Short-Term Rental Property Insurance vs. Regular Property Insurance


In the modern era of travel and hospitality, short-term rentals have emerged as a popular choice for travelers seeking unique accommodations. Platforms like Airbnb, Vrbo, and have transformed the way people experience their vacations, making it imperative for property owners to understand the nuances of insurance coverage. Short-term rental (STR) property insurance, often referred to as holiday rental insurance or vacation property insurance, is a specialised form of coverage that differs from regular property insurance in several key ways.

Short-Term Rental Property Insurance Explained

Short-term rental property insurance is tailored to meet the unique needs of property owners who rent out their homes or apartments for short stays. Unlike traditional property insurance, which is designed to cover long-term residential properties, short-term rental insurance provides coverage for the specific risks associated with temporary rentals. Let’s delve into the primary differences and benefits of short-term rental property insurance:

1. Liability Coverage

One of the most crucial aspects of short-term rental property insurance is liability coverage. Hosting guests in your property, even for a short period, introduces potential liability risks. Whether it’s accidental injuries, property damage, or legal claims, liability coverage safeguards you against these unforeseen events. In contrast, regular property insurance might not adequately address these risks posed by short-term guests.

2. Property Damage

Short-term rental insurance typically extends coverage for damages caused by guests. Regular property insurance might exclude coverage for damages inflicted by tenants, as it is more tailored to traditional long-term rentals.

3. Theft and Vandalism

Since short-term rentals may experience higher turnover rates, the risk of theft and vandalism can increase. Short-term rental property insurance often includes provisions to address these specific concerns, whereas standard property insurance might not offer comprehensive protection for such occurrences.

4. Business Interruption Coverage

If your short-term rental property becomes uninhabitable due to an insured event, business interruption coverage within your short-term rental insurance policy can help compensate for the loss of rental income during the downtime. This is a feature not typically found in regular property insurance.

5. Comprehensive Coverage

Short-term rental property insurance packages are designed to provide comprehensive protection, acknowledging the unique blend of personal and commercial use that characterises short-term rentals. This holistic approach differentiates it from standard property insurance.

What about Airbnb insurance?

Airbnb Insurance AirCover is designed to address the specific needs of hosts who offer their properties as short-term rentals on platforms like Airbnb. This insurance solution goes beyond standard property insurance by considering the distinctive challenges posed by temporary guests and their activities within the property.

What does Airbnb insurance cover?

One of the most compelling aspects of Airbnb Insurance AirCover is its wide-ranging coverage. Hosts can expect protection against a variety of risks that are prevalent in the short-term rental landscape:

Fire: Accidental fires can pose a significant threat to both your property and the safety of your guests. With Airbnb Insurance AirCover, hosts are covered for repair and rebuild costs resulting from fire incidents, even if they are caused by a guest’s negligence.

Theft or Attempted Theft: Instances of theft can occur in any property, and short-term rentals are no exception. Airbnb Insurance AirCover can reimburse hosts for costs associated with theft or attempted theft, providing financial relief for the losses incurred.

Bursting, Leaking, Discharging, or Overflowing: Plumbing mishaps such as burst pipes or leaks are common occurrences in properties. Airbnb Insurance AirCover typically includes coverage for damages resulting from these incidents.

Identity Theft: In an age of increasing digital threats, identity theft can be a distressing experience. Airbnb Insurance AirCover extends coverage to hosts for legal costs and fees associated with identity theft incidents involving guests.

Malicious Damage by Guests: Not all guests treat your property with care, and malicious damage can be a concern. This insurance solution covers malicious damage caused by guests to both contents and the building.

Accidental Damage by Guests: Accidents happen, and guests might inadvertently damage belongings or the property itself. Airbnb Insurance AirCover reimburses hosts for such accidental damages.

Vandalism: If your property falls victim to vandalism by guests, Airbnb Insurance AirCover provides financial assistance to rectify the damage.

Loss of Rental Income: When unforeseen events render your property uninhabitable and unavailable for rentals, hosts can receive reimbursement for the loss of rental income they would have otherwise earned.

Temporary Accommodation: Should an insured event like a fire render your property temporarily uninhabitable, Airbnb Insurance AirCover covers the costs of alternative accommodations for affected guests.

Tax Audit: This can cover the cost of an audit if you need one for the property you’re insuring and renting out.

Factors to Consider When Seeking STR Insurance Coverage

As hosts explore insurance options for their STR properties, it’s crucial to be aware of potential gaps in coverage that may arise from relying solely on standard home or landlord insurance policies. Understanding the limitations of these policies can help hosts make informed decisions about obtaining comprehensive protection for their short-term rental ventures. Here are key considerations to keep in mind:

Limited Coverage Duration: Traditional landlord insurance policies typically require a minimum stay duration of three months for coverage to apply. Given that the majority of Airbnb stays are considerably shorter, often lasting only a few days or weeks, hosts could find themselves without coverage under such policies. If you’re an existing landlord insurance policyholder planning to utilise your property for short-term rentals, it’s advisable to contact your insurer to explore the possibility of extending coverage to STR arrangements.

In some cases, you can’t live on the property: A distinct feature of Airbnb and similar platforms is the opportunity to rent out individual rooms or portions of a property. However, some landlord insurance policies stipulate that coverage is contingent on the host not residing on the property while guests are present. This limitation can leave hosts without coverage if they intend to live on-site while simultaneously offering short-term rentals. It’s important to review the terms of your insurance policy to determine whether this requirement applies.

Home insurance only covers you for personal use: Home insurance policies are designed to protect your property for personal use, but they generally do not extend coverage to paying guests. The moment your property generates income from short-term rentals, your standard home insurance policy may no longer provide adequate coverage. As the dynamic shifts from personal to commercial use, hosts need to seek insurance solutions that explicitly address the unique risks associated with hosting guests.

Exclusions to Watch Out for in Short-Term Rental Insurance Policies

Natural Disasters:
Certain short-term rental insurance policies may not extend coverage for damages caused by natural disasters such as storms, earthquakes, bushfires, and floods. In such cases, your standard home and contents insurance policy should step in to provide the necessary coverage. Before finalising your short-term rental insurance, review the policy’s stance on natural disaster coverage and consider how it aligns with the geographical risks your property might face.

Lack of Written Consent:
If you haven’t obtained written consent from the property owner or landlord to rent out a room or the entire property, your short-term rental insurance policy might not cover you. This emphasises the importance of transparent communication and obtaining proper authorisation before engaging in short-term rental activities.

Occurrence During Guest Stay:
Coverage under short-term rental insurance often applies only when a guest is present on the property. Any loss or damage that occurs outside of a guest’s stay might not be covered. It’s crucial to understand the scope of coverage concerning the timing of incidents and whether they align with guest occupancy.

Gradual Deterioration or Wear and Tear:
Typically, short-term rental insurance policies do not cover gradual deterioration, depreciation, or wear and tear of the property or its contents. These forms of damage are considered inherent to the aging process and are generally excluded from coverage.

Damage by Insects or Vermin:
Short-term rental insurance might not provide coverage for damage caused by insects, pests, or vermin. While regular maintenance can help prevent such issues, hosts should be aware that this type of damage might not be included in their policy’s coverage.

Building Work and Renovations:
If you’re planning significant building work, repairs, or renovations to your property that exceed a specified value, your short-term rental insurance policy may not cover any damage resulting from these activities. It’s advisable to consult your insurance provider before undertaking major projects to ensure you maintain appropriate coverage during construction.

Policy-Specific Exclusions:
Every insurance policy comes with its own set of exclusions and limitations. It’s crucial to carefully review the product disclosure statement (PDS) provided by your insurance provider to gain a comprehensive understanding of all the exclusions that apply to your chosen policy.

All policies have exclusions. While these exclusions can vary from policy to policy, they underscore the importance of due diligence and thorough review of the terms and conditions of your chosen insurance coverage. It’s best to read the product disclosure statement (PDS) for a full rundown of these.
Your hosting journey deserves the best protection. Have a look at STR insurance providers available in Australia.