8 Insurance Coverages Your Vacation Rental Business Actually Needs

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Threads in Facebook groups occasionally take a mind of their own and go off on a tangent the poster never intended.  This is what happened when Staywise Rentals shared their Trust issues in Week 1 of SSTIR Crazy Month.

You could term it a ‘race to the bottom’ thread, as owners piled in to share their budget insurance tips.  What it ultimately amounted to were unsettling recommendations for cutting coverages that could leave their businesses vulnerable.

If you were following this, it may be easy to assume that a standard homeowners or landlord insurance policy will cover short-term rental risks at a lower cost – which is invariably not the case.  

Unfortunately, many property owners don’t realize that short-term rentals require specialized insurance policies that address the unique risks of hosting guests.  And as managers, we need to be on the case because when that process server comes knocking, you won’t be left out.

If you want to really protect your business, your assets, and your peace of mind, here are seven essential insurance coverages every vacation rental operator needs.

1. Commercial General Liability Insurance (CGL) – Your First Line of Defense
2. Property Damage & Contents Coverage – Because Stuff Happens
3. Loss of Income Coverage – Protection When You Can’t Rent due to Property Damage
4. Pet & Animal Liability – Because Even "Good Dogs" Can Bite
5. Squatter & Unauthorized Holdover Protection – The Nightmare No One Talks About
6. Host Liquor Liability – If a Guest Finds Left Behind Alcohol 
7. No Occupancy Restrictions - It’s not always peak season
8. Cyber Liability Insurance – Bonus Coverage Because Hacks & Fraud Are Real

1. Commercial General Liability Insurance (CGL) – Your First Line of Defense

If a guest slips on a wet floor, falls down the stairs, or suffers an injury while staying at your property, you could be held legally responsible. Many homeowners' policies exclude business activity, meaning your claim will likely be denied for any coverage involving your business.

It’s not only accidents and incidents that happen on your property. As a short-term rental business owner, you can be found responsible for the actions of your guests.

Picture this: What happens if a guest gets injured away from your property while using the amenities you provided them to use like bicycles, waterfront access, kayaks, golf carts, etc.? Or what happens if a guest is hosting a celebration with floating lanterns and it ends up catching a neighboring house on fire?

Short-term rentals are risky - with new guests and new variables happening sometimes within the same week. Commercial Liability is the only kind of insurance coverage that follows your guests around while they are staying at your rental. -

What to Look For:

• At least $1 million in coverage, though $2M+ is recommended.
• Protection for guest injuries or accidents (both on-and-off premises)  including legal fees and medical expenses.
• Coverage that applies if you list your rental on platforms like Airbnb, Vrbo or choose to book directly.

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2. Property Damage & Contents Coverage – Because Stuff Happens

Guests don’t always treat your property with the same care that you do. Spilled wine, broken furniture, or a kitchen fire can quickly become expensive repairs. 

A recent post in that same Facebook group blamed guests for frozen pipes and significant damage because they neglected to leave the taps dripping when they left the property after their stay. You may be surprised, but guest caused damage is commonly excluded from standard policies meaning you’ll be paying out of pocket for damages stemming from your short-term rental business. And while you may be hopeful of guests following the house rules, like leaving the taps dripping upon check out, ultimately the responsibility for the property falls on the owner and their insurance

.Many hosts mistakenly believe Airbnb’s AirCover for Hosts will be enough to reimburse them for guest-related accidents—but it has strict limitations and is not a replacement for carrying the correct insurance policy for short-term renting.

What to Look For:

• Coverage for accidental,intentional and malicious guest damage.
• Replacement cost coverage (not just actual cash value).
• Loss of rental revenue if your property is temporarily damaged/uninhabitable.

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3.  Loss of Income Coverage – Protection When You Can’t Rent due to Property Damage

Hurricanes, tornadoes, wildfires, flooding ... it seems natural disasters are happening much more often and more homes are vulnerable to damage. Short-term rental properties are vulnerable to damage, whether it’s at the hands of guests or Mother Nature herself. 

What would happen if the damage at your property forced you to shut down your rental for weeks, months or even longer than a year? How would  you cover your mortgage and expenses? This is where Loss of Income, or even better Loss of Revenue, coverage can help supply you with lost income during covered property claims.

What to Look For:

• Income replacement for covered property damages.
• Revenue coverage for extended closures due to property repairs or rebuilding.
• Review your policy to understand limitations (timeframe and financial) attached to Loss of Income coverage.

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4. Pet & Animal Liability – Because Even "Good Dogs" Can Bite

When a guest’s dog escaped from a property owner’s fenced garden and bit a neighbour, the owner was shocked to find they were liable and a legal process ensued.

Many guests travel with pets, and while offering pet-friendly accommodations can increase bookings, it also increases your risk. A guest’s dog could bite , a neighbor or your neighbor's dog could bite your guests. You might not be aware that most standard policies exclude pet-related incidents, leaving you exposed to costly claims.

So, whether you choose to allow dogs at your short-term rental or not (guests are known to sneak them in from time-to-time), it’s important to look at your insurance policy to see if you are covered for animal/pet liability. 

Homeowners, Landlord, and even some Commercial policies, exclude pet liabilities and/or they may also exclude certain dog breeds, dogs with a history of biting and exotic animals from coverage. 

What to Look For:

• Exclusions or limitations for  pet/animal related injuries whether to your guests or to others.
• Coverage for incidents that happen on your property or away from your property, like a guest dog escaping and biting a neighbor. 
• Protection up to $1M for liability incidents

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5. Squatter & Unauthorized Holdover Protection – The Nightmare No One Talks About

Did you know that in some locations, if a guest stays past their check-out date, you can’t legally remove them without an eviction process? This happens more often than you’d think, particularly with mid-term stays of 30+ days. Some squatters even exploit local laws to gain tenant rights.

What to Look For:

• Coverage for legal fees and eviction costs.
• Loss of rental income during the eviction process.
• Coverage that includes guest-caused damage, if you do have a squatter that you are able to remove, expect them to leave damage behind.

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6. Host Liquor Liability – If a Guest Finds Left Behind Alcohol 

Some Airbnb hosts like to supply their guests with a welcome basket upon arrival that include local delicacies like a bottle of wine or booze. If you furnish alcohol for your guests, you’ll want to be sure that your insurance policy doesn’t exclude liquor liability. Why? If the guest over consumes the alcohol and gets injured or if it gets into the wrong hands (aka curious children and teenagers) you could be held liable since you furnished the liquor. So, maybe your policy does exclude liquor and you decide just not to include it in a welcome basket - well,  It’s not always that simple. 

People on vacation are known to relax, enjoy a few drinks or even overindulge. Liquor and beer is one of the most common left behind items at an Airbnb - in the kitchen cabinets, the freezer, maybe even in the bedroom. One instance of overlooking your former guest’s hiding spot could lead you to a world of legal trouble if the stash is found by the next group of guests and a claim arises from it. 

What to Look For:

• Coverage if a guest’s alcohol consumption leads to injury or damage.
• Policy includes liability instances related to liquor consumption provided by the host
• Protection even if alcohol was not intentionally  provided by the host.
• High enough limits of $1M if a claim does occur on your property.

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7.  No Occupancy Restrictions - It’s not always peak season

The average occupancy rate in the United States for short-term rentals is 54.3% as of January 2025 according to AirDNA. This statistic varies drastically based on time of the year and location of the property. However, this means that the average property is unoccupied/vacant for more than 50% of the year. 

Many insurance policies carry a vacancy clause. Some define vacancy as ‘no people’ for 30 or 60 days, some define vacancy as ‘no people and no contents’ for 30 or 60 days, and worst case, most do not define vacancy at all. What this means is that at the time of a loss, say broken water pipes, it’s open to the insurance carrier to decide what their definition of vacancy should be. 

If a property is deemed vacant at the time of an insurance loss there is typically no coverage for vandalism, water damage, or theft. The reason is no one is there to protect the property (vandalism and theft ) or shut off the water in the event of broken water pipes (water damage), which is a very common insurance claim.

What to Look for:

• Verify the time frame for what is considered vacancy in your policy
• Gain clarity on any exclusions or limitations to your coverage in the instance of vacancy
• Confirm that you have coverage in place for varying occupancy: guest use, personal use, periods of vacancy

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8. Cyber Liability Insurance – Bonus Coverage Because Hacks & Fraud Are Real

Vacation rental hosts and managers handle sensitive guest information, including names, addresses, and payment details. If your booking system or email is hacked, you could be liable for identity theft or financial fraud. Cyber liability insurance helps protect your business from digital threats.

What to Look For:

• Coverage for data breaches and guest privacy violations.
• Protection against fraudulent chargebacks or hacking incidents.
• Coverage for legal fees and reputation management.
  
  

Are You Fully Covered?

Before you listen to those banging on about buying the cheapest insurance on social media, find out what is covered in those policies. This is not an area to cut corners because you will never know the dangers of doing that until it is way too late!

Whether you're running a single vacation rental or managing multiple properties, having the right insurance is critical to protecting your business and financial future.

Action Steps:

🔹 Review your current policy to check for coverage gaps.
🔹 Consult with a vacation rental insurance expert about adding these coverages.
🔹 Ensure your policy is tailored for short-term rentals—not just a standard homeowners' plan.

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