Understanding Insurance Options for STRs DADUs and VRBO Rentals
- brianwutz
- Oct 23, 2025
- 4 min read
In recent years, the popularity of short-term rentals (STRs), detached accessory dwelling units (DADUs), and vacation rentals by owner (VRBO) has soared. This rise presents incredible opportunities for property owners to earn income, yet it also introduces specific challenges—especially related to insurance. Knowing your insurance options is essential for protecting your investment and ensuring your peace of mind.
This blog post will discuss different types of insurance available for STRs, DADUs, and VRBO rentals, guiding you to make informed decisions about your property.
Why Insurance Matters for Short-Term Rentals
Insurance is vital for managing any rental property, but it becomes critical with short-term rentals. Unlike traditional long-term leases, STRs typically have a higher turnover, which means more guests and increased risks of:
Property damage
Liability claims
Unforeseen events
Having the right insurance in place can save you from financial loss and legal trouble. It also reassures your guests that they are staying in a well-protected environment.
Insurance Coverage Options for STRs
When insuring your short-term rental, there are several coverage types to consider:
1. Homeowners Insurance
Many standard homeowners insurance policies exclude short-term rental activities. If you are renting out your property temporarily, you should either purchase a specific short-term rental policy or add an endorsement to your existing homeowners policy.
For example, in 2022, nearly 60% of homeowners discovered that their insurance didn’t cover short-term rentals. This could expose them to significant out-of-pocket expenses for damage or liability claims. Always review your policy thoroughly and discuss your rental intentions with your insurance agent.
2. Landlord Insurance
Landlord insurance is another option that covers properties rented out, either short-term or long-term. Typical coverage includes:
Property damage
Liability protection
Loss of rental income
If you're renting a DADU or a separate unit, landlord insurance could be ideal. However, verify that the policy covers short-term rentals, as some plans have specific restrictions.
3. Short-Term Rental Insurance
Short-term rental insurance is specifically tailored for homeowners who frequently rent their properties. This type of coverage generally includes protection for:
Property damage
Liability claims
Income loss due to property damage
This insurance is excellent for hosts who consistently welcome guests. Research suggests that properties with short-term rental insurance saw a 30% decrease in litigation costs compared to those without.
Liability Coverage Explained
Liability coverage is a crucial part of any insurance policy related to STRs. It protects you if a guest gets injured or if their belongings are damaged while on your property.
1. General Liability Insurance
General liability insurance is common for property owners, protecting them from claims for bodily injury or property damage. It covers legal fees, medical expenses, and settlements, which can cost thousands of dollars in case of a lawsuit.
2. Guest Medical Coverage
Some insurance policies offer guest medical coverage. This benefit helps pay for medical bills if a guest is injured, regardless of fault. Providing this type of coverage can reduce the likelihood of lawsuits, thus giving you peace of mind while hosting.
Additional Coverage Considerations
Beyond standard options, consider these additional insurance coverages that can be beneficial:
1. Property Damage Coverage
This coverage shields you from losses due to damage caused by guests. It can protect your furniture, appliances, and even structural elements. For instance, if a guest accidentally breaks a valuable piece of furniture worth $500, this coverage helps offset that cost.
2. Loss of Income Coverage
If your home becomes unlivable due to an insured event, loss of income coverage compensates you for rental income you would have received during that period. This is especially important if you're relying on short-term rentals as your primary source of income.
Selecting the Right Insurance Provider
Finding a suitable insurance provider is essential. Here are some tips to help you:
1. Compare Policies
Examine various insurance policies and providers to find ones that address the specific risks associated with short-term rentals.
2. Read Reviews
Look for reviews and testimonials from property owners who have used the providers you’re considering. Insight from others can help gauge customer service and claims handling efficiency.
3. Consult an Insurance Agent
An experienced insurance agent is invaluable. They can guide you through the complexities of rental insurance and recommend tailored solutions based on your needs.
Compliance with Local Laws
Before you start renting your property, it's crucial to navigate local regulations and requirements regarding short-term rentals. Many cities have specific rules on STRs, including:
1. Licensing and Permits
Make sure your city doesn’t require a special license or permit to operate a short-term rental. Not having the necessary permits can lead to fines or even legal action.
2. Zoning Laws
Zoning laws dictate where STRs can operate. Ensure your property is in an area that permits short-term rentals to avoid future complications.
3. Insurance Requirements
Some local laws mandate minimum insurance coverage for short-term rentals. Familiarizing yourself with these requirements will help you remain compliant.
Understanding Online Marketplace Coverage
Many property owners utilize online platforms like VRBO and Airbnb for listings. These platforms may offer some insurance, but it's vital to understand their limitations.
1. Host Protection Insurance
Platforms often provide host protection insurance, which can help cover liability claims. However, this coverage may not be comprehensive. It's a good idea to supplement it with your insurance policy.
2. Review Platform Policies
Platforms have unique policies regarding insurance and liability. Carefully review these to understand what is included and what isn’t.
Final Thoughts
Deciphering insurance for short-term rentals, DADUs, and VRBOs can seem complicated, yet it is crucial for protecting your investment and ensuring a great experience for your guests.
By understanding various insurance types, emphasizing liability protection, and knowing local regulations, you’re better positioned to make wise choices that protect both your property and your income.
With the short-term rental market expanding, staying informed about your insurance options will set you up for success. Whether you’re a seasoned host or just starting, securing the right insurance coverage is an essential step in your rental journey.
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