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What is short-term rental insurance?

Short-term rental insurance – also known as host insurance – is a specialized type of business insurance designed to protect property owners who rent out their homes or rooms for brief periods, typically via platforms like Airbnb or Vrbo.

It covers risks that standard home insurance usually excludes. It offers financial protection against property damage, liability claims and loss of income related to your rental activities.

Though Airbnb and Vrbo both offer complementary liability and damage protections to their hosts (think Airbnb's AirCover for Hosts coverage), it’s better to also purchase short-term rental insurance to fill some of the gaps. It also offers more coverage options and lets you set higher limits. This is especially invaluable if you rent out your property frequently, since you’re exposed to more risk.

Who needs short-term rental insurance?

Short-term rental insurance is essential for anyone renting out their property through platforms like Airbnb or Vrbo. This includes:

• Homeowners who rent out their entire primary residence occasionally.
• Property investors who own one or more properties used exclusively for short-term rentals.
• Hosts who rent out a single room, a basement suite or a guest house on their property.

What does short-term rental insurance cover my business for?

This business insurance policy provides crucial coverage tailored to the risks of hosting guests. Key coverages include:

• General liability insurance: Protects you if a guest is injured on your property or if you are found liable for damage to a third party's property.
• Commercial property insurance: Covers the costs to repair or replace your building and its contents if they are damaged by an insured event, such as a fire or theft.

What insurance coverage add-ons are recommended for short-term rentals?

To ensure comprehensive protection, consider these valuable add-ons:

• Business interruption insurance: Also known as ‘loss of income’ or ‘rental income’ insurance, this reimburses you for lost rental income if your property becomes uninhabitable due to a covered loss, helping you stay afloat during repairs.
• Loss assessment insurance: If instead of a house you’re renting out a condo, this will protect you if a customer makes a claim against the condominium association that exceeds its insurance policy limit. Such claims are made for issues occurring within your condo building’s common areas, such as a fitness centre, not the condo itself.
• Contingent unit insurance: This protects you if your condominium association doesn’t have insurance or lacks the funds to fully protect your condo. Given that the risk is higher when you rent out a condo, adding this coverage could prove very useful.
• Cyber liability insurance: Protects you from financial losses if your guests’ personal data is compromised through a data breach or cyberattack.

How much does short-term rental insurance cost?

The cost of short-term rental insurance in Canada can vary significantly, with annual premiums typically ranging from $700 to over $2,000. The cost depends on factors like your property and rental activities, so these numbers are just estimates.

What factors determine short-term rental insurance rates?

Insurers consider several key factors when calculating your premium, including:

• Location: Where your rental is located plays a significant role in determining your insurance premium. Insurers assess risk based on neighbourhood crime rates, proximity to fire services, and the frequency of weather-related claims in the area, such as floods or wildfires. A property in a low-risk area will typically have lower insurance costs than one in a location prone to claims.
• Property type and construction: The type of home you're renting out – whether it's a single-family house, a condo, or a cottage – affects your rate. The materials used to build your property also matter. For example, homes with newer, more durable construction materials are often cheaper to insure than older homes with outdated electrical or plumbing systems, which may pose a higher risk.
• Amenities offered: Do you offer exciting extras like a swimming pool, hot tub, fireplace or barbecue? While these features can attract more guests, they also increase the risk of accidents and liability claims. As a result, properties with these types of amenities usually have higher insurance premiums to account for the added risk.
• Rental frequency: How often you rent out your property will influence the price.
• Coverage limits: The amount of coverage you choose directly impacts your premium. Higher liability and property coverage limits will result in a higher cost.
• Claims history: Your personal claims history is a strong indicator of future risk. If you’ve made multiple insurance claims in the past, whether for your primary home or another property, insurers may view you as a higher-risk client. A claims-free record can help you secure a more competitive rate.

How does short-term rental insurance work?

Short-term rental insurance works by providing a financial safety net for your rental business. For instance, if a covered event occurs – such as a guest slipping and getting injured or causing accidental damage to your property – you can file a claim with your insurer.

Here are the steps:

• Choose your coverage: Pick the types of insurance that suit your needs, such as general liability or rental income coverage.
• Pay your premium: You pay a monthly or annual premium to keep your policy active. The cost depends on factors like your property type, location and your claims history.
• File a claim when needed: If an incident occurs, you can file a claim with your insurance provider, so they can assess the situation and see what compensation is available to you.
• Receive compensation: Once you pay your deductible, your policy covers the rest up to your limit, saving you from large out-of-pocket costs.

How to get the cheapest short-term rental insurance quote

Finding affordable coverage doesn't mean you have to sacrifice protection. Follow these steps to secure the best rate for your business insurance:

• Bundle your policies: Many insurers offer discounts when you bundle your short-term rental policy with other insurance, such as your primary home or auto insurance.
• Increase your deductible: Choosing a higher deductible can lower your annual premium, but make sure it’s an amount you can comfortably afford to pay out of pocket.
• Implement risk management: Installing security systems, smoke detectors and fire extinguishers can demonstrate to insurers that you are proactive about safety, which may result in a lower premium.
• Maintain a good claims history: Avoid filing small claims that you can cover yourself. A good claims record can make you eligible for lower premiums over time.