic tenant from time to time. We’ll ask how often you rent your property to help determine which plan is best for you.
Once we have the information we need, we’ll comb through our database of plans from trusted providers to find the perfect match for you.
Rental Property Insurance Frequently Asked Questions
Human beings are inquisitive, so it’s natural to have questions. Two of the most common questions about vacation rental insurance are answered below.
Do I Need Vacation Rental Insurance?
If you own a vacation property you rent to guests for a monetary gain, vacation rental property insurance is a must. The risks to your guests, your property, and your bank account are too high to not have a plan.
Do These Plans Cover Dog Bites?
That depends on the type of plan you sign up for and the terms of that specific plan. If you plan on allowing pets in your rental, it’s best to specifically look for plans that offer this type of coverage.
Vacation rental properties are fun, but when things go wrong, the financial burden could cause you to lose the property if you’re uninsured. The good news is that insurance coverage is relatively inexpensive and easy to get. Why wait? Contact Torian Insurance today to speak about vacation rental property insurance with an agent who can walk you through the process.