Do you really need a STR insurance?
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votesI am sorry @Joel Oh but you are 100% wrong that a standard homeowners policy will cover guest damage when you are using the home as a short term rental.
The only way they would cover it is if they were unaware that you were short term renting the home. That would be fraud and is a criminal offense.
Just to be clear, you own 250 properties? I find it hard to believe that you would risk a 9 figure portfolio for $300k
I am not saying that getting a 1m payout on a destroyed property is easy. What I am saying is that AirBNB or VRBO aren't going to cover it. You need to have the correct insurance for a STR. That is a type of commercial insurance and not a simple homeowners policy.
Regarding the little things, yes that is what AirCover is for. I have had 3 claims. One for $100 for stolen stuff, one for $250 for a broken futon and a $1000 payout for a broken window (VRBO).
All of those payed out in about 2 days. All I did was send proof of the damage and repair bill.
We are talking about foregoing the correct STR insurance for homeowners expecting it to payout for major guest damage.
I think this calls for another patented day of Mike's Research Plan.
I will do my best to call 6 major insurance companies (not brokers) and get the scoop. I will also call a few lenders to find out what they say regarding using homeowners insurance for commercial purposes.
I figure that should put it to rest. I will start another post like I did with the STR valuation research.
31 Replies
Here is a link to an explanation of what is covered in a good STR policy. This was written by Proper insurance who writes one of the most comprehensive policies you can get for an STR.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Owning a STR is not like owning a typical house, even a LTR. There are so many moving parts involved in vacation rentals....more people, in and out of your property every week or few days...people on vacation like to party more, so drinking and running around doing dumb stuff. It's just an accident waiting to happen IMO.
Why take a risk? I paid approx $100 mo for insurance on my STRs, both insured through State Farm. I am currently using Proper to insure another property, and they're very good and reasonable as well.
Like I said above - why take a risk?
Quote from @Bruce Woodruff:
Owning a STR is not like owning a typical house, even a LTR. There are so many moving parts involved in vacation rentals....more people, in and out of your property every week or few days...people on vacation like to party more, so drinking and running around doing dumb stuff. It's just an accident waiting to happen IMO.
Why take a risk? I paid approx $100 mo for insurance on my STRs, both insured through State Farm. I am currently using Proper to insure another property, and they're very good and reasonable as well.
Like I said above - why take a risk?
From my experience, Aircover never failed to cover any damage. The best part is they don’t increase my insurance quote. As you know, a lot of STRs claims are pretty small so they don’t worth putting a claim and increasing your insurance premium for your portfolio. $100 per month is a pretty significant amount considering the volume. If you have 10 units, it is $12,000 expense per year which is a downpayment for a small house. I just never find myself using all those small claims ($10,000 under) through insurance and increase $10,000 premium for my portfolio. Insurance always scoop their money back haha
Quote from @Jeff E.:
Here is a link to an explanation of what is covered in a good STR policy. This was written by Proper insurance who writes one of the most comprehensive policies you can get for an STR.
Yes… but do you really think anyone will put an insurance claim for those small claims they talk about? I understand it gives you peace of mind but even flea damage will only cost you a maximum of $2,000 and it still isn’t worth the premium increase you will see next year.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Joel Oh:
Ah well there's your problem....If you read similar threads on this very Forum, you'll see that most host's experience with AirBnB are the opposite. They don't cover nuthin' for most people, particularly not major things like severe damage to structure.
But hey if you want to take the risk, go ahead. IF $100 a mo breaks your budget, then I'd say you need to raise your rates......
Just my $0.02....
- Honestly, I think if people can't get the cover from Aircover, they will not get the insurance coverage from bigger insurance companies. People just need to understand how to put the claims following their format. I understand the most people are not familiar with their system though. Aircover is honestly the reason why I use Airbnb. The concept of insurance without paying premium is crazy.
Quote from @Bruce Woodruff:
Quote from @Joel Oh:
Ah well there's your problem....If you read similar threads on this very Forum, you'll see that most host's experience with AirBnB are the opposite. They don't cover nuthin' for most people, particularly not major things like severe damage to structure.
But hey if you want to take the risk, go ahead. IF $100 a mo breaks your budget, then I'd say you need to raise your rates......
Just my $0.02....
Hey every penny matters! XD - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
This is just dumb @Joel Oh. I am bit surprised that anyone who operates a STR would consider not having the correct insurance.
AirCover and VRBO's coverage is not insurance. It just isn't. It is a way to get some kind of assurance that any guest damages will be covered.
I would love to see how AirBNB would react if the whole house burned down due to a guest. 300-500k in rebuild costs. I seriously doubt it. They often don't cover a $1000 bill for obvious guest damage to furniture. Their are hundreds of stories about how AirBNB left owners out in the cold.
https://www.nbcbayarea.com/news/local/fire-prompts-1-million...
There is just one article where AirBNB seems to have skirted it's 1m guarantee. Whole house burned to the ground, likely due to guests smoking on the deck. Took nearly 2 years and help from the local NBC station to get some kind of resolution which is confidential. We have no idea what the payout was. They did get immediate payout from their STR insurance policy.
To everyone reading this - This is not something you want to do. Don't rely on AirBNB and VRBO to cover ANY kind of damage let alone major house damage due to guests.
Get a correct STR policy even if it is an extra $1000 a year (that is about what we pay) over a standard home owners policy.
This is the textbook definition of penny wise and pound foolish.
- Realtor · Miami, FL · Member since 2024 · 14 posts · 7 votes2y
Let's not forget the liability piece that STR insurance provides in MUCH higher liability limits for incidents ON your property but also incidents off your property while your guests are staying there (like using a bike). Not to mention legal representation, loss of use coverage, etc.
It's not just about damage claims.
Quote from @Michael Baum:
This is just dumb @Joel Oh. I am bit surprised that anyone who operates a STR would consider not having the correct insurance.
AirCover and VRBO's coverage is not insurance. It just isn't. It is a way to get some kind of assurance that any guest damages will be covered.
I would love to see how AirBNB would react if the whole house burned down due to a guest. 300-500k in rebuild costs. I seriously doubt it. They often don't cover a $1000 bill for obvious guest damage to furniture. Their are hundreds of stories about how AirBNB left owners out in the cold.
https://www.nbcbayarea.com/news/local/fire-prompts-1-million...
There is just one article where AirBNB seems to have skirted it's 1m guarantee. Whole house burned to the ground, likely due to guests smoking on the deck. Took nearly 2 years and help from the local NBC station to get some kind of resolution which is confidential. We have no idea what the payout was. They did get immediate payout from their STR insurance policy.
To everyone reading this - This is not something you want to do. Don't rely on AirBNB and VRBO to cover ANY kind of damage let alone major house damage due to guests.
Get a correct STR policy even if it is an extra $1000 a year (that is about what we pay) over a standard home owners policy.
This is the textbook definition of penny wise and pound foolish.
I think you misunderstood it a little bit. Regular home owner's insurance will always pay for guest's damage to the house. I am not speaking about removing regular home insurance and 100% relying on the Aircover. I think STR Insurance successfully drew many misunderstood pictures that regular insurance will not cover guest's damage to the house. The only difference between STR insurance and LTR insurance is STR insurance will have a higher ceiling, which is normal considering their higher premium, and they will cover irregular items like flea damage, furniture damage or bike accidents which never fully cover the cost of insurance increase if you ever claim them.
Also, any insurance claim for a burnt house will take a minimum of 2 months of investigation and it can go to a long *** court case depending on the situation. No insurance company will give you a million-dollar check on the spot.t. Even getting a new roof or windows often takes a month to two. Also the worst, your premium will likely triple for the rest of your life.
My point is Aircover has perfect coverage for small claims that would not normally go to an insurance claim such as smoke damage, furniture damage, small accidents… I never failed to get covered for over 50+ claims I placed so far.
I see many people saying oh it is just $100 but as I said it adds up pretty fast and in reality, it is way more than a $100 difference as the price of insurance is going up very high. I just closed a $1.2 million dollar insurance deal and every dollar really matters. Yes, it is just $1,200 per unit but if you have 250 units, it is a $300,000 difference per year. Definitely something to think about in my opinion.
- I am not sure even the liability gap is reasonable considering their difference in premium. I just can’t justify Proper’s overpriced packages.
Quote from @Brian Christinakis:
Let's not forget the liability piece that STR insurance provides in MUCH higher liability limits for incidents ON your property but also incidents off your property while your guests are staying there (like using a bike). Not to mention legal representation, loss of use coverage, etc.
It's not just about damage claims.
From my experience, Aircover has been covering loss of income if there were bookings for those days.
I am not sure how much fight they can do in the court for cases like outside bicycle incidents but I think I will hire an actual attorney instead of relying on an insurance company’s lawyer if it ever happens haha.
I just don’t like how STR insurances are talking like they are the only one who will cover everything. In my view, regular home insurance is really no different, and adding the Aircover makes it better than any insurance I have seen.
I see that STR insurance can benefit people who can’t utilize Aircover though. Aircover definitely requires you to prove everything. - Member since 2023 · 113 posts · 129 votes2y
The biggest issue here: If you're covering a property with a homeowner's policy or LTR landlord policy and the property is actually a full-time STR, then you're concealing material info about the property's use from the insurer. If they find out, then legally, contractually, they have grounds to retroactively void the policy and deny claims for *anything* it covers -- including losses totally unrelated to STR, like wildfire or a windstorm.
And you better bet they'll find out if you have a big loss. The adjuster is going to ask a lot of questions, starting with "where were you at the time of the loss?" and "when was the last time you were at the property?"
That said, you don't absolutely need an STR specialty policy. A standard "business owner's policy" is fine -- it covers the building, commercial general liability, and ideally, loss of rent. Written by an insurer who is okay with full-time STR use. Personally I question whether the "extras" on policies like Proper's are worth the extra price. Most of those STR-specific risks are avoidable. Don't provide alcohol to your guests, or bikes for them to ride offsite. Maintain your hot tub properly so no one gets "hot tub rash" or Legionnaire's disease. Etc, etc.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
I am sorry @Joel Oh but you are 100% wrong that a standard homeowners policy will cover guest damage when you are using the home as a short term rental.
The only way they would cover it is if they were unaware that you were short term renting the home. That would be fraud and is a criminal offense.
Just to be clear, you own 250 properties? I find it hard to believe that you would risk a 9 figure portfolio for $300k
I am not saying that getting a 1m payout on a destroyed property is easy. What I am saying is that AirBNB or VRBO aren't going to cover it. You need to have the correct insurance for a STR. That is a type of commercial insurance and not a simple homeowners policy.
Regarding the little things, yes that is what AirCover is for. I have had 3 claims. One for $100 for stolen stuff, one for $250 for a broken futon and a $1000 payout for a broken window (VRBO).
All of those payed out in about 2 days. All I did was send proof of the damage and repair bill.
We are talking about foregoing the correct STR insurance for homeowners expecting it to payout for major guest damage.
I think this calls for another patented day of Mike's Research Plan.
I will do my best to call 6 major insurance companies (not brokers) and get the scoop. I will also call a few lenders to find out what they say regarding using homeowners insurance for commercial purposes.
I figure that should put it to rest. I will start another post like I did with the STR valuation research.
- 2yOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 689 posts · 260 votes
@Joel Oh What do you mean by: "Regular home owner's insurance will always pay for guest's damage to the house."?
Royal Oath Insurance Group4.9208 Reviews Quote from @Michael Baum:
I am sorry @Joel Oh but you are 100% wrong that a standard homeowners policy will cover guest damage when you are using the home as a short term rental.
The only way they would cover it is if they were unaware that you were short term renting the home. That would be fraud and is a criminal offense.
Just to be clear, you own 250 properties? I find it hard to believe that you would risk a 9 figure portfolio for $300k
I am not saying that getting a 1m payout on a destroyed property is easy. What I am saying is that AirBNB or VRBO aren't going to cover it. You need to have the correct insurance for a STR. That is a type of commercial insurance and not a simple homeowners policy.
Regarding the little things, yes that is what AirCover is for. I have had 3 claims. One for $100 for stolen stuff, one for $250 for a broken futon and a $1000 payout for a broken window (VRBO).
All of those payed out in about 2 days. All I did was send proof of the damage and repair bill.
We are talking about foregoing the correct STR insurance for homeowners expecting it to payout for major guest damage.
I think this calls for another patented day of Mike's Research Plan.
I will do my best to call 6 major insurance companies (not brokers) and get the scoop. I will also call a few lenders to find out what they say regarding using homeowners insurance for commercial purposes.
I figure that should put it to rest. I will start another post like I did with the STR valuation research.
Haha, I am not sure why you are so invested in this. This is just an idea and actually, my insurance told me adding a guest covering premium to LTR insurance will cover all the STR issues. (of course not the silly bicycle ones haha) I think my agent knows what is right or wrong.
I manage 600 LTR for my work. So I work with a lot of insurance claims. Being an open mind always opened new opportunities for me even if it is a ridiculous idea! Insurance is definitely one of the parts that can be creative and save you a lot of money! The original insurance package wanted 2M and later became a 1.2M deal, just giving you an idea of how wild the industry is.Quote from @Owen Rosen:
@Joel Oh What do you mean by: "Regular home owner's insurance will always pay for guest's damage to the house."?
If it is your owner occupied house and using your home for STR and the insurance has a premium for guest damage, you are insured just like any other STR insurance.
The same logic goes for the LTR insurance with adding premiums (which is really what Sthe STR insurance model is)
Most STR insurance is exactly the same thing as LTR with tons of premiums added for unnecessary reasons like no one will ever use.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Joel Oh, I am invested because people who are new come here for information. Your idea is just plain wrong man.
Now you said for the first time a guest rider added to your standard home owners. I do know that is something different than STR insurance.
Thanks for letting me know that so when I call all the insurers I can get accurate info.
I don't think your agent knows what they are talking about or they don't have the correct info.
I am not against crazy ideas, but this isn't that. It is wrongheaded. It is a quick way to bankruptcy, especially if there is a guest injury, even if they are negligent and not fault of yours.
Having the correct insurance to cover not only damage but guest injuries is why you have commercial STR insurance.
- 2yOwen RosenBusiness MemberProfessional · Clinton Township, MI · Member since 2015 · 689 posts · 260 votes
Quote from @Joel Oh:
Quote from @Owen Rosen:
@Joel Oh What do you mean by: "Regular home owner's insurance will always pay for guest's damage to the house."?
If it is your owner occupied house and using your home for STR and the insurance has a premium for guest damage, you are insured just like any other STR insurance.
The same logic goes for the LTR insurance with adding premiums (which is really what Sthe STR insurance model is)
Most STR insurance is exactly the same thing as LTR with tons of premiums added for unnecessary reasons like no one will ever use.
A rider allowing for using your owner-occupied property as a short-term rental for a specific/limited amount of time is very different than an investment property being used as a short or long term rental 100% of the time.
Also, telling your home insurance company that you STR your home occasionally does not give you extra coverage for those types of risks, it simply means if your renter burns your home down the insurance company isn't going to immediately deny your claim. I'm simplifying but by no means do those riders enhance coverage - they prevent the contract from being voided and add premium to make up for the increased risk.
You're an investor with multiple properties so adding this type of rider isn't really what your initial post was about at all, was it?
Royal Oath Insurance Group4.9208 Reviews - 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 4k+ posts · 3k+ votes
The way I understand it is if you were to say, have a fire (even while vacant), and put a claim in with your insurer and they find out you have been utilizing the property as an STR they will deny the claim. They look for any reason to deny the claim, and they would have every right to deny it. The reason you get it is not to cover guest damages but to keep your property compliant and covered.
Vacation Rentals of Florida53 Reviews - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Joel Oh
A regular insurance policy can refuse your catastrophic loss claim if they find out you were renting your house as an STR. Do you want to take that chance?
Air coverage can require your primary insurance to pay out first. See the problem?
- Atlanta · Member since 2022 · 716 posts · 645 votes2y
Quote from @Bruce Woodruff:
Owning a STR is not like owning a typical house, even a LTR. There are so many moving parts involved in vacation rentals....more people, in and out of your property every week or few days...people on vacation like to party more, so drinking and running around doing dumb stuff. It's just an accident waiting to happen IMO.
Why take a risk? I paid approx $100 mo for insurance on my STRs, both insured through State Farm. I am currently using Proper to insure another property, and they're very good and reasonable as well.
Like I said above - why take a risk?
i would say it depends. I agree you need coverage and happy for you. If i used Proper for mine, its around $12,000 per year. Florida is a tough place to rent, insurance wise. I wont not have coverage as i cant afford to pay out of pocket to replace a catastrophic event, but im always open to hearing how I could reduce costs. But there is no way i would rely on Aircover or VRBO to pay out.
- Atlanta · Member since 2022 · 716 posts · 645 votes2y
Quote from @Michael Baum:
I am sorry @Joel Oh but you are 100% wrong that a standard homeowners policy will cover guest damage when you are using the home as a short term rental.
The only way they would cover it is if they were unaware that you were short term renting the home. That would be fraud and is a criminal offense.
Just to be clear, you own 250 properties? I find it hard to believe that you would risk a 9 figure portfolio for $300k
I am not saying that getting a 1m payout on a destroyed property is easy. What I am saying is that AirBNB or VRBO aren't going to cover it. You need to have the correct insurance for a STR. That is a type of commercial insurance and not a simple homeowners policy.
Regarding the little things, yes that is what AirCover is for. I have had 3 claims. One for $100 for stolen stuff, one for $250 for a broken futon and a $1000 payout for a broken window (VRBO).
All of those payed out in about 2 days. All I did was send proof of the damage and repair bill.
We are talking about foregoing the correct STR insurance for homeowners expecting it to payout for major guest damage.
I think this calls for another patented day of Mike's Research Plan.
I will do my best to call 6 major insurance companies (not brokers) and get the scoop. I will also call a few lenders to find out what they say regarding using homeowners insurance for commercial purposes.
I figure that should put it to rest. I will start another post like I did with the STR valuation research.
will love seeing what your research produces.
- Specialist · Strongsville, OH · Member since 2016 · 304 posts · 217 votes2y
Quote from @Joel Oh:
Hi guys,
I know I will get a lot of hates from this but does STRs insurance really good as their price?
From my experience so far, Airbnb never failed to cover any issues I had caused by guests.
Also in case of fire or flood, I know a regular homeowner's insurance will have no problem covering it.
I have been wondering, if the local regulation doesn't require it, why do we need pay thousands of extra for STRs?
Also I am having more and more difficulty finding insurance companies service STRs.
My agent recommended a visitor covering option to my regular insurance. Any thoughts on this?
Where do I start?
No homeowners policy of any type covers flood - you need a special "Flood" insurance policy for that.
What happens if the home is damaged between guests?
What happens if the home is damaged by a storm?
There are so many holes in the concept of having Airbnb's policy act as your primary form of coverage.
Last thing - it sounds like you have a standard homeowners policy and not a landlord policy?
If so the carrier has the right to deny any/all claims you make or if they want to be nice they will settle the claim and retro charge you the premium you would have owed having the proper policy in place when you started renting it out.
Talk to a legit local agent and tell them what is going on and get them to run down all the exposures you have and what you could do to best protect yourself for the best possible premium.
- Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes2y
Quote from @Craig Jones:
The biggest issue here: If you're covering a property with a homeowner's policy or LTR landlord policy and the property is actually a full-time STR, then you're concealing material info about the property's use from the insurer. If they find out, then legally, contractually, they have grounds to retroactively void the policy and deny claims for *anything* it covers -- including losses totally unrelated to STR, like wildfire or a windstorm.
@Joel Oh Yes, what Craig is saying. Sure, if you have an actual guest -- like your mother -- visiting and she breaks her leg and tries to sue you, then a regular homeowner's policy would cover that, but not if that guest were part of a rental transaction.
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
There so many answers here I'll just drop this thought you can think about.....It all depends on how hard you want to gamble when that large insurance claim finally does happen.
Lastly, you want Waivo for small damage claims not your homeowner's insurance. And that can easily be a pass-through charge to the guest.
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