Understanding Nightly Rental Insurance
Branson attracts millions of tourists each year, and many residents of the area capitalize on this influx of visitors by investing in nightly rental properties. With the popularity of house-sharing services like Air BnB and VRBO, many people manage a nightly rental within their home by renting particular rooms, or even an entire floor to visitors. Others own several nightly rental properties, making them a primary source of income. Additionally, those who own a second home often rent it out while they are away.
Whatever the case may be, if you own a nightly rental, you need to make sure that you are receiving all the coverage required to protect your property. Without proper coverage, nightly rental owners put their assets at risk every time someone comes to stay. Today, we would like to outline the basic coverages that we believe you need in order to protect your nightly rental.
A common misconception among nightly rental owners is that a normal homeowner’s policy will automatically cover nightly rentals. In nearly every case, nightly rental insurance is an extra coverage or “endorsement” that must be added to your existing homeowner’s policy. Without purposefully asking for this coverage, the language of the “liability” section of your policy will likely exclude coverage of nightly rental liability claims. If you own a nightly rental and do not have this extra endorsement, you need to inquire about it right away.
However, if you do have a nightly rental endorsement, you still need to make sure that your policy is substantial enough to have you covered in case of an emergency. Here are the coverages we recommend:
1) Personal property coverage at replacement cost. You need to make sure that, in case of an accident, you will receive the amount of money necessary to replace the personal property in your nightly rental. This is especially important when you consider personal property that depreciates over time, such as appliances. If you own a washing machine for ten years and an accident occurs, you do not want to be reimbursed for the current value of the washing machine. Instead, you need to make sure that your washing machine will be replaced with a new appliance of comparable quality.
2) $500,000 in personal liability. If someone is injured while staying in your nightly rental, you will need to be able to cover their health insurance deductible and medical costs. Most homeowner’s policies have a much lower personal liability limit, set between $100,000-$300,000. We highly recommend that you inquire with your insurance provider about your personal liability coverage, and consider setting a limit at or above $500,000.
3) Loss of income coverage. If an accident occurs and your nightly rental is not fit to be occupied for a while, you want to make sure that you will remain in a stable financial situation. One way to ensure financial stability in case of an emergency is to invest in loss of income coverage. However, it is important to have an accurate understanding of this coverage . It does not mean that, in case of an accident, your insurance will pay you the average income that your nightly rental had been providing. Instead, loss of income coverage depends on the rate set by you and your insurance provider. That rate should be set at the percentage of your income that would keep your business afloat in case of an emergency.
Finally, if your nightly rental is a condo, make sure that you also look into loss assessment coverage. Loss assessment provides coverage for payments that your condo or home-owner’s association could ask of you if certain circumstances arose involving damage to the exterior of your nightly rental property. We recommend that you set a loss assessment limit of no less than $15,000.
If you invest in the above coverages, we believe that your welfare, as well as the welfare of those who stay in your nightly rental, will be protected. If you have any further questions about nightly rental insurance, please give us a call and we would be happy to speak to you.