One of the top requirements of owning a vacation rental is having adequate home insurance coverage. Any number of things could go wrong that you need to protect yourself against including damage and theft.
Be sure to call a few different places for price estimates to find the coverage you need at a price you can afford. Below are some of the main points to remember when it comes to insuring your vacation rental so you can make an informed decision on your coverage.
Understanding insurance laws
If you regularly rent out your home, a homeowner’s policy will likely not cover theft or damage associated with your guests. Instead, invest in a separate insurance policy to cover renters. If you don’t and the insurance company determines that you’ve been operating a business, any future claims can be denied.
Municipalities have different rules and restrictions when it comes to vacation rentals, so read up on the ones where your home is located. Some communities do not allow long term rentals while others may prohibit rentals of any kind.
If you are renting out your home through a property management company like Topsail Realty, you’ll want to familiarize yourself with the rules regarding any minimum requirements for insurance.
Types of insurance coverage
Commercial insurance policies have two key components of coverage — property and liability. Property insurance coverage protects the physical structure and belongings in the event of a fire or other damage. Liability insurance coverage protects you in case a renter or guest incurs and injury and sues for damages.
Your policy should include the following coverage:
- Replacement cost for the structure and your personal property.
- Personal liability coverage.
- Loss of income coverage.
- Supplemental coverage for pets, liquor liability and any damage caused by a tenant, including theft of the owner’s personal property.
- Umbrella policy. A personal umbrella policy (PUP) gives you additional liability insurance beyond your existing coverage.
- If there is a swimming pool or hot tub on your rental property, be sure to ask if additional coverage is required.
- Purchase flood, wind damage, and hurricane insurance if your rental is in an area prone to these disasters.
How to find an insurance agent
Check around for the right commercial insurance agent by asking friends and family for recommendations. You could save yourself money and aggravation down the road. Try to find an agent that specializes in insuring vacation rentals.
When you compare policies, be sure to compare prices based on equal coverage limits. The financial strength and stability of an insurance company matters as well. Check the company’s rating from one of the four independent agencies: A.M. Best, Fitch, Moody’s and Standard & Poor’s before making your final decision.