Does Homeowners Insurance Cover Short Term Rentals?

Does Homeowners Insurance Cover Short Term Rentals?

April 21, 2023

As short-term rentals, such as Airbnb and VRBO, have become increasingly popular, many homeowners are wondering if their insurance policies cover the potential risks and liabilities associated with renting out their homes. 

It's important to understand that not all insurance policies are created equal. While some policies may offer coverage for short-term rentals, others may exclude coverage or require additional endorsements or riders. According to a survey by the National Association of Insurance Commissioners, only 15% of homeowners who rent out their homes through services like Airbnb or HomeAway have purchased additional insurance coverage beyond their standard homeowners' policy.

In general, standard homeowners' policies do not provide coverage for business activities, which can include renting out your home on a short-term basis. If you are planning to rent out your home, it is essential to review your insurance policy to determine if you have adequate coverage.

If you do not have coverage for short-term rentals, you may need to purchase additional insurance or a specific endorsement. Some insurance companies offer a "homesharing endorsement" that provides coverage for short-term rentals. However, it is important to note that these endorsements may have specific requirements and limitations, such as the number of rental days per year, the maximum number of guests, and the type of rental activities covered.

Most standard homeowners' policies provide liability coverage for bodily injury or property damage that you or your family members may cause to others. However, if a guest is injured or damages property while staying in your home, your liability coverage may not be enough to cover the costs. According to a survey by Insurance Journal, 29% of Airbnb hosts do not have liability insurance to cover damages or injuries to guests. This is a significant risk as lawsuits can be costly and devastating to your financial well-being.

It is crucial to review your insurance policy before renting out your home on a short-term basis. While some policies may offer coverage for short-term rentals, others may require additional endorsements or riders. It's essential to make sure you have adequate coverage for both property damage and liability risks to protect yourself financially. If you are unsure about your coverage, it's always best to err on the side of caution and purchase additional insurance to cover potential risks and liabilities.