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How Much Does Vacation Rental Insurance Cost

Why Do Travelers Purchase Vacation Rental Insurance For Renters

QUICK TIP: How much does your vacation rental really cost?
  • Covers losses for trip cancellations or trip interruptions
  • Provides peace of mind, especially in an uncertain travel environment
  • Protects against strict or ridged vacation rental cancellation policies
  • Coverage for illness, injury, and other medical concerns
  • Covers accidental damage to a vacation rental property
  • Benefits & Coverages in affect before and while traveling

Why Buy Travel Protection:

Vacation Rental Insurance Guide

Whether you list your property only in the summer or all year round, whether you work on it full-time or while holding down another job, it is important to recognize that you are running a vacation rental business. As a business owner, one of the things you need to consider to protect your business in the long-term is insurance for your vacation rental. Hereâs our definitive guide to vacation rental insurance.

Rental Frequency & Occupancy Rates

The revolving door of guests increases liability, so the more frequently your property is rented, the pricier your premiums. If you have a particularly high average occupancy rate say the property is occupied with guests for more than 180 days a year then youll likely be quoted a higher premium.

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Other Beach House Bills

Renting a beach house involves costs above and beyond the mortgage, utility, and cable. For one thing, the tax bill is likely to be hefty, given the high value of many beach houses. And if the beach house is an income property, homeowners must typically pay for marketing and advertising. Shelling out money to hire people to show off the property is only one part of these expenses. Super unlucky beach house owners might also have to foot the legal costs associated with litigating tenant disputes.

I Booked The Vacation Rental Through Vrbo Or Airbnb Do They Cover Me

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No, they do not cover guest damage. Some online travel agencies, like VRBO, Expedia or Airbnb, do offer some protections and policies. As these are often changing its best to check directly with the agency. Note that these are not comprehensive coverages and only pertain to property damage.

VRBO, does offer travelers a Accidental Damage Protection that covers accidental damage to a vacation rental up to a certain dollar limit. Airbnb, alternatively, sets limits on how much a host can charge for damage, however, a guest can still be responsible to cough up money for damage. These gaps are where vacation rental insurance for renters would kick in and add value.

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Optional Additions To Your Rental Property Insurance

The coverage provided by rental property insurance will vary by insurer, and coverage that is standard with one insurer may be optional or unavailable with another. Below we’ve listed a few examples of common endorsements you may be able to add to your rental property insurance. We recommend shopping for quotes to find the best combination of price and coverage that fits your needs.

What Kind Of Insurance Do I Need For A Vacation Rental

The simple answer is: you need a specialized policy that covers vacation rentals. Heres why.

Your personal insurance policy whether thats a homeowner, landlord, or condo policy does not automatically cover everything that you need it to cover as a short-term rental host. You may be able to purchase add-ons and extend your current policy. However, not all insurance carriers have this option.

Results of our survey of 41 short-term rentals hosts in the US.

Another way to go is to take out a business insurance policy. However, even these can have restrictions around renting out your home on a short-term basis. And, business insurance policies tend to be extremely expensive for hosts no one wants insurance fees to cut into their rental income.

But what about the policies that platforms like Airbnb and Vrbo offer?

Results of our survey of 41 short-term rentals hosts in the US.

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How Much Does Landlord Insurance Cost

Landlord insurance policies usually cost about 25% more than homeowners insurance policies, according to the Insurance Information Institute. The average cost of landlord insurance was $1,478 in annual premium, and the average cost of homeowners insurance was $1,192, as of a few years back.

For example, we got insurance quotes for a typical 3-unit Chicago rental property from five different companies, and the insurance premiums ranged from $2,400 up to $6,600 for the same coverage.

Vacation Rental Insurance For Owners: A Complete Guide

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Running any kind of business has its risks and short-term rentals are no exception. If you decide to rent out your vacation home, you need to make sure that you protect it against unprecedented damages and incidents. After all, things go wrong all the time: even the most well-meaning guests can cause damage or be involved in accidents.

The only way to make sure that you, your property, and your renters are protected is to take out vacation rental insurance. However, its not as easy as it sounds.

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  • What makes insurance for vacation rentals different from standard homeowners policy?

  • What type of coverage do you need?

  • Which providers insure vacation rentals and what is the best option?

  • How much does insurance for vacation rentals cost?

  • How do you file a claim?

If you have, youve come to the right place. I recently noticed just how often questions concerning insurance come up in short-term rental groups and forums. So, I decided to dig deeper into the topic.

I sent a survey to my community of US-based short-term rental hosts, asking them about their experience. 41 hosts came back to me with lots of useful insight, which Im going to share with you below. Ive summed up the main takeaways in an infographic.

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Vacation Rental Home Vs Second Home

People usually purchase a vacation rental home for two purposes: to use for their own vacations and to rent out to othersoften to offset some of the costs of homeownership and vacation expenses. However, a second home is not normally rented out and is just used as a second primary residence. This makes a difference when it comes to insurance.

For example, if the owners use a vacation rental home for 14 days or fewer per year or 10% or less of the time its rented, vacation rental insurance providers generally consider it a business.

However, this is a general rule of thumb and varies among providers. Insurance providers also want to know how often the property is visited by owners or a property manager.

In contrast, a second home isnt rented, and coverage is generally similar to a typical homeowners policy. Insurance providers consider a second home to be less risky than a vacation rental home because it doesnt have the liability associated with renters. Some home policies cover a second home while other providers require separate second home insurance.

Calculate The Total Cost Of All Activities Per Person Before Your Vacation Starts

Activity costs will all depend on what you plan on doing while on vacation. Some cities are filled with free things to do, while others are museum meccas where youll find plenty of admission ticket costs.

Assuming a one week vacation, lets estimate that youll visit three attractions that have an admission fee of $25. For a family of four, youll want to budget $300 for attractions.

And if you like to get your kids souvenirs on vacation, be sure to allow perhaps another $50-$100 for shopping. Ill admit that I also like to shop on vacation, so consider adding some shopping budget to your plans if you want to buy something special on your trip.

For major cities you can save some serious money on attraction expenses by purchasing a CityPASS or Go City card. Both of these programs are a voucher system where you pay one price for a booklet of entrance tickets to various popular city attractions. You can save about 40% on attractions in places like LA, NYC, San Diego, Orlando, Boston, and more!

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Do I Need Vrbo Or Airbnb Insurance

There arent any legal requirements in place, but to keep yourself protected against unexpected costs and claims, you should maintain an insurance policy tailored to short-term vacation rental properties.

Airbnb does offer its own free insurance program, but there are policy holes, disclaimers, and other important information buried in 70+ pages of hard-to-read fine print.

You dont have to stitch together policies that dont fit. Save yourself time and stress by purchasing a single vacation rental insurance policy that provides all the coverage you need.

How Much Cash Should You Carry On Vacation

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In these days of credit cards Ill be the first to admit that I forget about carrying cash. You do want to have cash on hand for vacation. In my experience you should estimate to carry about $20 a day in cash. Again, this will vary based on your destination.

Youll need to do some research in advance to find out how widely credit cards are accepted at your destination. For most places in the US, credit cards are widely accepted and cash will mainly be used for tipping hotel staff.

You might need cash for some smaller shopping spots, like food carts or farmers markets. You could also need to have cash on hand for taxis as some will offer you a deal to pay in cash instead of credit.

Youll also want to determine how easy it will be for you to get more cash while on vacation. Are you traveling to a destination that has ATMs that partner with your bank?

Or perhaps you want to get a no-fee ATM bank account like SoFi to save on ATM fees while traveling abroad. Be sure you know your ATM pin code and if chips are required. Also, make sure youve notified your bank of your travel plans as part of your vacation preparation.

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A Tip For Future Landlords

We spoke with a real estate investor and he shared an insight on how he uses landlord insurance for the properties that he rehabilitates that he rents out to tenants in the future.

Remember you should only have a landlord insurance policy in place when the property is actually tenant occupied. You need what is called a vacant policy which as you can imagine is more expensive because statistically, a vacant property is much more likely to file a claim. We use a vacant policy after we have completed construction and are waiting to place a tenant. After the tenant has moved in we convert the policy to a landlord policy which is cheaper. Looking back at your historical expenses a vacant policy is 120% more expensive than a landlord policy

Average Property Management Fee Calculation

In order to effectively do a property management fee calculation, youâll have to consider a number of factors:

  • The kind of property management fees theyâre offering: flat fees, percentage-based, etc
  • The fee model they work with: whether they use commission or guarantee models
  • Extra fees: like cleaning, maintenance, and advertising fees

If youâre still not sure how to calculate your property management fees, you can try using Landlord.netâs property management fee calculator here.

We recommend making sure you know what youâll be paying for before working with a property manager. However, most professional vacation rental property managers will provide you with a list of all the fees and be able to explain the importance of each one.

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What Deductible Is Right For Vacation Rentals

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Property deductible is a portion of what you are responsible for paying out-of-pocket toward a loss at your property before your insurance carrier will pay for a claim. When deciding on a property deductible, think about the minimum claim you would have to turn in before it harms your business and do as much as double it. If you would never file a $1,000 claim, dont carry a $500 deductible. Remember, the lower your property deductible, the higher your rate. Our liability insurance has no deductible.

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What Does Rental Property Insurance Cover

Rental property insurance coverage will vary, but policies will generally cover the dwelling or structure of your property, contents of the property belonging to the landlord, liability coverage and loss of rental income. Much of its coverage is similar to that of homeowners insurance, though it has unique features that homeowners insurance lacks and that account for the added risk of having tenants on your property.

Dwelling coverage

Just like homeowners insurance, rental property insurance covers physical damage to your dwelling, meaning damage to the structure of the home or apartment itself. For example, it will cover damage to your walls and your roof but not the personal items of your tenant. Coverage will only extend to damage caused by a covered peril, and you should make sure to understand which perils, such as fire or lightning damage, are covered by your particular policy.

Coverage for the landlord’s personal property

When shopping for rental property insurance, you should check whether personal property coverage is included in the insurer’s standard policy and if it is, to what extent it will cover your property. Sometimes this coverage is only offered as an optional add-on, called an endorsement. In other cases, coverage will function as appliance insurance for your rental property. This means that only damage to property that is used to service the apartment, such as a washing machine, may be covered, whereas damage to a television set will not be covered.

Vacation Home Vs Vacant Home Insurance

A vacation home is a secondary property used for family trips, rentals to vacationers, and temporary housing for short-term corporate visitors. The last two of these uses require business insurance. A vacant home is an empty home that is in transition either because it is on the market for sale, in probate, or is otherwise unoccupied and needs a form of a personal homeowners insurance policy.

For more information on vacant property insurance, check out our in-depth guide on vacant and unoccupied home insurance, including providers and costs.

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Understand What Is Excluded

It is just as important to understand what your policy excludes. The insurance company wants to be as specific as possible, because if it is vague, they may be on the hook for it. The policy will say what is covered and also what is excluded from coverage. Make sure you look at this list to understand what you are not protected from.

Best For Landlords: Farmers

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For landlords short-term rental insurance needs, you wont find a better choice than Farmers. Its prepackaged landlord insurance policy includes liability insurance and comprehensive property coverage, with optional coverage additions for lost rents, personal property, personal injury, and other structures like sheds, garages, and pools.

  • Policies available in all states

  • Discounts available for teachers, doctors, and some other professions

  • Bundling discounts available

  • Claim forgiveness prevents a rate increase for longtime customers after their first claim

  • Fewer complaints than expected, relative to its size

  • Deductibles decrease over time if no claims are made

  • Some coverages are only available as part of a package

  • The online quote tool offers several coverage options but doesn’t necessarily explain what those coverages are or what the limits are for filing a claim

Farmers landlord insurance understands the risks to the short-term guests, to the home itself, and to your business, making it our favorite insurance carrier for landlords. You can tailor your custom package to handle storm damage, a burst pipe, a guests injury, and the rents you lose while recovering from any of these setbacks.

Policyholders can download the Farmers mobile app to access ID cards, pay bills, view policy documents, set up payment reminders, or report a claim.

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A Breakdown Of Short Term Rental Management Fees

Deciding whether or not to hire a property manager for your vacation rental is a big decision. After all, how do you know your property will get the attention it deserves? What about the guest experience? Will problems get adequately fixed? And finally, the most critical questions, how much will all this cost me and what fees should I consider? The simple answer is: there are many rental management fees you need to consider. These range from the cost of the property management company, to routine maintenance fees, and local taxes.

Today we are going to demystify short term rental management fees to help you make more informed decisions about your vacation rental property. Weve also canvassed experts in the vacation rental field to give you their insights on short term rental management fees.

Theres no fee for this ride folks!

Note: In this article, we interchange vacation rental and short-term rental. There may be a difference in the offerings each provide. However, both rely on similar processes and marketing tactics to run successfully. In general, a great vacation rental management company will be able to operate short-term rentals

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