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How Much Short Term Rental Insurance Do You Need?

Renting out your property through sites like Airbnb or Vrbo comes with unique risks not covered by standard insurance policies. As a short term rental host, understanding what kind of coverage you need and how much it costs is crucial for protecting your investment. This article provides guidance on evaluating your specific insurance needs when renting out your property on a short term basis.

The Risks of Short Term Rentals

Short term rental properties face higher risks than long term rentals in several key areas:

More frequent turnover of occupants - With guests constantly changing over, there is increased wear and tear and a higher chance of damage occurring. There may also be lapses between bookings where the property is vacant and more vulnerable to risks like vandalism or theft.

Higher chance of accidents - Travelers staying in an unfamiliar environment can lead to more accidents like slips and falls that result in liability claims.

Parties and unauthorized guests - Travelers may violate rental agreements by bringing more guests than permitted or throwing unauthorized parties that damage the property.

Geographic risks - If your rental property is located in an area prone to natural disasters like floods, hurricanes or wildfires, there is a greater chance of a catastrophic loss from these events.Without proper insurance, any of these issues can become extremely costly for the property owner.

Key Factors That Influence Your Insurance Costs

Insurance premiums for short term rentals vary significantly based on:

Property type – Standalone houses cost more than condos or apartments.

Location & disaster risk – Flood/hurricane zones have elevated rates.

Claims history – Prior insurance losses increase costs.

Rental frequency – The more days rented per year, the higher the rates.

According to Steadily, average annual premiums for a typical short term rental property fall between $500 to $3,000. However, costs can surpass $10,000 for very large, frequently rented, or disaster-prone properties.Use the sample quotes below for estimated insurance costs based on property type:

Single family home

  • 2 bedrooms, 2,000 sq ft
  • $800,000 reconstruction cost
  • $400,000 personal property limit
  • $2 million liability coverage

Estimated annual premium: $1,100

Beach condominium

  • 2 bedrooms, 1,000 sq ft
  • $400,000 reconstruction cost
  • $100,000 personal property limit
  • $1 million liability coverage

Estimated annual premium: $900

Lake cabin

  • 3 bedrooms, 1,500 sq ft
  • $600,000 reconstruction cost
  • $75,000 personal property limit
  • $2 million liability coverage

Estimated annual premium: $1,500

The best way to determine accurate insurance costs for your specific short term rental property is to get a quote from a provider like Steadily that specializes in this type of coverage.

How Much Coverage Is Enough?

Getting enough insurance is crucial, but how much is really needed? When insuring a short term rental property, dig into the details to tailor protection to your individual risk factors. Consider key areas:

Reconstruction Cost – This insurance limit covers rebuilding your property if a total loss occurs. Calculate this value factoring in construction materials, labor, demolition, permits, and more. For a 2,000 square foot home, this cost often exceeds $300 per square foot.

Personal Property – Inventory everything inside your rental unit from appliances, furniture and electronics to linens and kitchenware. Replacing these belongings gets pricey. Even a modestly furnished 2-bedroom rental can easily top $50,000 to $100,000 in contents.

Lost Rental Income – If damage renders your unit uninhabitable for repairs, this keeps rental income flowing for 12-24 months. Budget at least $3,000 per month for a typical single family home.

Liability – Insuring against guest injury claims is equally crucial. Industry experts recommend $1 million as a minimum liability limit for short term rentals. Some providers may require coverage up to $5 million.Leaning on short term rental insurance experts helps determine sufficient limits unique to your property. Don’t leave major gaps trying to minimize premium costs.

Covering Your Short Term Rental Risks

Skimping on insurance to save money can backfire terribly if a loss occurs. The potential costs of uncovered damage, liability claims or lost rental income could be financially catastrophic.

Work with a reputable insurance agent or company that understands the unique risks facing short term rentals. Make sure your policy limits adequately cover the full reconstruction cost of your rental along with your personal belongings. Also confirm liability coverage is sufficient based on your rental size and capacity.

Paying for proper short term rental insurance coverage gives you peace of mind knowing your hard-earned investment is protected. Don't take chances by relying on standard homeowners policies that exclude many rental risks. Protect your property and your finances by securing specialty short term rental insurance tailored for hosts and vacation rental owners.

Reveal your property’s rental profitability

Buy this property and list it for short term rental.