Insurance Essentials for Furnished Rentals

# Insurance Essentials for Furnished Rentals

Insurance for furnished rentals is fundamentally different from traditional landlord policies. The combination of transient guests, personal property at risk, and unique liability exposures requires specialized coverage that many operators lack—often discovering gaps only when filing a claim.

This guide covers insurance essentials for furnished rentals, helping operators and investors understand, obtain, and maintain appropriate coverage for their properties.

Table of Contents

1. [Quick Summary](#quick-summary) 2. [Why Standard Insurance Falls Short](#why-standard-insurance-falls-short) 3. [Types of Coverage Needed](#types-of-coverage-needed) 4. [Policy Options and Providers](#policy-options-and-providers) 5. [Platform Protection Programs](#platform-protection-programs) 6. [Coverage Amounts and Deductibles](#coverage-amounts-and-deductibles) 7. [How This Affects Investors](#how-this-affects-investors) 8. [How This Affects Operators and Sellers](#how-this-affects-operators-and-sellers) 9. [Insurance Checklist](#insurance-checklist) 10. [Worked Example: Coverage Analysis](#worked-example-coverage-analysis) 11. [Common Mistakes to Avoid](#common-mistakes-to-avoid) 12. [FAQ](#faq)

Quick Summary

• **Standard landlord policies exclude short-term rental activity**—claims will be denied, and policies may be canceled
• **Specialized STR insurance costs $1,500-4,000/year** for most properties, covering dwelling, contents, liability, and lost income
• **Platform protection (AirCover) is supplemental, not primary**—always maintain your own commercial policy
• **Contents coverage for furnishings is essential**—expect $30,000-80,000 in furnishing value at risk
• **Umbrella policies provide additional liability protection** beyond primary policy limits

Why Standard Insurance Falls Short

The Coverage Gap Problem

Standard homeowners and landlord policies have explicit exclusions:

• **Homeowners Insurance:**
• Excludes any business activity
• Excludes paying guests
• May void entire policy if violated
• Claims denied; coverage canceled

• **Landlord/Dwelling Insurance:**
• Covers long-term rental (12+ month leases)
• Excludes short-term rental activity
• May require policy endorsement for STR
• Often inadequate for furnished property contents

Real Consequences of Inadequate Coverage

**Scenario 1: Guest Injury** Guest trips on stairs and sustains injury. Your homeowners policy denies the claim because you were running a business. You face personal liability for medical bills and legal costs.

**Scenario 2: Property Damage** Fire damages property and furnishings. Insurance investigates, discovers STR activity from Airbnb listings. Claim denied, policy canceled, and you're uninsured for rebuilding.

**Scenario 3: Theft** Guest steals electronics and furnishings. Standard landlord policy doesn't cover tenant theft and may not cover furnished contents adequately.

Types of Coverage Needed

Dwelling Coverage

Covers the physical structure:

• **What's Covered:**
• Building structure
• Attached structures (garage, deck)
• Built-in appliances
• Permanent fixtures

• **Coverage Amount:**
• Replacement cost (not market value)
• Should equal cost to rebuild
• Review annually for construction cost increases

**Typical Limits:** $200,000 - $1,000,000+

Contents/Personal Property Coverage

Covers your furnishings and equipment:

• **What's Covered:**
• Furniture (beds, sofas, tables)
• Electronics (TVs, routers, smart devices)
• Kitchen equipment and dishware
• Linens, towels, decor
• Appliances (washer, dryer, etc.)

• **Coverage Amount:**
• Should equal replacement cost of all furnishings
• Create detailed inventory with photos
• Update after major purchases

**Typical Limits:** $30,000 - $100,000

Liability Coverage

Covers injuries and property damage to others:

• **What's Covered:**
• Guest injuries on property
• Third-party property damage
• Legal defense costs
• Medical payments

• **Coverage Amount:**
• Minimum: $300,000
• Recommended: $1,000,000
• Consider umbrella for additional protection

**Typical Limits:** $300,000 - $2,000,000

Loss of Income Coverage

Covers revenue lost when property is uninhabitable:

• **What's Covered:**
• Rental income during repairs
• Time to restore to rentable condition
• Based on documented booking history

• **Coverage Amount:**
• Typically 12 months of projected income
• Requires documentation of rental history

**Typical Limits:** $30,000 - $100,000

Additional Coverages to Consider

| Coverage | Purpose | Typical Cost | |----------|---------|--------------| | Vandalism | Guest or third-party damage | Included | | Theft | Stolen furnishings/equipment | Included | | Water damage | Pipe breaks, flooding | Included (flood separate) | | Bed bugs | Treatment and remediation | Add-on, $100-300/year | | Pool/Hot tub | Specialized liability | Add-on or endorsement | | Umbrella | Additional liability layers | $300-500/year per $1M |

Policy Options and Providers

Specialized STR Insurance Providers

• **Proper Insurance**
• Built specifically for STR
• Per-booking or annual options
• Quick online quotes
• Good claims reputation

• **CBIZ**
• Commercial STR policies
• Strong liability coverage
• Works with property managers
• Multi-property discounts

• **Safely**
• Damage protection focus
• Per-booking pricing
• Guest screening integration
• Good for high-turnover STR

• **Foremost (Farmers)**
• Traditional insurer with STR endorsement
• Combines with existing policies
• Broad coverage options

• **NREIG (National Real Estate Insurance Group)**
• Portfolio-focused
• Good for investors with multiple properties
• Competitive pricing at scale

Annual vs. Per-Booking Coverage

| Model | Best For | Typical Cost | Pros | Cons | |-------|----------|--------------|------|------| | Annual | Full-time STR, high occupancy | $1,500-4,000/year | Comprehensive, simple | Fixed cost regardless of bookings | | Per-booking | Part-time STR, occasional rental | $3-15/booking night | Pay only when booked | Can add up with high occupancy |

Getting Quotes

When requesting quotes, be prepared to provide:

• Property address and type
• Number of bedrooms/bathrooms
• Square footage
• Year built
• Replacement cost estimate
• Furnishing value
• Annual revenue (projected or actual)
• Booking frequency
• Pool/hot tub presence
• Claims history

Platform Protection Programs

Airbnb AirCover (Host Protection)

• **What It Covers:**
• Guest damage up to $3M
• Liability up to $1M
• Some income protection

• **Limitations:**
• Supplemental, not primary insurance
• Excluded items (cash, jewelry, pets, etc.)
• Claims process can be slow
• Not available in all situations
• Wear and tear excluded

**Verdict:** Good supplement, not replacement for proper insurance

VRBO/Expedia Protection

• **What It Covers:**
• Similar to Airbnb protection
• Liability coverage options
• Damage protection programs

• **Limitations:**
• Similar gaps as Airbnb
• Varies by property type
• Requires booking through platform

Why Platform Protection Isn't Enough

Platform protection is designed to protect the platform, not you:

1. **Secondary coverage:** Kicks in only after your policy 2. **Exclusions:** Many common scenarios excluded 3. **Claims process:** Platform controls decisions 4. **Coverage gaps:** Between checkout and next guest not covered 5. **Off-platform:** No coverage for direct bookings

**Always maintain your own comprehensive policy.**

Coverage Amounts and Deductibles

Right-Sizing Your Coverage

| Coverage Type | Minimum Recommended | Optimal | Formula | |--------------|---------------------|---------|---------| | Dwelling | Rebuild cost | Rebuild cost + 20% buffer | Get contractor estimate | | Contents | Inventory value | Inventory + 25% buffer | Complete inventory | | Liability | $500,000 | $1,000,000+ | Higher with pool/hot tub | | Loss of Income | 6 months revenue | 12 months revenue | Based on actual history |

Deductible Considerations

Higher deductibles lower premiums but increase out-of-pocket costs:

| Deductible | Annual Premium Impact | Best For | |------------|----------------------|----------| | $500 | Baseline | Risk-averse, frequent small claims | | $1,000 | -10-15% | Most operators | | $2,500 | -20-25% | Experienced, reserves available | | $5,000 | -25-35% | Large portfolios, catastrophic focus |

**Recommendation:** $1,000-2,500 for most single properties

How This Affects Investors

When evaluating furnished rentals for investment:

• **Due Diligence Questions:**
• What insurance is currently in place?
• Is it proper STR coverage or standard landlord?
• What are the coverage amounts and deductibles?
• Any claims history on the property?
• Are there pool/hot tub liability considerations?

• **Valuation Considerations:**
• Proper insurance = professional operation
• Claims history may indicate property issues
• Insurance costs impact net operating income
• Uninsured properties = significant risk

A marketplace connecting sellers with investors helps identify properties with proper insurance documentation.

How This Affects Operators and Sellers

• **For Operators:**
• Proper insurance protects your business and personal assets
• Documentation enables smooth claims processing
• Annual reviews ensure adequate coverage
• Insurance costs are operating expenses

• **When Selling:**
• Transfer insurance information to buyer
• Document claims history transparently
• Proper coverage demonstrates professionalism

Insurance Checklist

``` INSURANCE CHECKLIST

POLICY VERIFICATION [ ] Current policy is STR-specific or endorsed [ ] Coverage active and premiums current [ ] Policy reviewed within last 12 months [ ] Agent understands STR use

COVERAGE VERIFICATION [ ] Dwelling coverage matches rebuild cost [ ] Contents coverage matches inventory value [ ] Liability minimum $500,000 (prefer $1M) [ ] Loss of income coverage included [ ] All properties on same policy or coordinated

DOCUMENTATION [ ] Complete furnishing inventory [ ] Photos of all rooms and items [ ] Receipts for major purchases [ ] Inventory stored off-site/cloud [ ] Updated after major changes

ADDITIONAL COVERAGES [ ] Umbrella policy ($1M+ recommended) [ ] Flood insurance (if applicable) [ ] Earthquake (if applicable) [ ] Pool/hot tub endorsement (if applicable) [ ] Bed bug coverage (if available)

TENANT REQUIREMENTS [ ] Lease requires renters insurance [ ] Minimum liability specified ($100K+) [ ] Additional insured status required [ ] Verification process in place

ANNUAL REVIEW [ ] Coverage amounts adequate [ ] Replacement costs updated [ ] Deductibles appropriate [ ] Compare quotes every 2-3 years [ ] Claims history reviewed ```

Worked Example: Coverage Analysis

Property Details - 3BR/2BA house in vacation market - Replacement cost: $450,000 - Furnishings value: $55,000 - Annual revenue: $65,000 - Has hot tub - Some direct bookings (not just platforms)

Current Coverage (Inadequate)

• **Standard Landlord Policy:**
• Dwelling: $400,000
• Contents: $10,000 (personal property)
• Liability: $100,000
• Premium: $1,800/year

• **Problems:**
• No STR endorsement = claims denied
• Contents far below furnishing value
• Liability inadequate for guest injuries
• No hot tub coverage
• No loss of income coverage

Recommended Coverage

• **Specialized STR Policy:**
• Dwelling: $475,000 (rebuild + buffer)
• Contents: $70,000 (furnishings + buffer)
• Liability: $1,000,000
• Loss of Income: $65,000 (12 months)
• Hot tub endorsement included
• Premium: $3,200/year

• **Umbrella Policy:**
• Additional liability: $1,000,000
• Premium: $350/year

**Total Annual Cost:** $3,550

Coverage Comparison

| Scenario | Landlord Policy | STR Policy | |----------|----------------|------------| | Guest injury lawsuit ($500K) | DENIED | Covered | | Fire destroys furnishings ($55K) | $10K max | Covered | | Theft of electronics ($3K) | Maybe partial | Covered | | Hot tub liability ($200K) | DENIED | Covered | | Income during repairs ($30K) | Not covered | Covered |

**Additional $1,750/year provides genuine protection vs. false security.**

Common Mistakes to Avoid

1. **Relying on homeowners insurance:** Standard homeowners policies exclude business activity. Your claim will be denied and your policy canceled.

2. **Assuming platform protection is enough:** AirCover and similar programs are supplemental. They have significant exclusions and limitations.

3. **Underinsuring contents:** Furnishings often total $30,000-80,000. Inadequate coverage means out-of-pocket replacement costs.

4. **Skipping liability coverage:** Guest injuries can result in lawsuits exceeding policy limits. Carry adequate liability ($1M+) plus umbrella.

5. **Forgetting loss of income:** During repairs, you lose revenue. Loss of income coverage protects your cash flow.

6. **Not documenting inventory:** Without documentation, claims are difficult to process. Photo everything and keep receipts.

7. **Infrequent policy reviews:** Costs change, property values change, furnishings change. Review coverage annually.

FAQ

Can I use my homeowners insurance for a rental?

No. Homeowners insurance excludes business activity including rentals. Using it for STR will result in denied claims and policy cancellation. You need landlord or specialized STR coverage.

How much does STR insurance cost?

Typically $1,500-4,000 annually for a single property, depending on location, value, and coverage amounts. Per-booking options run $3-15 per night. Costs are higher for properties with pools/hot tubs.

Is Airbnb's AirCover enough protection?

No. AirCover is supplemental coverage with significant exclusions. It's designed to protect Airbnb, not you. Always maintain your own comprehensive STR insurance policy.

What's the difference between actual cash value and replacement cost?

Actual cash value deducts depreciation (you get less). Replacement cost pays to replace at current prices (you get more). Always choose replacement cost coverage for dwelling and contents.

Should I require guests to have renters insurance?

For short stays, it's impractical. For 30+ day corporate housing, yes—require renters insurance with $100,000+ liability and your property named as additional insured.

How do I document my furnishings for insurance?

Create a complete inventory spreadsheet with item descriptions, purchase dates, costs, and photos. Store in the cloud. Update after major purchases. This documentation is essential for claims.

What happens if I have a claim?

Contact your insurer immediately. Document everything with photos. Don't make permanent repairs before adjuster inspection. Keep receipts for temporary fixes. Platform protection claims are separate processes.

How often should I review my insurance?

Annually at minimum. Review after: major purchases, property improvements, claims, significant rate changes, or policy renewals. Compare quotes every 2-3 years to ensure competitive pricing.

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*Looking for investment properties with proper insurance documentation? Browse listings on a marketplace connecting sellers with investors, or list your property to reach serious buyers.*

• **Internal Links:**
• [How Corporate Leases Work for Landlords](/blog/corporate-leases-landlords)
• [How to Screen Corporate Rental Tenants](/blog/screen-corporate-rental-tenants)
• [Underwriting a Short-Term Rental Property](/blog/underwriting-short-term-rental-property)
• [Investor Checklist: Analyze Any Rental Deal](/blog/investor-checklist-analyze-rental-deal)

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*Consult a professional for your specific situation.*