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This article is presented by Proper Insurance.
As a real estate investor, you likely already know quite a bit about the importance of landlord insurance for your rental properties. You also probably know that landlord policies are separate and different from regular home insurance.
But what about when you decide to branch out into short-term rentals? You might be comparing policies and wondering if Airbnb rentals will be covered if you decide to go down that route in the future, or only occasionally, or you may be considering a complete business strategy switch to short-term rentals.
Regardless of the exact circumstance, there’s one point that will apply to you in most cases: You will need to dig deeper into your current policy specs rather than assuming your short-term rental will be adequately covered by your current policy. Many investors only discover coverage gaps after a denied claim, which is why providers that specialize specifically in short-term rental insurance, like Proper Insurance, emphasize reviewing your policy before you ever host your first guest.
If you haven’t bought your policy yet but are thinking about going into short-term rentals, here are the things you need to think twice about when buying insurance.
Can My Landlord Policy Cover Short-Term Rentals?
The short answer is: it depends — and that uncertainty alone is worth investigating. Landlord/Dwelling insurance is not designed to cover the vast risks of short-term rentals, but that’s not always obvious. Some insurers market DP-3 policies as short-term rental products, but underneath, they remain standard landlord policies with the same limitations.
The most significant of those limitations is liability and guest-caused damage.
If you’re renting your investment property as a short-term rental, a Commercial Homeowners policy is the appropriate product. Unlike Landlord insurance, a Commercial policy is a business policy built to cover business operations, with Commercial General Liability that extends beyond your property line, and without the exclusions that can leave property owners and investors exposed.
Equally, if you’re completely switching over your rentals to STRs, you can’t just keep your current landlord policy and hope for the best. There is a mechanism for writing the occasional short-term stay into the homeowner’s insurance for your primary residence. In this case, the insurer can simply add on what’s known as a “rider” to your existing policy. But an investment property that has been rented out on a long-term basis (12+ months is the standard lease term for LTR) will not be covered.
What a Landlord Policy Will Not Cover When It Comes to Short-Term Rentals
Let’s take a more in-depth look at what won’t be covered and why relying on a landlord policy for a short-term rental can lead to unexpected costs when something goes wrong.
For an insurer, deciding how to structure an insurance policy and how much coverage to offer boils down to the specific risks associated with the activity that’s being insured. And while to a beginner investor, STRs and LTRs seem like similar activities, they are actually subject to very different risks—hence the different coverage types required.
The most significant coverage gap is in liability. Landlord insurance protects investors by covering lawsuits for tenants’ personal injuries while occupying the property. But what if it turns out that the “tenants” suing for personal injury were only staying for the weekend and are not the tenants named on the long-term lease? The insurer most likely will deny coverage. Most Landlord policies include a “business pursuits” exclusion. Your insurer has the authority to determine that short-term renting is a business pursuit; your liability coverage could be voided entirely, even for incidents that do occur on the premises.
The same goes for if a guest slipped and fell in front of an outdoor hot tub or got injured while kayaking in a nearby river in a kayak you provided as a host. Certain activities, amenities, or off-premises exposures may require separate coverage or specific endorsements and are often excluded unless explicitly insured. Without appropriate coverage, even a single accident involving a hot tub, pool, or recreational equipment can quickly escalate into a six-figure liability exposure.
Next, if a guest steals something of yours during a weekend stay, landlord coverage will not be of help here because landlord policies assume that nothing in a rental property is your own personal property, with most LTR properties offered on an unfurnished/partially furnished basis. Theft is especially problematic if you offer an STR that is elaborately furnished or “themed” with knick-knacks and unique decor.
Be careful with this, though: Even short-term insurance plans often won’t cover the cost of expensive items like artwork or jewelry; if you really feel like leaving these in a property you’ll be using as an STR, you’ll need to add a special add-on plan for valuable personal property.
Hot water heater, air conditioner, refrigerator, circuit panels, heating, or smart home system stops working? If an appliance breaks due to mechanical failure, landlord insurance generally does not cover replacement unless a specific equipment breakdown endorsement is in place. Landlord insurance typically responds only to damage caused by a covered peril such as fire or storm. And if you are forced to cancel a booking due to the equipment that broke down, without this coverage, you’ll have to shoulder the loss of income from that booking and any other impacted booking as well.
What if one of your guests accidentally brings in bedbugs via their bags? A pest infestation can make an STR uninhabitable for weeks while pest control deals with the issue.
Landlord insurance does not cover pest infestations because they’re considered preventable with proper maintenance. Some short-term rental policies, on the other hand, will cover this problem due to high guest turnover, which can make such infestations impossible to prevent in short-term properties.
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When bedbugs or similar infestations occur under a landlord policy, the financial impact is twofold: the owner is responsible for extermination and remediation costs and must cancel upcoming reservations while the property is out of service. Because landlord policies do not include loss-of-revenue protection, the lost booking revenue during this downtime is typically uninsured.
All these exclusions amount to a fundamental assumption about the key differences between STRs and LTRs: Long-term renters, as a rule, tend to take better care of the properties they occupy than short-term renters. They are also less likely to sue their landlords because they want to stay in their home, so you have less of a risk of someone filing a claim opportunistically. Long-term rentals are just subject to fewer unpredictabilities.
For all these reasons, short-term rentals require their own kind of insurance with higher liability limits, broader property protection, and business income considerations, coverage structures that contemplate hospitality-style operations rather than long-term tenancy.
When a Rental Becomes a Business
There’s one more important thing investors need to know about switching to short-term rental insurance: What you’ll be switching to is actually a form of commercial insurance, combined with elements of home insurance.
In the eyes of an insurer, a short-term rental stay is considered a “business activity.” In this, the insurers follow IRS guidance that deems active hospitality, where cleaning, concierge services, and amenities are offered as part of the stay, a business activity rather than passive income, as in the case of traditional real estate investing.
This is important not just because this designation as a business activity may automatically exclude you from LTR landlord policies, most of which come with a “business pursuit exclusion” clause, but also because you may need a lot more than you think as an STR landlord, including a business permit, a local STR registration, and any other licensing required specifically of short-term rentals in your local area.
The precise guidelines vary, and you’ll need to do your own research, but, as a rule of thumb, if you’re planning on using your investment property for stays that will be, on average, seven days or fewer, you almost certainly will fall into the category of a short-term rental “business,” with all the legal implications.
Final Thoughts
For a short-term rental landlord, there’s far more to think about due to the higher-risk and more unpredictable nature of this rental strategy.
If you’re planning on renting through Airbnb or Vrbo, it can be tempting to rely solely on the OTA guarantees these companies advertise.
Resist the temptation to skip the fine print. Standard platform protections come with significant limitations. For example, Airbnb’s host coverage is not a policy with your name on it, meaning you forfeit all policy rights. They are in complete control of the process, how long it takes, if you get paid, and how much for any experienced loss.
The strongest protection strategy is a policy designed specifically for short-term rentals and customized to your property’s risk profile. Working with a provider that specializes exclusively in STR coverage, such as Proper Insurance, ensures your policy reflects the realities of operating a hospitality business, not just owning a rental property.
