Q: An insured is purchasing a second home and is toying with the idea of renting it out on VRBO or Airbnb. What homeowners insurance options would cover this risk?

Response 1: VRBO and Airbnb probably provide coverage while it is rented. The insured should check on this. It would be considered a “business" on a homeowners policy and would reduce personal property coverage and eliminate liability coverage. ISO developed an exclusion endorsement for the 2011 program. The 2022 edition of the ISO homeowners policy definitely excludes this exposure for property and liability. However, there is an option to buy back coverage. 

Also, depending how often they rent the dwelling, it might not be considered a residence and may not qualify for a homeowners policy. Ultimately, any coverage will depend on the carrier.

Response 2: Something like the ISO dwelling fire program is routinely used for one or a very few rental properties. VRBO and Airbnb probably have some sort of program too but, if so, I wouldn't rely on them.

Response 3: You'll have to check with the insurers you represent to see if they're willing to insure a vacation rental. They were previously only written by specialty insurers, a growing number of standard insurers are now willing to insure them. Policies forms are typically homeowners or dwelling fire forms. 

Response 4: Many homeowners carriers have endorsements for this home-sharing exposure—just talk to your carriers. The product you want is an endorsement on the homeowners policy.

Response 5: ISO has come out with endorsements that address home-sharing exposures, although not every carrier uses ISO forms. Ultimately, it is up to each individual carrier if they want to extend coverage, and it may depend on the frequency of rentals, as well as other underwriting concerns. This is an area that is different with each carrier. 

Start with the carrier who is insuring the home, or if you haven't insured it yet, with the carrier that insures the primary residence. It should not be difficult to find standard carriers who accept this risk.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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