Insurance can be confusing but doesn't have to be. Here's a very simple break down that you can do more research on if you choose....
Short-term rental insurance...This coverage is "STR homeowners" policy that would cover any damage to the property from a storm, fire, guest, and even liability if a guest gets hurt. Not many companies off comprehensive STR insurance but there's a few, and you may get extra coverage on loss of rental income, bedbugs, etc. Make sure to read over every policy you consider! Some exclude short-term rentals and if that's in the fine print and your home burns or is damaged in a storm, it's not covered because you acted outside the policy limitations. Proper Insurance is the best for STR policies but there's a couple other options as well. You would have no other insurance on the property, this is a "homeowners" policy.
Mid-term rental insurance...Mid-term rental is a term that was made up outside the loan and insurance industries. They don't recognize MTR at all, only STR and LTR. So, for properties that offer stays no less then 28 days, you would get a landlord or LTR insurance policy. If you're doing a hybrid model of STR and MTR, I would suggest just getting a STR policy. And again, this is "homeowner or landlord" policy, and the property would need no other insurance.
Guest Damage Insurance...This type of insurance covers small damages (no more than several thousand) that guests might do to the property. Like you mentioned some of the property management software offer their version, and there's also companies like Superhog, Waivo, and Safely. If done correctly this is a great way to replace damaged item without a cost to the host. The cost per booking is baked into the guests charge of staying at your STR and if damage is done the item(s) are replaced or fixed at no charge to the host. We've used this type of insurance and replaced damaged items for our clients at no charge to us or the homeowner. It's not a waste of money at all if you choose a reputable company.
There is aircover which essentially is guest damage insurance but it's an absolute pain to deal with and get money out of Airbnb. If you don't follow all their steps in the right time and manner, they deny any payouts. It's much easier working with Waivo or Safely, and other such companies.
There are a couple STR podcasts that have interviewed insurance agents to talk about what is needed for a property. I believe Natalie Palmer interviewed a guy from Proper Insurance so if you look up the podcast and search for "insurance", the episode should come up. It was a very informative podcast that explained everything you're looking to know.
