Submitted by HHLOA Allied Partner, Stockton-Hill Insurance
Vacation & Short Term Rental Insurance – Avoiding Coverage Pitfalls
At Stockton-Hill Insurance we love vacation rentals. Whether you own a cabin in the Hocking Hills of Southern Ohio or a beach house on the gulf coast of Florida we can help.
One of the most misunderstood concepts in insurance are the different types of policies available for short term, vacation rental properties.
There are three basic ways a dwelling is rented out:
- Long Term Rental: This is a traditional rental property where the dwelling is rented out for a month and longer. These types of rentals are typically not advertised on sites like AirBnB or VRBO. These types of rentals are not owner occupied. They are best insured on a traditional dwelling fire insurance policy.
- Short Term Rental: Typically a dwelling rented less than a month at a time (nightly or weekly) is considered a short term or vacation rental. We recommend this type of rental be insured on a commercial policy which provides many coverages not afforded under a homeowners or dwelling fire policy. Not to mention there may be no coverage under a homeowner or dwelling fire depending on the exact policy language and exclusions.
- Part Time Rental: This may be the renting of a room or the seasonal rental of an owner occupied residence (think snowbird). This type of rental may qualify for coverage using a homeowners policy with a home sharing endorsement depending on the specific policy endorsement requirements and language (see below for more info). Many domestic insurance carriers have adopted new ISO home sharing endorsements that can be added to a traditional homeowners policy. The endorsement offers limited coverage for home sharing.
The problem is homeowners policy’s require the dwelling to be owner occupied. The policies are written with a definitions section that specifically define certain terms used in the policy. Policies define “insured location” as the “residence premises”, then further define “residence premises” as the dwelling where you reside.
What this means is a homeowners policy with a home sharing endorsement is only applicable to a primary residence (owner occupied). If your Vrbo/AirBnB type property is an investment property (not owner occupied), then beware! At the time of a claim you may find out your policy provides no coverage. There are many public court cases online that surround this exact subject, where insurance carriers have denied coverage based on the “residence premises” definition.
There are several companies (Proper Insurance, CBIZ, etc) you may see offering coverage for your vacation rental. The advantage of using Stockton-Hill Insurance is we are an independent agency that has access to those companies as well as many others that have special policies