Damage Insurance for Your Short-Term Rental: Why Host Damage Protection Falls Short

Exploring damage protection for short-term rental hosts

Affiliate Disclosure: This post contains affiliate links, which means I may earn a commission if you click through and make a purchase. However, this does not influence my reviews and comparisons. I share my honest opinions and only recommend products and services that I personally have experience with and believe will genuinely benefit my readers. Thank you for supporting my work in this way!

Introduction

Why third-party damage insurance? Have you had damage at your short-term rental? Have you learned the hard way that not all damage insurance covers everything? Maybe you've heard or worse - experienced, a booking platform like Airbnb declining a reimbursement request or a retaliation review from a Guest who was contacted to cover damages. Let's dive into the world of damages in short-term rentals, and how you as a Host can protect your business.

Booking Platforms

Most of us use the large OTA like Airbnb and VRBO and often believe we are covered when it comes to guest damages. The reality is, while both offer protections for Hosts - they fall far short. As of this authoring, following is what each OTA offers in terms of damage protections

Airbnb’s Host Damage Protection is part of AirCover for Hosts, which offers up to $3 million coverage for damages caused by guests. It covers damages to the property and belongings, extra cleaning costs, and income loss from canceled bookings due to guest-induced damage. However, this is not an insurance policy, and the process involves contacting the guest first for payment, which can lead to uncomfortable situations and potentially negative reviews if the guest feels wrongly accused.

Here’s what Airbnb covers:

Damage to property and belongings by guests.
Extra cleaning costs from stains, pet accidents, and smoke odor.
Lost income due to necessary cancellations after guest-induced damages.

And what it doesn’t:

Normal wear and tear.
Loss of currency.
Damage from natural disasters.
Damage or injuries covered under separate liability insurance.

VRBO’s Accidental Damage Protection, offered through Generali Global Assistance, provides coverage for accidental damage during a stay. It’s a purchasable policy with coverage options ranging from $1,500 to $5,000, based on different payment tiers. While this adds an extra layer of protection, it requires guests to opt-in by purchasing the coverage, which can add an additional step in the booking process and does not cover intentional damage or theft.

Security Deposits

Security deposits have long been a staple in the rental industry. The Guest leaves a deposit or we put a hold on a credit card which we access if there are damages.

Typically, hosts determine the amount of the security deposit based on factors like the value of the property and the length of the stay. This deposit is collected upfront from the guests and held until after they depart. The main advantage of this method is the direct control it gives hosts over funds to cover potential damages. However, managing security deposits also comes with challenges. Depending on where the booking comes from, the booking platform may or may not support collection of a security deposit. More and more, its possible to obtain technology support via a channel manager but that increases our fees. Without that support, we have to manually process both the collection of, and release of, those funds.

Legally, we have to handle this money according to state and/or federal regulations; its not "our" money and we can't just decide to keep it because a guest behaved badly. In my state, an itemized invoice showing fair market value charges is required. There are stipulations on how the funds are held, and how long they can be held post stay. A failure to comply, or even just a guest wishing to object to the charges, can legally pursue any claims we put against that deposit.

Moreover, while security deposits provide a clear financial deterrent against damages, they can also make listings less attractive to potential guests who are wary of the additional upfront costs. In today’s competitive rental market, where ease and convenience are highly valued, the requirement of a hefty security deposit can be a deterrent, especially for those looking for a simple booking process.

Third Party Damage Insurance

Enter third party damage insurance. This is independently purchased insurance outside of the booking platforms where a single, one time fee is collected at the time of booking from the guest, and remitted to the company (by the Host) in order to have that coverage. When I began looking into this, I discovered Waivo. I looked into Safely and SuperHog at the time - and have since reevaluated, but I'm a big fan of Waivo for two reasons;

1. They don't contact guests. Reviews are everything in our business, and while I'm not a ride or die, anything for a 5-star review type of Host I don't like to court possibly of a lowered review for a reasonable guest who just happened to knock the coffee maker off the counter, smashing it all to heck. A guest who can be worry free and knows they are covered is both going to tell me in advance about the incident (hello lets ensure we have a functioning coffee pot) and also not perceive their stay as "less" because I asked them for an additional $130 on top of that $4000 stay.

2. They cover malicious damages. "Malicious" in this case is any instance where damage is incurred due to a guest breaking the rules. So, damage from a non-disclosed dog in a no-pet property? Outdoor chair ruined by illicit fireworks? I'm aware of no other company in the industry - including the booking platforms, that cover malicious damages.

I will also note that providing third-party damage insurance to a Host with only 1 or 2 properties is not easy or cost effective and therefore isn't offered by other companies, but Waivo also covers you with their product WaivoNow.

The Waivo Workflow

So when I implemented Waivo, I updated all my booking fee's to include the "per booking" rate. The cost will vary depending on your portfolio, but I will tell you I get far more coverage than VRBO offers for far less per booking.

I actually add a small upcharge on the cost per booking to cover the administrative overhead of administering it (more on that below). So, yeah, I even make a couple bucks per booking.

Its a per booking fee added essentially as a pass through to the guest. I charge this for every booking - on and off platform. So yes, book my place via Airbnb? The fee is added to your booking (much like the cleaning fee). Do I think it discourages bookings? No; in fact, because its not a high fee I think it actually contributes more to the guests peace of mind but I say that knowing it could impact some markets where pricing is super tight and competitive. That said, some guests will see it as advantageous.

To that point, I also updated my listing descriptions and messaging to include the fact that their booking includes third party damage insurance, and once booked the messaging to the guest includes a link to the policy they purchased.

Once a month, I send a list to Waivo of all my bookings along with the level of coverage (I can tailor by property) and premium amounts and they deduct that amount monthly. That administrative overhead is about 5 minutes of work.

Accessing Coverage

Another thing I like about Waivo is - its all they do. That means they put all their attention into making their product the best. So, getting reimbursed is simple, straightforward and requires simply to upload the form, some photo documentation, receipt or link to similar product and viola - 2 or so business days later, reimbursed.

Train Your Cleaner

Just a reminder, cleaners don't always appreciate the need for photo documentation of damages. So as part of your training with cleaners, make sure they understand the importance of taking and sending you photo evidence prior to cleaning up any damage. Also, if a guest contacts you about damage mid-stay, ask them to shoot you a photo as well. Having documented evidence goes far. I had a cleaner who I thought knew this, but then one day while she was reporting damages to me when I was working on the claim realized that two items she texted me about were not represented in the photos she sent, and when I asked her about it she didn't have any - and the items had been thrown away already. I should note I was able to get reimbursed for those regardless, but evidence is oh so helpful.

Conclusion

So, when it comes to damage protection at your short-term rental I say skip the game of roulette in using the booking platforms, avoid the headaches and cost of security deposits and jump right into third-party damage insurance. Maybe Waivo is right for you, maybe another company - but regardless you are likely to find its a great option for your business.

Thinking about getting third-party damage insurance? I hope you'll use my link and chat with Waivo - I make a couple bucks, which supports my website and blog!

LEARN MORE HERE.

Thinking about how to protect your STR Assets? Read more HERE in a previous blog.

Don't miss out ...

Leaning into the short-term rental space? Let The CEO Host help. Services include

Income analysis for a potential investment or optimization. Leverage my deep experience of studying successful short-term rentals to help define income potential and recommend what it takes to achieve a properties full potential

Get Optimized. Learn the principles of an optimized short-term rental through the STR Listing Lab , covering everything from what your conversion rate means to how to select what photos to lead with in your listing and even AI prompts to help ease your journey to a more optimized - and therefore more profitable, listing.

1:1 Consult. Just need someone with the skills and experience to talk through some challenges in your STR biz? Leverage my experience and insights to help unpack your trickiest challenges. Whether its a one hour ad hoc session or a 6 month structured program, add me to your team to grow your business.

Speaking. Webinars or in person - reach out and bring The CEO Host to your next event. Grab some time on my calendar to discuss your event. I most commonly speak about getting into short-term rentals, optimizing your rentals, growing your portfolio, and work-life balance in the STR biz (I see you momma’s!), and entrepreneurship after the c-suite career

What to expect when you work with The CEO Host

Data-backed, expert insights to help you confidentially make your next moves

Experienced, tested input

Professional interactions

"This is all about teaching you to fish so you can grow your knowledge and expertise. I've had clients go from working with me to now doing this work for others, and I'm delighted to have been part of their journey!" - Kate

*****

Find Me on FACEBOOK or Instagram or LinkedIn as @theceohost

*****

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: : insurance