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Short-Term Renters Insurance Basics

As a homeowner or renter, temporarily leasing your residence as a short-term rental might be a reason to purchase additional insurance.

Short-term insurance for homeowners

Home owners who lease their residence for less than 30 consecutive days are typically considered short-term renters and need to understand and weigh the insurance ramifications of temporarily renting their home to guests.  Depending on the number of days a residence is leased, an existing insurance policy might be adequate or a homeowner might need to purchase an endorsement or separate policy.

Generally, homeowners liability protection will cover lawsuits filed against a policyholder by short-term guests.  It might also cover damages caused by a guest to a lessor's home or personal property. Policyholders should make sure they fully understand what their homeowners insurance will cover by checking their policy and speaking to an agent or company representative.

However, insurance companies make an important distinction between owners who occasionally lease their home to visitors and owners engaging in commercial activity.  Most insurance companies define commercial activity as any home inhabited by one or more short-term renters more than 90-days of a year.  In that situation, protections offered by a homeowners insurance policy would be negated.

If a homeowner's short-term renting activity can be defined as commercial, they should strongly consider purchasing an endorsement (if their homeowners insurance company offers one) or a separate policy to cover themselves and their home while lessees stay there.

Short-term insurance for renters

Like homeowners insurance, renters insurance will protect a renter in circumstances related to short-term lessees.  A renters insurance policy will cover a policyholder from lawsuits filed against them by a short-term guest.  It might also cover damages to the rental unit or a renter's personal property caused by a temporary lessee.  Like homeowners, renters need to reference their policy and speak to their company to ensure they understand their coverage.

Unlike homeowners, renters also need to be aware of the terms of their own lease agreement.  Some landlords and developers might prohibit tenants from temporarily leasing their home to others.  In that case, their renters insurance company might cover a claim related to a short-term renter, but they might also be jeopardizing their home in the process.

Assuming a tenant's landlord permits them to host short-term guests, a renter is still subject to rules regarding commercial activity. In addition to the definition of commercial activity generally used by insurance carriers – leasing of 90 days or more per year – individual states and cities might have their own laws regarding short-term guests.

Insurance for short-term guests

There are no insurance policies specifically designed to protect short-term guests paying to stay in someone's home or rental unit.  Liability protection that is part of homeowners and renters insurance travels with the policyholder, so as long as a guest has a policy, they will be covered.  Homeowners and renters insurance will also cover a guest's personal property they might have with them, up to a limit of a policy.

The only insurance policy a short-term guest might consider purchasing for their stay might be travel insurance.  Most travel insurance policies will not cover a guest's personal property or provide them liability protection.  However, many travel insurance policies cover trip cancellations and will reimburse a policyholder for accommodation expenses, such as a deposit or bill for a short-term lease.

Insurance for 30-day stay or longer

A guest paying to stay at someone's home for longer than 30-days is not considered a short-term guest. Most homeowners policies will not cover any claim related to a guest who has been paying to stay at the insured residence for that long.  Anyone renting out their home for longer than 30-days will likely need to purchase either a landlord endorsement (if their insurance policy offers one) or a separate landlord policy.

As a guest renting a home for longer than 30-days, you should consider purchasing a traditional renters insurance policy.  Some insurance carriers will allow policyholders to purchase renters insurance for a shorter period than a year.  Most will offer a policy lasting as short as six months, but other companies might insure a policyholder for a shorter term.  When purchasing a renters insurance policy for a stay less than six months long, do not assume you can simply cancel a renters insurance policy with a one-year term without penalty.  Some companies might charge a fee or refuse to refund all of the premiums for the months that were paid but went unused.

For answers to other questions you may have regarding Short-Term Rental insurance, I suggest that you contact Christian Richter with Old Harbor Insurance at CR@oldharborins.comHis cell phone number is (951) 297-9742.

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