Thinking about using your home as a short-term rental? Make sure to contact your homeowners insurance company first
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- Homeowners insurance usually has a landlord clause for long-term rentals, but not short-term.
- Short-term rentals raise additional liability concerns for homeowners.
- If you fail to inform your homeowners insurance about renting out your home short-term, it could result in denial of coverage.
- See Insider's picks for the best homeowners insurance companies.
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Summer is here and travel is on the upswing. According to AirDNA, demand for short-term rentals is up 64% from last year, especially in small towns and destination areas near a lake, mountain, or coastal region.
If you're considering earning extra cash by renting out your home as a short-term rental, it's important to understand how it impacts your homeowners insurance coverage.
Unless you've purchased your home specifically as a vacation rental, homeowners insurance may not cover damages to your primary residence if used as a short-term rental.
Homeowners insurance may not include short-term rentals
Although most homeowners insurance companies have some sort of landlord clause for long-term renters, short-term rentals are new to the market and raise concerns about liability, according to Steve Wilson, a senior underwriting manager at Hippo Insurance.
He recommends homeowners contact their insurance carriers to make sure they have appropriate coverage for short-term rentals, because depending on the language in standard homeowners policy they may not be covered.
The worst case scenario is if you haven't informed your homeowners insurance company before using your home as a short-term rental and damage occurs or someone is injured, you may not be covered or denied coverage. For instance, one homeowner listed her home on Airbnb and had $25,000 in damages – an incredibly high amount to be on the hook for with no insurance coverage.
Short-term rentals mean extra liability for homeowners
Wilson said not all homeowners insurance companies provide coverage for short-term rentals. He said some may have an endorsement or rider for short-term rentals. He recommends requiring short-term renters to pay for any property damage.
If your homeowners insurance carrier doesn't provide short-term renters coverage, you're unprotected for damage to your home, personal property, or personal liability if guests are injured. You will also be responsible for repairs or legal costs if you're sued for personal liability. This is particularly important if you have a swimming pool or trampoline.
Contact your insurance carrier if you want to Airbnb your home
Although Airbnb says hosts are eligible for property damage protection, bodily injury is the responsibility of hosts, and hosts are encouraged to get personal insurance.
VRBO encourages hosts to require guests to get property damage protection insurance. Ultimately, the homeowner is responsible if Airbnb, VRBO, or the guests do not cover damage.
Contact your homeowners insurance carrier before using your home as a short-term rental to address damage and personal liability concerns. Your homeowners insurance carrier will want to know:
- The length of time and how often your home will be rented
- Is this your primary residence?
- How will the space be used? Vacations, event space, or both?
- Are guests required to get damage insurance?
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