Damage Insurance for Short-Term Rentals

How to protect against costs associated with damages from guests at your short-term rental

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I've been talking about damage protection insurance lately. It had been on my list and finally pulled the trigger a couple months ago to get away from relying on the booking platforms for damage protection. Before we talk about that though, lets talk about asset protection in general.

Asset Protection

1. Legal structure. Having the right legal structure affords a high level of asset protection. (The STR Law Guys are a good resource)

2. Liability protection. If you don't have atleast $2M in liability protection as a business owner - get it. Some insurers include this in your short-term rental insurance policy, others don't offer as much as is recommended so you might need an umbrella policy to help. Some policies exclude say swimming pools - so a guest sues for accidental drowning?

3. Premises protection. This is typical in home-owners insurance, but note some homeowners policy's don't cover any business loss, commercial use, etc. Guest torches the house due to leaving the grill too close? You need the right insurance to cover commercial use, vacancies, income loss, etc.

There is often a gap, though - and that's damages caused by guests which are not covered by your insurance - maybe under a certain threshold (so only claims in excess of a certain dollar amount are covered) or not covered at all. Frankly, these are more likely and while you could chalk it up to the cost of doing business it can get expensive - fast!

You've heard the horror stories...

I choose to file a claim a couple months ago through Airbnb for excess cleaning. They sent the claim to the guest. The guest was kind enough to pay it. The guest was kind enough to not leave a review, although leaving a good review would have been appreciated I'm guessing being asked to pay the excess cleaning fee left a bad taste. Had the guest not paid it, I would have had to jump through some hoops and hope Airbnb covered it, or I was out of pocket to pay it out of the proceeds of the stay (which honestly - my off season rates are so low the proceeds are not much). Somethings are absolutely the cost of doing business, like the $20 alarm clock that walked out with the second guests I ever hosted (grrr). In this case, the guests brough a dog who pooped and peed in the house - and literally we'd had the carpets cleaned (2) weeks before. Yes, the disclosed the dog. In fact, I'm guessing they didn't even realize the dog had done it as it was in a secondary bedroom and it was one incident. But right after getting our carpets cleaned - ugh!

The other day I saw a post on social media from a host who had video evidence from their doorbell video camera of a guest walking out with a bluetooth speaker and a duffle bag she assumed carried many other stolen items. She had an itemized list of everything that was missing after those guests left. The camera was disclosed in her listing but she hadn't "checked the box" in the Airbnb platform question that there was a security camera - one she's installed more recently and probably didn't even realize there was a box to check. She knew it had to be disclosed - and had in the listing description. In presenting video evidence of the theft, Airbnb shut down her listing and cancelled all future stays due to a policy violation linked to having an undisclosed camera. While I'm not going to get into the right or wrong of that, I will say if she had filed that claim with Waivo there would have been no issue with her listing being shut down - at least not as a result of filing a claim stemming from a theft.

Or there's the "retaliatory" reviews when guests are asked to pay claims. "We paid a cleaning fee, we aren't paying any more" and then a bad review follows.

We are in the hospitality business, there will be bad guests. I've been lucky not to have any major damages, an would like to avoid having to deal with retaliatory reviews and the big machine of Airbnb who has a reputation of denying claims more than it pays them (and I'll be honest - I have seen hosts happy with outcomes as well so is not universal!).

The Solution

I now use Waivo, whose only business to to provide damage protection insurance for short-term rentals. No security deposits (makes my direct booking process easier), no contacting guests (can't retaliate with a bad review if I don't even ask the guest to pay for damages) and they promise payouts within (2) business days.

Are there other companies that offer damage protection? Yes. Are they all offering the same thing? NO! Waivo is the only one exclusively focused on this - other companies have multiple products they offer and the protections are different. Also, there are different interpretations of coverage based on malicious intent vs. accidental - and malicious is linked to policy violations in some cases. So, pet damages by an undisclosed pet? Malicious. I spoke to (3) different companies and knew pretty quickly Waivo was straightforward and easy to use.

Can we get protection from the booking platforms? Or security deposits? Yes. But we are subject to their rules and regulations, security deposits have to be held in escrow and managed according to local rules and regulations, AND in filing claims the platforms may contact guests (Airbnb) or the protection offered costs more (VRBO). Plus - it takes care of my security deposit requirements for direct bookings and harmonizes my workflow regardless of booking source.

Yes, its a bit more administrative work once a month but I upcharge a couple bucks on the pass-thru - we charge the guest the fee plus a couple bucks to cover our administrative overhead associated with offering the insurance. Heck, you could charge even more to have it as a revenue stream and still the guests pay less than they would for VRBO's coverage!

They do request claims per stay are >$50, but it isn't per line item - its in total. So ✅stained towel and ✅broken plastic outdoor side table that in total = $52? Covered. Reasonable due diligence? yep, link to the product or similar product to support the claim amount - ✅reasonable

So, check them out if this is of interest to you! I appreciate you using my referral link and supporting my small business if you do choose to work with Waivo - it costs you nothing and helps me a bit.

Hey Boss! I'm Kate, owner/founder of The CEO Host. If you are interested in taking a leap into short-term rentals - or have some questions about your existing business, my goal - passion, and career, is to help YOU succeed. I've coached hundreds of folks getting started or looking to optimize, analyzed more deals (and duds) than I could count, completed thousands of hours of education and training, attended conferences... So don't be shy. A good CEO knows to bring in expert help - and that's what I'm here for! Lets HOP ON A CALL and chat!

Categories: : asset protection, propertymanagement, self management