Renting out your property through Airbnb or other platforms can be an excellent way to earn extra income, but it also comes with unique risks. Some of the unforeseen issues that can arise when hosting guests include accidental property damage and liability claims, to mention a few. This is where short-term rental insurance comes in.
Unlike standard homeowner’s insurance, this specialised policy is designed to address the complexities of hosting. It provides tailored coverage designed to protect your property, belongings, and finances.
If you are considering renting out a spare room or your entire holiday home, choosing the right insurance ensures peace of mind and financial security as you welcome travellers from around the globe. This guide discusses all you need to know before insuring your short-term rental.
What is Short-Term Rental Insurance?
Short-term rental insurance is a special insurance policy that protects property owners renting out spaces for short durations, especially through platforms like Airbnb and Stayz. Unlike standard home insurance, short-term rental insurance extends coverage to business-related activities, leaving no gaps in protection.
This insurance policy offers property damage insurance against accidental or intentional harm caused by guests, liability protection for claims arising from guest injuries, and even guest medical payments for unexpected accidents.
Many platforms, including Airbnb, require hosts to have proper rental insurance coverage options to ensure guest safety and compliance with regulations. These policies are also crucial for unexpected scenarios like legal disputes.
Any property owner looking to join the short-term rental market in Australia will need the right coverage to safeguard their property and avoid financial losses. One popular coverage, for instance, is the loss of income insurance, which compensates hosts for cancellations due to covered events. We’ve covered more in the sections below.
What Does Short-Term Rental Insurance Cover?
Since short-term rental insurance is tailored to protect property owners against risks unique to short-term rentals, it comes with comprehensive coverage options. Here’s a detailed look at the key protections:
- Property Damage Coverage: This protects against accidental or malicious damage caused by guests, pets, or unforeseen incidents. Providers like ShareCover offer coverage for building damages up to $2 million and contents up to $500,000, while RentCover includes coverage for accidental, malicious, and pet damage up to $70,000.
- Liability Protection: This protection covers legal costs and liabilities if a guest is injured on your property. Most providers, such as ShareCover, Terri Scheer, and RentCover, offer public liability protection up to $10–20 million. The right liability protection coverage ensures that you are safeguarded against expensive lawsuits or compensation claims.
- Loss of Income Insurance: If your property becomes uninhabitable due to a covered incident, this feature compensates for lost rental income. Insurance companies like Terri Scheer and RentCover provide loss of rent protection up to $50,000. This helps maintain financial stability during repairs or restorations.
- Guest Medical Payments: As the name suggests, this protection covers medical expenses if a guest sustains an injury on your property. While not all insurers specify this explicitly, many include it under liability or personal injury coverage.
- Additional Living Expenses: In the event that your property becomes uninhabitable, some policies cover temporary accommodation costs for you as the host. Coverage amounts and availability will often depend on the insurer.
As noted above, coverage limits and inclusions vary among Australian insurers. Some, like ShareCover, focus on flexibility and offer pay-per-night or 6/12-month policies with strong property and liability protections. Terri Scheer, another one that specialises in holiday rentals, offers policies with tailored coverage for contents, buildings, and liability.
On the other hand, insurers like RentCover offer extensive protection across damages, including water, fire and natural disasters, with generous limits of up to $70,000. Ceneta also provides mid-range coverage for contents ($30,000–$60,000) but higher liability limits ($20 million).
Costs of Short-Term Rental Insurance
Rental insurance costs for short-term rental properties vary significantly based on location, property size, rental frequency, and coverage. Below is a quick overview of the key factors influencing short-term rental premiums.
- Location: Properties in high-risk areas (e.g., prone to natural disasters or with high crime rates) have higher premiums. For instance, New South Wales averages $650 annually for RentCover Short-Term policies, while Tasmania has lower premiums at $477.
- Rental Frequency Impact on Cost: Renting frequently increases risks of property damage or liability claims and can have a significant impact on premiums. Flexible options like ShareCover allow you to pay less than $8 per night for occasional rentals, covering up to 90 nights annually.
- Property Type and Size: Larger or luxury properties demand higher coverage, which can drive up costs. Insuring a small unit, for instance, may cost less than AUD 600 annually, while a high-value villa in a coastal area can exceed $2,000 per year.
- Coverage Limits and Options: Choosing extensive or specialised flexible insurance coverage increases premiums. If you increase liability coverage from $10 million to $20 million, you will undoubtedly incur a higher premium.
- Security Measures: Installing security systems (e.g., alarms and cameras) can lower premiums since they help deter risks like theft and intentional property damage.
Typically, pay-per-night policies (<$8/night) or six/12-month coverage offers up to $2 million for the building and $500,000 for contents. An example of a provider with such coverage is ShareCover. Some insurers like RentCover offer coverage for contents and buildings billed annually, starting from AUD 517. The premiums, however, vary by postcode and property type. If you are in for low-cost coverage for your holiday rental, Terri Scheer covers you for $1.50 or less per day. This coverage may not cover everything, but is ideal for seasonal hosts.
Tips for Managing Risks as a Host
Effective rental risk management is crucial if you are to avoid most hosting challenges. Ideally, you want to start by setting enforceable guest house rules that establish expectations around behaviour and safety. Similarly, consider implementing routine property maintenance tips, like inspecting for hazards and servicing appliances to help prevent accidents and keep your property in top condition.
Other ways to manage risks include:
- Carefully vetting rental guests by reviewing profiles and engaging in communication to filter responsible tenants.
- Install safety features such as smoke detectors, secure locks, and well-labelled emergency exits.
- Preparing an emergency plan with key details such as whom to contact and how to respond to unforeseen situations.
See more: Managing Multiple Short-Term Rentals: Tips, Tools, and Best Practices
L’Abode Got You Covered!
If you own an Airbnb property, L’Abode’s full-service hosting makes hosting and property management hassle-free. We specialise in short-, mid-, and long-term property management, offering everything from guest screening and listing management to emergency repair coordination.
Our team provides regular property assessments post-guest departure and in-depth guidance on the best short-term rental insurance to safeguard your property from unforeseen damages. Partner with us today, and we’d love to make your hosting a fun, profitable, and less risky experience.
At L’Abode Accommodation, we are known for unbeatable Airbnb host management Sydney.