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Damage Insurance for Vacation Rentals: A Complete Guide for Property Managers

In an industry that’s driven by frequent guest turnover and a broad range of clients, the only thing that really protects professional property managers from accidents is damage insurance for vacation rentals. 

While a guest screening process is a wonderful way to weed out questionable or unwanted guests before they even step foot in your rentals, these efforts aren’t nearly enough to ensure peace of mind when you’re juggling over 50 properties. Even with the most rigorous vetting procedure in place, mishaps are bound to happen, and the best thing you can do is prepare for them. 

In this article, we’ll go over the most important things you need to know about damage protection insurance as a professional property manager: how much it costs, what it covers, what companies provide the best insurance, and what you can expect from online travel agencies like Airbnb and Vrbo. 

Table of Contents 

  1. What is damage protection insurance for vacation rentals and why do you need it?
  2. What kind of insurance do you need for your vacation rental? 
  3. How much does vacation rental damage insurance cost?
  4. What does damage insurance for vacation rentals cover? 
  5. What are the best vacation rental insurance providers?
  6. Damage insurance and OTAs 
  7. Damage Insurance for Vacation Rentals: Top Tips for Property Managers

Distributing your listings is a strategy, not a task. Take our free 5-day email course for property managers who want new, creative strategies for distributing their vacation rentals. 

What is damage protection insurance for vacation rentals and why do you need it?

Holidays often get out of control as eager renters try to take advantage of their time off while simultaneously getting to know a new environment in just a few days. 

Although one can hope that the only property damage you’ll encounter is a few broken plates or wine glasses, things can sometimes take a turn for the worst, leaving you with a giant crack through the new flatscreen TV that you just installed. 

You might think that you’re already covered because the property owner has homeowners insurance, but that’s not the case at all. In fact, their insurer most likely already terminated their policy once the property was considered a business activity.  That said, you need all-inclusive vacation rental damage insurance to specifically cover guest-related damage. 

01_preview of increased damage insurance for vacation rentals due to amenities

Credit: Max Vakhtbovych from Pexels

Damage insurance covers the expenses for fixing or replacing damaged property in your vacation rentals and safeguards your business in the long term. Seeing as rentals are considered high-risk properties, especially due to the wear and tear of frequent guest turnovers, this type of insurance tends to be more expensive than a homeowners insurance policy. 

For that same reason, damage protection insurance is an investment that you don’t want to skimp on—doing so will only lead to stress, paranoia, and hefty expenses down the road. 

For professional property managers that are using vacation rental software and looking for a simplified insurance process, Avantio has changed the game by partnering up with Europ Assistance

Not only is this the first time that vacation rental software teams up with an insurance company, but it’s also based on a deposit-free model that improves customer experience and your overall relationship with guests. 

What kind of insurance do you need for your vacation rental? 

Damage insurance isn’t the only type of protection you should invest in as a property manager. Your short-term rental insurance policy should also cover: 

  • Trip cancellation insurance: If a guest needs to cancel their trip, cancellation insurance guarantees that they’ll get their money back while you keep their payment. In other words, it’s a win-win where you can generate trust for future bookings without losing rental income. 
  • Loss of income: If you’re not able to rent out a vacation rental property due to covered damage, this insurance takes care of the repair and replacement costs as well as any income that should have been generated during that time period. 
  • Liability insurance: This type of insurance covers legal fees and penalties in the event that a guest gets injured during their stay and decides to sue. 
  • Weather-related incidents: For locations that frequently experience unpredictable weather conditions, it’s important to protect your business from earthquakes, floods, and other natural disasters. 
02_damage insurance for vacation rentals during a flood

Credit: Genaro Servín from Pexels

How much does vacation rental damage insurance cost?

Vacation rental damage insurance is considered a variable cost, meaning it fluctuates depending on a variety of factors like: 

  • The location of the property: The more popular the location of your rental property, the higher its value. As a result, booming tourist destinations tend to have elevated vacation rental damage insurance costs as well. 
  • Amenities and activities: While providing first-class appliances and activities in a vacation rental is always recommended to boost guest experience, it does come at a greater price. The more amenities your property has, the more risks your insurance company faces. 
03_damage insurance for vacation rentals and outdoor amenities

Credit: Pixabay from Pexels

Overall vacation rental insurance costs (not just those related to damage) can also be affected by: 

  • Additional activities open to the public: Some vacation rentals offer activities to the public, all of which need to be communicated when looking through insurance policies. A beach-side boutique hotel that offers on-site yoga classes or paddleboarding lessons has a much higher risk of injury than a property without these additional and public operations.
  • Safety features: Some insurance companies offer lower rates to properties that are equipped with safety features like handrails and fire extinguishers. 

What most property managers fail to understand is that these costs are not a burden: they actually increase your vacation rental profitability by protecting your properties from irreversible damage.

04_preview of outdoor activities and an increased damage insurance for vacation rentals

Credit: Yan Krukov from Pexels

What does damage insurance for vacation rentals cover? 

Most vacation rental damage insurance plans cover: 

  • Fees for both guests and property managers regarding accidental damage
  • Damage caused by weather conditions

Damage insurance does not cover:

  • Liability risks
  • Loss of income (depending on the cause) 

Keep in mind that the coverage limits of each vacation rental insurance plan vary so it’s advisable to look over at least a few options and compare their insurance policies.

What are the best vacation rental insurance providers?

To give you a head start, we’ve put together a list of five of the best vacation rental insurance providers for a stress-free property management experience: 

  1. Europ Assistance: With over 30 years of experience in vacation rental insurance, Europ Assistance knows what kind of protection property managers and guests need. As previously mentioned, one of the many perks of the Europ Assistance and Avantio partnership is that guests don’t need to put down a security deposit in order for their trip to be insured. Property managers cover the costs for damage protection and reservation cancellation protection, which results in happier clients and more bookings. 
  2. TERN Financial Group: Another Avantio partner, TERN Financial is a Lloyd’s of London coverholder delivering risk solutions in partnership with new-economy innovators and disruptors, particularly in the vacation rental property sector. They develop creative, technology-based protection programs for the vacation rental industry worldwide.
  3. SUPERHOG: This platform focuses on artificial intelligence to verify guests and provides guarantees up to $1 million in damage and liabilities in the case that anything goes wrong with a verified visitor. 
  4. Proper Insurance:  Endorsed by Vrbo, one of the leading vacation rental sites, this well-known insurance company covers a variety of short-term rental types. 
  5. Allstate: This company offers landlord insurance that protects you from damage and liabilities but also offers add-ons that you can include for a custom policy. 

According to vacation rental statistics, almost 90% of Americans plan to travel before 2022 (HomeToGo). That being said, now is as good a time as any to set up your insurance before travel fully resumes.

05_the need for damage insurance for vacation rentals increases as travel resumes

Credit: Pixabay from Pexels

Damage insurance and OTAs 

Online travel agencies like Vrbo and Airbnb have evolved to include protection programs within their services to safeguard both guests and hosts. While these may come across as a safety net, they are in no way considered insurance policies, nor do they provide full coverage. Here are a few examples: 

  • Vrbo: This OTA has an Accidental Damage Protection in place that allows you to set up a damage deposit for each booking. Guests can also protect themselves with travel insurance plans. Nonetheless, the protection is limited, and instead, Vrbo recommends Proper Insurance for complete insurance coverage. 
  • Airbnb: With Airbnb’s Host Guarantee Protection, you can get covered for up to $1,000,000 in damages. However, this program doesn’t protect you from theft of cash or securities.
  • Booking.com: Unfortunately, Booking.com doesn’t offer any damage protection aside from a deposit that guests may be required to leave. Deposits are often seen as an inconvenience for guests and can reduce the number of bookings you receive.
06_OTAs and damage insurance for vacation rentals

Credit: ready made from Pexels

Damage Insurance for Vacation Rentals: Top Tips for Property Managers 

If there’s something you take with you from this article, we hope it’s the following five tips:  

  1. DON’T confuse homeowners insurance with vacation rental damage insurance 
  2. DO explore several vacation rental insurance companies before settling on one 
  3. DON’T skimp out on vacation rental damage insurance because you think it’s a waste of money
  4. DO learn which factors affect its overall cost and make it work!
  5. DON’T rely solely on insurance from OTAs

Even if you’ve triple-checked every corner of your property to make it foolproof, occasional damage will inevitably occur from time to time. 

The smartest way to get ahead of the chaos and protect your peace of mind is by investing in a vacation rental damage insurance that complements and streamlines your business.

Distributing your listings is a strategy, not a task. Take our free 5-day email course for property managers who want new, creative strategies for distributing their vacation rentals. 

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