Today, you would be hard-pressed to have not heard about vacation rental properties that are offered through Airbnb and Vrbo. These websites, where people rent out their home or a portion of it as a short-term rental, have become an increasingly popular way for homeowners to make extra money. 

“We're seeing several trends emerge in the home rental market that are redefining what people want when they rent while traveling," says Bob Herich, vice president, product management at American Modern, a Munich Re company. “One noteworthy trend is the increase in flexible cancellation policies, offering travelers the ability to adapt their plans if needed.

“There is also an increase in demand to stay in unique properties such as eco-friendly homes, tiny homes, and off-grid retreats," Herich continues. “Extended stays are also becoming more popular as more individuals seek longer-term rentals for remote work or extended vacations."

For homeowners who rent out their property, it's imperative to understand what insurance coverages are needed to protect themselves and their property. Agents also need to comprehend the many factors insurance carriers are taking into consideration when offering coverage for vacation rentals.

While the 2022 edition of the ISO homeowners policy excludes this type of rental for both property and liability coverage, there is an option to buy an endorsement. However, simply adding a limited endorsement to a homeowners policy has the potential to leave many hosts without sufficient protection.

Landlord insurance policies will only cover long-term rental properties, so clients looking to rent on a short-term basis cannot generally rely on such policies. For hosts of Airbnb and Vrbo properties, there are options that an independent insurance agent can offer, as well as numerous tips agents should relay to their clients to avoid a claim.

“One of the most important things as it relates to rentals is who's actually renting the property and what type of experience they have in the business," says Christopher Giuditta, vice president and senior advisor of Private Client Group, World Insurance Associates LLC. “How many units are they managing and maintaining? And do they have a property management team involved when they're absent as an owner or a landlord?"

The more background a host can provide on their experience as a host and how well the property is maintained, the better. A host should also be prepared to provide detailed information on what type of property is being rented out—whether it's the rental of a bedroom or two, versus the entire house—as well as the safety of the property, including egress windows for safe evacuation in the event of a fire.

“If it's a single situation where it's just a host who's renting one home, there's a market for that," Giuditta says. “If you go past a certain number of units, you then enter into writing a commercial policy, simply because there's so much risk there that carriers in personal lines don't want to insure that anymore."

In choosing coverage for a short-term rental, agents should ensure the following components are included in the coverage offered: property and contents, loss of income, and liability.

Safety is paramount, and agents are in a position to provide risk advice for any short-term rental host. Here are three tips to pass on to clients: 

1) Revolving tenants. A short-term rental does not traditionally have a lease agreement in place, leaving implications for both parties involved.

“Background checks are typically not used for short-term vacation rentals," Giuditta says. “Because of that, the risk is forever changing as a host really doesn't know who is walking into their home."

However, “platforms like Vrbo and Airbnb enable users to review guest profiles and feedback from previous hosts, which can assist hosts in screening prospective renters," Herich says.

2) Protect valuables. Clients should take precautions to protect their property and belongings. Both valuable contents and the property itself should be taken into account. “Is there copper piping that could be stolen?" Giuditta says. “After protecting the nuts and bolts of the house itself, other valuables, such as TVs, should be considered."

“These include securing or removing valuables, locking certain areas—such as personal bedrooms or storage rooms—installing security measures, including motion sensors and lighting, and performing regular maintenance to identify and address any potential hazards," Herich says.

3) Protect renters. Hosts should ensure their property is well maintained and does not pose a potential danger to their renters.

“From a liability and safety standpoint, there shouldn't be cracked walkways, and appropriate railings should be in place where required," Giuditta says. “Additionally, if there's a weather issue, a host needs to make sure someone is there maintaining, plowing and sanding for slip and falls. Preparation planning for hurricane, flash flood or brush fires is a key component of protecting the home and tenants." 

And if there is a pool connected to the property, all laws should be adhered to, including having a locking gate in place.

“By taking a few proactive measures, homeowners and hosts can help protect their property and provide a safe environment for their guests," Herich says. "By clearly communicating house rules and restrictions and providing contact information for emergency services in the area, hosts can help ensure a safe and positive experience for all parties."

In essence, the more education an agent can offer a client on trends within the short-term rental market and the status of the market in general—including the hard market—the more prepared their client will be when it comes to renting their home.

It pays to help clients identify “how to protect their property, get ahead of a claim, self-insure to some extent, and put things in place so that they are prepared if something does come up, whether it's a water incident, a pipe burst, electrical issues or a fire," Giuditta adds.

Olivia Overman is IA content editor.