Short-term rental insurance: how it works and which insurance companies offer it

This article has been updated from a previous version. 

Renting out your home or cottage can be a great source of income, but it comes with risks. We’ve all read the horror stories of the damage that short-term renters can do to a property.  

So how can you benefit from renting out your property and still protect your space? That’s where short-term rental insurance can be an option.  

What is short-term rental insurance? 

Short-term rental, also known as home-sharing insurance, is a type of insurance that covers your property and potential liabilities while renters stay in your home.  

If you rent out your primary home or vacation property for a short period of time, usually up to six months, this protection will prove to be necessary. 

Short-term rental insurance may also be offered as Airbnb insurance, but we’ll get to that later.  

Related: How does cottage work in Canada? 

Short-term rental insurance vs. Homeowners' insurance 

If you’re planning on renting out your primary home on a short-term basis, talk to your primary home insurance provider to see if your current policy already covers you for short-term rentals.  

However, if you’re planning on renting out your property on an ongoing basis, your regular home insurance probably won’t cover any damages caused by your guests/tenants. This is because most home insurance policies assume you’re the owner and occupier of the residence.  

Your policy can be invalidated on grounds of misrepresentation if homes are unoccupied by the owner for more than 30 to 90 days. The longer you’re away from the property, the greater the risk of a peril happening and not being tended to, and the higher the perceived risk by your insurer.  

Short-term rental insurance is designed for commercial use of your property, specifically when hosting guests, whereas home insurance protects long-term occupancy.  

Read more: What is personal liability insurance in home insurance? 

What does short-term rental insurance cover?  

Short-term rental insurance covers more than theft and damage. Most policies will also cover: 

Accidental and deliberate damage: Short-term rental insurance protects against both accidental or intentional damage caused by guests or tenants. Whether it’s a broken window or vandalism, you’ll be protected. 

Theft: If a guest or tenant steals from your property, your policy will cover the loss.   

Legal liability (with exceptions): Short-term rental insurance addresses legal liability. However, it won’t cover poor home conditions that are neglected and left unfixed by the owner leading to claim denials. 

Loss of income: Imagine a scenario where guests cause significant damage to your property that leaves it uninhabitable. In this case, your coverage will help compensate for any loss in income from rentals during repairs. 

Cost of utilities: Sometimes guests can be overly enthusiastic about using utilities, like water or hydro. If their usage leads to significantly higher utility bills, your insurance may cover the increased costs. 

Replacement costs: The cost of having to replace the keys and change the locks for security reasons. 

Read more: What recourse does a landlord have if the tenant uses their home for illegal activity? 

Insurance offered by Airbnb and other rental companies 

If you list your property for rent via Airbnb, you’re automatically covered for up to $1 million USD in host liability coverage. This will protect you if you’re held legally responsible for a guest getting hurt/injured, if there’s theft or damage to the guest’s property, and/or if there’s damage caused by the guest to shared spaces (lobbies, elevators, etc.)  

You’re also covered for up to $3 million USD under host damage protection if there’s damage caused by the guest to your home, furnishings, belongings, parked vehicles, any loss in income, and any extra cleaning costs required to restore the property to its original state.   

There are caveats to both, however. The host damage protection doesn’t cover damage caused by acts of nature. And the liability coverage doesn’t cover intentional damage or injuries.  

Vrbo, another online vacation rental company, also offers up to $1 million USD liability coverage for hosts in case of accidents on the property, but it doesn’t offer any coverage or protection against property damage.  

While Airbnb and Vrbo may provide some coverage, there are gaps in how you’re protected. Their policies shouldn’t replace your existing home insurance policy, and it may even be a good idea to get additional short-term rental insurance to cover some of the holes left by these companies’ coverage.  

Related: Renting out your pool? Beware the home insurance liability pitfalls 

What does short-term rental insurance cost, and which insurance providers offer it? 

Your premiums for short-term rental insurance depend on your desired coverage, where your property is located, the value of the items in the home, and all the other things that are factored into a standard home insurance policy. Keep that in mind when you’re comparing costs. 

Not all insurance companies offer short-term rental insurance. Some that do include:  

• Aligned Insurance  
• Apollo Cover  
• April 
• Aviva 
• BCAA  
• Kase Insurance  
• Netsurance  
• Wawanesa 

Short-term rental insurance can give you the security and control required in case something happens to your income property or your primary home. 

Read next: When buying insurance, should you go with a broker or an agent?