STR Insurance: What You Need and What You're Missing

Insurance is the least exciting topic in short-term rental investing. It is also one of the most important. Many STR owners operate with significant gaps in their coverage, assuming their homeowners insurance or platform guarantees will protect them. This assumption has cost hosts hundreds of thousands of dollars in uninsured losses. Insurance is just one component of getting your STR ready; for a comprehensive overview of all pre-launch requirements, see our First STR Checklist Guide.

This guide explains why standard insurance falls short, what STR-specific coverage includes, and how to build a protection strategy that actually works when you need it.

Why Homeowners Insurance Is Not Enough

Standard homeowners insurance is designed for owner-occupied residences, not commercial rental activities. When you rent your property to paying guests, you change the risk profile in ways most policies explicitly exclude.

The Business Activity Exclusion

Most homeowners policies contain language excluding coverage for "business pursuits" or "commercial activities" conducted on the premises. Short-term renting is a business activity. If your insurer discovers you have been hosting guests, they can:

• Deny claims: Refuse to pay for damages that occurred during guest stays
• Cancel your policy: Drop coverage entirely, sometimes with minimal notice
• Rescind coverage retroactively: In some cases, act as if the policy never existed
• Flag you in industry databases: Making future insurance harder to obtain

Liability Gaps

Homeowners policies typically provide $100,000-300,000 in liability coverage for incidents involving family and invited guests. This coverage often does not extend to paying guests, and the limits are insufficient for serious injuries anyway. A guest who slips and falls, suffers burns, or is injured by a defective appliance could generate claims exceeding your policy limits.

Property Damage Limitations

Even if your insurer does not explicitly exclude STR activity, coverage for contents and personal property assumes normal residential use. Wear and tear from frequent guest turnover, intentional damage by guests, and theft by non-household members may not be covered.

Platform Guarantees: Helpful But Limited

Airbnb, VRBO, and other platforms offer host protection programs. These are better than nothing but should not be your primary protection.

Airbnb AirCover for Hosts

Airbnb provides up to $3 million in damage protection and $1 million in liability coverage. However, there are significant limitations:

• Secondary coverage: Airbnb pays only after your own insurance (if you have any that applies)
• Exclusions: Cash, securities, pets, shared spaces, normal wear and tear, mysterious disappearance
• Claims process: Notoriously difficult, with many hosts reporting denied or reduced claims
• No guaranteed coverage: Airbnb reserves the right to deny claims at their discretion
• Platform-only: Only covers Airbnb bookings, not other platforms or direct bookings

VRBO Liability Insurance

VRBO offers $1 million in liability coverage for US hosts, but similar limitations apply. It covers third-party bodily injury and property damage claims but not damage to your own property.

Why Platform Coverage Falls Short

Platform guarantees are not insurance policies. You have no contract with an insurance company. There is no state insurance commissioner to appeal to if your claim is denied. The platform makes the final decision on whether and how much to pay, and their interests may not align with yours.

STR-Specific Insurance Policies

The insurance industry has recognized the STR market and developed products specifically designed for short-term rental hosts. These policies address the gaps in traditional coverage.

What STR Policies Cover

• Property damage: Structural damage, contents, and personal property during guest stays
• Liability: Bodily injury and property damage claims from guests and third parties
• Loss of income: Revenue lost while property is uninhabitable due to covered damage
• Guest-caused damage: Intentional or negligent damage by guests
• Theft: Items stolen by guests or during guest stays
• Amenity liability: Hot tubs, pools, fire pits, and other high-risk features

Policy Types

Dwelling fire policies with STR endorsements add short-term rental coverage to a basic property policy. These work well for dedicated rentals you do not personally occupy.

Hybrid owner/rental policies cover properties you both live in and rent out (house hacking, part-time rentals). They switch between homeowner and commercial coverage based on occupancy.

Commercial vacation rental policies treat your STR as a business from the start. These typically offer the broadest coverage and highest limits but cost more.

Top STR Insurance Providers

Several insurers specialize in short-term rental coverage. Here are the most established options:

Proper Insurance

Purpose-built for STRs with coverage that includes guest-caused damage, liability, and loss of income. Known for straightforward policies and competitive pricing. They offer both annual policies and per-stay options.

CBIZ

Offers comprehensive vacation rental insurance through their specialty program. Strong on liability coverage and works with hosts who have multiple properties or unique situations.

Safely

Provides per-booking insurance that covers damage and liability for individual stays. Good for hosts who want coverage that scales with bookings rather than annual premiums.

Lloyds of London (via brokers)

For high-value properties or unusual situations, specialty brokers can access Lloyds syndicates that underwrite custom STR policies.

Traditional Insurers

Some mainstream insurers (Allstate, State Farm, Farmers) now offer STR endorsements or standalone policies. Availability varies by state and property type. Ask your existing agent what options they have.

Understanding Liability Coverage

Liability claims represent the biggest financial threat to STR owners. A serious injury on your property can generate claims in the hundreds of thousands or even millions of dollars.

What Liability Insurance Covers

• Bodily injury: Medical costs, lost wages, pain and suffering for injured parties
• Property damage: Damage your property or operations cause to others' property
• Legal defense: Attorney fees, court costs, settlements, judgments
• Medical payments: Immediate medical costs regardless of fault (usually $5,000-25,000)

How Much Liability Coverage Do You Need?

The minimum recommendation is $1 million per occurrence. However, consider higher limits if you have:

• High-value property or multiple properties
• High-risk amenities (pools, hot tubs, boats, ATVs)
• Significant personal assets to protect
• Properties in litigious markets

Umbrella Policies

An umbrella policy provides additional liability coverage above your primary policy limits. A $1 million umbrella typically costs $200-400 per year and kicks in after your primary liability coverage is exhausted. For STR owners with significant assets, umbrella coverage is strongly recommended.

The Claims Process

Understanding how to file and manage claims improves your chances of a successful outcome.

Document Everything

Before guests arrive, maintain thorough documentation:

• Video walkthrough of the property before each stay
• Photos of all rooms, furniture, appliances, and valuables
• Inventory list with estimated values
• Receipts for major purchases
• Maintenance records showing property was in good condition

When Damage Occurs

1. Document immediately: Take photos and video of all damage before cleaning or repairs
2. Notify your insurer promptly: Most policies require notification within specific timeframes
3. File with the platform: Submit claims through Airbnb/VRBO resolution centers
4. Get repair estimates: Obtain written estimates from licensed contractors
5. Keep all receipts: Document every expense related to the damage
6. Cooperate with adjusters: Provide requested information promptly

Common Claim Denial Reasons

• Late notification: Waiting too long to report damage
• Insufficient documentation: Cannot prove condition before damage
• Excluded damage type: Wear and tear, pests, mold (often excluded)
• Policy violations: Operating outside policy terms
• Misrepresentation: Property description does not match reality

What Most Hosts Get Wrong

Common insurance mistakes that leave hosts exposed:

Relying Solely on Platform Coverage

Platform guarantees should supplement, not replace, proper insurance. Hosts who skip insurance often regret it when they need to file a significant claim.

Not Disclosing STR Activity

Keeping your rental activity secret from your insurer is fraud. If discovered, you lose coverage retroactively and may face legal consequences.

Underinsuring High-Risk Amenities

Pools, hot tubs, trampolines, and fire pits dramatically increase liability exposure. Make sure your policy explicitly covers these features.

Ignoring Loss of Income Coverage

If your property is damaged and uninhabitable, you lose rental income during repairs. Loss of income coverage (also called business interruption) replaces this revenue.

Not Reviewing Policies Annually

Your coverage needs change as property values increase, you add amenities, or you acquire additional properties. Review and update your insurance annually.

Building Your Protection Strategy

A comprehensive protection strategy layers multiple forms of coverage:

Layer 1: STR-Specific Property Insurance

Your foundation. Covers property damage, contents, and provides base liability coverage.

Layer 2: Umbrella Liability Policy

Adds $1-5 million in additional liability protection above your primary policy.

Layer 3: Platform Coverage

Free additional protection for bookings through that platform.

Layer 4: Entity Structure

Operating through an LLC can provide additional asset protection (consult an attorney).

Layer 5: Guest Screening

Prevention is the best insurance. Good screening reduces claims in the first place.

What to Ask Your Insurance Agent

When shopping for STR insurance, ask these questions:

• Does this policy explicitly cover short-term rental activity?
• What is excluded from coverage?
• Are guest-caused damages covered, including intentional damage?
• Does liability coverage extend to paying guests?
• Is loss of rental income included, and for how long?
• Are my specific amenities (pool, hot tub, etc.) covered?
• What is the claims process and typical timeline?
• Can I add umbrella coverage through you?
• What discounts are available (security systems, multiple policies)?