Homeowners Insurance for Vacation Rental Homes

Nov 6, 2022 | Airbnb Host Guide


Airbnb, VRBO, or any vacation rental should think to secure vacation rental insurance for vacation rental homes to protect them against liability claims and property damages. Of course, this is to ensure your rental business will gain you profit and will not cause financial loss.  This is why homeowners insurance for vacation rental homes should be considered.

With the increasing demands of vacation rentals, turning your second home into a vacation rental property is quite tempting. According to PR Newswire, the demand for short-term vacation rentals is fairly high despite the pandemic. Also, yes, a vacation rental business is an excellent source of passive income. But be wary, every business comes with a risk.

Though the vacation rental industry is easier to handle than other businesses, it is still important to understand and evaluate the risks involved when renting out your vacation home. So, with vacation rentals, there’s a risk of liability claims and property damage. 

Why Do You Need Short-Term Rental Insurance?

Why do you need short-term rental insurance when you already have a homeowners’ insurance policy? Also, home insurance only covers property damages and liabilities caused by family members and non-commercial visitors.

Furthermore, home insurance does not cover damages and liabilities caused by paying guests. Renting your vacation home to guests creates a gap with your homeowners’ insurance policy. That’s why you need short-term rental insurance to fill that gap and ensure your home’s protection.

What is Short-Term Rental Insurance?

Short-term rental insurance protects you and your vacation home against liability risks and property damage while it is being rented. A typical home insurance policy does not cover injuries or damages caused to your guests and home, as insurance companies consider it a business. 

What Does Short-Term Insurance Cover?

  • Loss of earnings
  • Liability coverage, such as liquor liability, identity theft, etc. 
  • Excess usage of utilities
  • Structure of your home
  • Contents of your home
  • Infestation

Insurance companies offer separate short-term rental insurance or as an endorsement to your standard home insurance policy. 

What Is the Cost of Short-Term Rental Insurance?

Just like standard home insurance, the cost of homeowners insurance for vacation rental homes varies. The factors that affect the cost of homeowners’ insurance rates are almost the same as short-term rental insurance. The calculation of short-term rental insurance premiums depends on:

Location of your home

The location of your home has a tremendous impact on the cost of short-term rental insurance. Insurance companies consider the risks present in your home’s location. These includes:

Natural Disasters Risk

Locations with higher risks of weather-related risks have higher insurance premiums. 

Fire Risk 

According to National Fire Protection Association (NFPA), structure fires caused $12.1 billion in property damage in 2020. Insurance companies consider the distance of your home from the fire station and fire hydrants. Proximity to the fire station and fire hydrants lessens the risk of property damage because of quick emergency response. 

Crime Risk

Crimes like theft and vandalism impact the cost of home insurance rates. If your rental home is in a high-crime neighborhood, it would most likely increase your property insurance premiums. Proximity to the police station and installing your home with safety features like a security alarm system and deadbolts minimize the risk of theft and vandalism. 


Insurance providers offer different homeowners coverage limits for home replacement. In case your home gets destroyed, insurers will pay the replacement value of your home depending on the coverage limit you chose. 

Actual Cash Value

An ACV pays for the actual value of your home minus depreciation. This coverage is the cheapest, but in the event of a catastrophic loss, it will not be enough to replace your home.

Replacement Cost

This coverage will pay for your home at its replacement cost without depreciation.

Guaranteed Replacement

This coverage guarantees the replacement cost of your home, even if the current replacement cost exceeds the coverage limit. This coverage has higher premium rates but provides the best protection for your home and family.


Deductibles are the amount of money a homeowner will shoulder in case of home repair or replacement. If you choose a higher deductible, you will have lower premiums and vice versa. 

Condition of Your Home

Your home’s characteristics also affect the rates of homeowners insurance for vacation rental homes. Insurance companies consider the following when calculating your home insurance premiums:

Date of Construction

The older the house, the higher the insurance rates, as older houses have higher repair costs than newer homes. 

Roof Condition

The quality and age of the roof also play an enormous factor in the cost of vacation rental insurance premiums. A new roof made with quality materials is more resistant to damage, thus lowering insurance rates. Older roofs are more prone to damage from hail or windstorms.

Increasing Home Construction Costs

Home repair and replacement costs increase year by year because of rising construction materials costs and regulatory building codes. 

Home Amenities and Activities

Additional home amenities raise the costs of home repairs and replacement. In addition, it also increases risks for injuries and liability claims of your guests. The following are additional home amenities and activities that increase insurance premiums:

  • Swimming pool
  • Hot Tub
  • Outdoor trampoline  
  • Fireplace
  • A Finished basement 
  • Treehouse
  • Exercise equipment
  • Docks                

Companies That Offer Short-Term Rental Insurance

Is Your Hosting Site’s Insurance for Vacation Rental Not Enough?

Why do you still need short-term rental insurance even when Airbnb and VRBO provide insurance coverage for property owners? Even though hosting sites provide insurance plans for homes listed on their sites, still it is not enough to ensure complete protection. The hosting site’s insurance coverage can only serve as supplementary coverage.


Having a vacation rental home provides extra cash flow to homeowners. It is a simple business to deal with, but make sure you manage the risks to ensure financial gain rather than loss. Equip your vacation rental home with proper insurance to protect you from accidental financial losses.

Is Your Airbnb Bankable?

Hosting on Airbnb is a lot more intimidating than searching for properties to stay in. We know that you’re anxious to get going and make some major bank (we’ve all thought about it). 

With CoCal Design Co.’s Airbnb Host Guide, our resources outline all the important things you’ll need to get started right today!


CoCal Design Co. and our Airbnb101 resource pages are NOT associated with or supported in any official capacity or under any circumstances by Airbnb.com or any of its subsidiaries. We receive compensation from the companies whose products we review and recommend on our CoCal Design Co. website, including the Amazon Associates Program. We only recommend goods we have personally tested or thoroughly evaluated by thousands of readers. We are privately owned, and the views expressed on this site are our own.