What to Know: Insurance & Liability at Vacation Rentals

Justin Ford
Justin Ford

February 11, 2021

When it comes to owning a business, one things for certain, insurance is complicated. As a property manager, these complications are compounded as there is no one-size-fits-all option, so you may find yourself stuck between different policies for your office, operations, and property locations. From liability and lawsuits to business commissions and income, how do you make sure all of your bases are covered?

Breezeway's Justin Ford sat down with Justin Brodin and Nicholas Massey of Proper Insurance (the nation's lead in short-term rental insurance), to chat about how property managers should approach safety and liability at their vacation rental properties. 

Should agencies be listed as the 'additional insured' on a policy?

The short answer is, yes. The property manager prepares and promotes the property, so they should be tied to the policy if someone is injured and files a lawsuit. Since you're not able to directly insure an asset you don't own, managers should be listed as 'additional insured' on each property's insurance policy.

How can managers maintain proof that homeowners are insured? How can they know each policy has changed, expired, or no is longer in effect?

We recommended that your contract with each homeowner requires a COI (Certificate of Insurance) that outlines the limits of liability protection, and names your management firm as 'additional insured'. For example, when Proper clients cancel our policy, the manager is also provided a notification to ensure they are aware of the coverage cancelation (and subsequently reach out to collect an updated COI from the new insurance provider).

What are some of the most common insurance claims in the short-term rental industry?

Some of the most common claims we see are theft/vandalism, sewer and drain back-up, and bed bugs. With respect to liability, we often see slips/falls and dog bites (we recently saw a $600k lawsuit against a property owner because a guest’s dog bit someone).

What types of coverages should managers have in place for amenities to protect owner?

Managers should ensure owners carry policies that list the agency as 'additional insured', and that the policy provides coverage for amenities (pools, hot-tubs, etc.) under liability protections. This way, in the event of a liability suit, both the property manager and owner will be duly represented in court.

What’s the difference between an underwriter vs. an agent, and who should a homeowner confirm policy questions with?

An agent is a representative who sells multiple policies. They present options and facilitate purchasing decisions. An underwriter represents a specific policy and works to decide if the particular risk fits their scope of coverage. The underwriter is ultimately the policy expert, and homeowners should always confirm policy details with the underwriter.

We recommend homeowners request answers (in writing) to the following questions from the underwriter:

  1. If I entrust my property to a short-term rental guest for 3 days, and that guest throws a party and vandalizes, damages or steals my property, do I have property coverage to the limits of insurance?
  2. If I entrust my property to a short-term rental guest for 3 days, and that guest breaks into my neighbor’s unit and steals their property, does my liability extend?
  3. If I entrust my property to a short-term rental guest for 3 days, and that guest assaults another person who then sues me, do I have liability coverage?
  4. If I entrust my property to a short-term rental guest for 3 days, and that guest sues me for invasion of privacy, do I have liability coverage?

How important is safety and preventative maintenance programs in protecting a property and guests?

Next to buying the right property insurance, investing in safety and preventative maintenance programs is one of the most important steps you can take. While insurance is built to protect you in worst-case scenarios, it's of course better to prevent accidents from happening in the first place.

What kind of insurance should a property management company consider?

Property management companies should be looking at three different types of insurance.

  • Property Manager Insurance: Your business needs to be insured, covering employees, professional liability, business computers, and any office space you may lease or own. Proper doesn't offer this, and many property managers use companies like USLI, Hiscox, or Brunswick Companies. This type of coverage doesn't extend to properties and agency managers, nor does it cover guest liability.

  • Homeowners Insurance: Homeowners are responsible for covering insurance needs themselves, and should list their agency as 'additional insured'. This is common practice with any full-service management company in the short-term rental industry. Very few companies in the U.S. explicitly cover this exposure. 

  • Guest Travel/Damage Protection: Companies like Vacasa, Vrbo, Booking.com, typically require guests to secure coverage from companies like CSA Travel, RedSky Travel, or UIG Travel Insurance for protection of last-minute trip cancellation and accidental damage. The accidental damage coverage is limited to cover accidents between $3,000 - $5,000. We're reinventing how damage protection is handled at our sister company Waivo™, and recommend integrating this technology into your booking process.

If you have questions about working with homeowners to verify their insurance, your current business coverage, or policy options, the specialists at Proper are happy to help. Just give them a call at 888-631-6680.

Want to learn more on how to improve the safety of your property? Check out Breezeway's new STRSI program to roll out a safety inspector training program at your property management agency. Looking for a free safety inspection app for a vacation rental property you own? Download our free self-inspection app.