Imagine this: You’ve turned your dream home into a cash cow by listing it on Airbnb, VRBO, or one of the many other platforms for short-term rentals. The reservations are pouring in, the extra income is helping you pay down your mortgage, and life seems pretty sweet. But then, out of nowhere, disaster strikes. It could be a fire, a flood, or even a rowdy guest causing damage. You think, “No problem, I’ve got insurance!” But when you file the claim, you’re hit with a harsh reality: your homeowner’s insurance isn’t going to cover it. Why? Because you didn’t update your policy from primary residence to short-term rental.
This isn’t just a hypothetical scenario—this is a story of one homeowner’s unfortunate experience that serves as a stark warning for others. Let’s dive into the details and discuss why having the right insurance coverage, like short-term rental insurance, is crucial for protecting your investment properties. We’ll also explore how Steadily Insurance can offer the peace of mind you need.
The Perfect Setup
Let’s call him Mark. Mark had owned his beautiful Victorian home in a charming neighborhood for years. After a job relocation, Mark decided to turn his primary residence into a short-term rental instead of selling it. He figured it was the best of both worlds: he could keep the home he loved and generate some extra income to cover the mortgage.
Like many new hosts, Mark was eager to get his property listed. He spent hours staging the rooms, taking professional photos, and crafting the perfect listing. Within days of going live, bookings were flooding in. It wasn’t long before the extra income rolled in, and Mark felt pretty savvy.
However, there was one critical step that Mark overlooked: he never updated his homeowner’s insurance policy to reflect the new use of the property.
The Incident
A few months into his new venture, Mark welcomed a group of guests for a weekend stay. Everything seemed fine until he got a frantic call from his cleaning service after the guests checked out. The group had thrown a wild party, and the aftermath was catastrophic. Furniture was broken, walls were damaged, and worst of all, there was significant water damage from someone leaving a bathtub running all night. The repairs were going to cost tens of thousands of dollars—way more than Mark had made from renting out the property.
No worries, Mark thought. That’s why I have insurance.
The Shocking Reality
Mark promptly filed a claim with his homeowner’s insurance company, confident that the situation would be taken care of. But then came the devastating news: the claim was denied. The reason? His policy was based on the assumption that the home was a primary residence, not a short-term rental.
Because Mark hadn’t informed his insurance company of the change in the property’s use, the policy was void for this type of claim. The insurance company explained that if they had known the home was being used as a rental, they would have required a different type of policy altogether—one designed for landlords or short-term rentals.
Mark was left to cover the repair costs out of pocket. The financial hit was severe, but the lesson he learned was even more impactful.
Understanding Rental Property Insurance
Mark’s story is a powerful reminder of the importance of understanding the type of insurance you need when you turn your home into a rental property. Here’s what you need to know:
Primary Homeowners Insurance: This type of insurance is designed to protect you and your home when you live there as your primary residence. It covers things like damage from fire, theft, and certain natural disasters. However, it doesn’t typically cover claims that arise when your home is being used as a rental property—whether short-term or long-term.
Rental Property Insurance (Landlord Insurance): When you start renting out your home, even occasionally, you need to switch to a landlord insurance policy. This type of insurance covers property damage, liability, and loss of rental income. It’s designed to protect you as a property owner and landlord.
Short-Term Rental Insurance: This is a specialized type of insurance that covers your property when it’s being used for short-term rentals. Unlike traditional landlord insurance, which is geared towards long-term rentals, short-term rental insurance takes into account the unique risks associated with frequent guest turnover, such as damage by guests or theft.
Get a landlord insurance quote in minutes.Why Updating Your Policy is Non-Negotiable
One of the most common mistakes homeowners make when transitioning to a rental property is assuming that their existing insurance will suffice. The reality is, insurance companies assess risk based on how a property is used. A primary residence has a different risk profile than a rental property, and the insurance premiums reflect that. If you don’t update your policy to reflect the change in use, your insurance company may deny claims related to rental activities.
Not only does failing to update your policy leave you exposed to significant financial risk, but it could also violate the terms of your mortgage. Many lenders require homeowners to maintain adequate insurance on their properties, and if they find out that you’re using your property as a rental without the proper insurance, you could face penalties.
Avoiding the Pitfalls: How to Protect Your Investment Property
If you’re thinking about renting out your home, whether it’s for a few weekends a year or as a full-time business, here are the steps you need to take to ensure you’re properly protected:
1. Talk to Your Insurance Agent: As soon as you decide to rent out your home, contact your insurance agent to discuss the change in use. They can help you understand what type of coverage you need and what your options are.
2. Switch to a Rental Property Insurance Policy: If you’re renting out your home on a long-term basis, you’ll likely need a landlord insurance policy. This policy will cover the structure of the property, liability, and loss of rental income.
3. Consider Short-Term Rental Insurance: If you’re renting out your home for short-term stays, like on Airbnb, you’ll need a policy that covers the specific risks associated with short-term rentals. This may be an add-on to your existing policy or a standalone policy, depending on your insurance provider.
4. Keep Records: Maintain detailed records of your rental activities, including guest contracts, payments, and communications. This documentation can be invaluable if you ever need to file a claim.
5. Review Your Coverage Regularly: As your rental business grows, your insurance needs may change. Review your coverage regularly with your insurance agent to make sure you’re fully protected.
Steadily Insurance: Your Partner in Protection
Navigating the complexities of rental property insurance can be daunting, but it’s essential to get it right. That’s where Steadily Insurance comes in. Steadily specializes in providing insurance solutions tailored to the needs of rental property owners, whether you’re renting out a single home or managing a portfolio of properties.
Why Choose Steadily?
• Expertise in Rental Property Insurance: Steadily understands the unique challenges that come with insuring rental properties, especially short-term rentals. Their policies are designed to cover the risks that other insurance companies might overlook.
• Flexible Coverage Options: Whether you need rental property insurance, short-term rental insurance, or landlord insurance, Steadily offers flexible coverage options that can be tailored to your specific needs.
• Positive Steadily Insurance Reviews: Customers consistently praise Steadily for their responsive customer service, clear communication, and fair claims process. These reviews highlight the trust that property owners place in Steadily to protect their investments.
• Seamless Claims Process: When disaster strikes, you need an insurance company that acts quickly and fairly. Steadily’s claims process is designed to be as smooth and stress-free as possible, so you can focus on getting your property back in shape.
Get a Steadily landlord insurance quote.Final Thoughts
Mark’s story is a wake-up call for anyone considering turning their home into a rental property. The potential rewards of rental income are undeniable, but they come with risks that require the right insurance coverage. Don’t wait until it’s too late—make sure you have the proper rental property insurance, short-term rental insurance, or landlord insurance in place to protect your investment.
Steadily Insurance is here to help you navigate the complexities of insuring your rental properties, with customized solutions that give you peace of mind. Don’t let a simple oversight turn into a costly mistake—get the right coverage today.
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
