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Insurance is one of the most important operating expenses for a short-term rental, and hosts often misunderstand it. Many assume Airbnb's AirCover program or their existing homeowners policy is enough. It is not. A single denied claim for guest injury, property damage, or lost income can cost more than years of insurance premiums.
This guide covers what each type of coverage provides, where the gaps are, and how to choose a policy for your rental.
Why standard homeowners insurance falls short
Standard homeowners policies exclude "business use" of your property. Once you accept paying guests, most policies can void coverage entirely, including property damage, liability, and loss-of-use coverage.
Some insurers cancel the policy if they discover rental activity you did not disclose. Others deny any claim related to guest stays. Either way, you pay for the loss yourself.
Landlord insurance does not fill the gap either. Landlord policies are written for long-term tenants on 6-month or 12-month leases, not nightly guests. Many landlord policies exclude short-term rental activity, defined as stays under 30 days.
What Airbnb AirCover covers
AirCover is free and automatic for all Airbnb hosts. It includes two components:
Host Damage Protection covers up to $3M for guest-caused damage to your property, belongings, and valuables. Host Liability Insurance provides up to $1M if a guest is injured at your property or if their property is damaged during a stay.
The limits are high, but the program terms narrow what you can collect.
The limitations of AirCover
Host Damage Protection is not your own insurance policy
Airbnb states that Host Damage Protection is not an insurance policy. It is a platform reimbursement program with its own eligibility rules, documentation requirements, exclusions, and deadlines.
It covers only Airbnb bookings
AirCover applies only to Airbnb reservations. It does not cover direct bookings, Vrbo stays, Booking.com reservations, or any other non-Airbnb guests.
Major exclusions
AirCover does not cover wear and tear, mold, pest infestations, loss of rental income during repairs, personal property theft (in many cases), intentional acts, or pet damage in some situations. STR hosts run into these problems often.
Claims process problems
Filing an AirCover claim often requires guest involvement, which can lead to disputes and retaliatory reviews. That risk can make hosts reluctant to file valid claims.
Program terms can matter more than the headline limit
The headline limits are helpful, but claims still depend on eligibility, exclusions, documentation, and whether the stay was booked through Airbnb. Read the current AirCover terms before treating it as full protection.
AirCover is a useful supplement, not a replacement for dedicated insurance. Treat it as secondary protection for Airbnb bookings.
What Vrbo offers
Vrbo offers Property Damage Protection as an optional add-on that travelers can purchase at checkout. It covers accidental damage caused by guests, but it is not automatically included. Hosts can also use a traditional damage deposit instead.
Vrbo also advertises a $1M liability insurance program for qualifying stays processed through Vrbo checkout. That can help with eligible third-party bodily injury or property damage claims, but it is still not a replacement for your own property and liability policy. For details on how Vrbo fees work, including damage deposit options, see our fee guide.
Hosts who list on Vrbo still need their own dedicated insurance policy because platform programs do not cover every booking channel, every type of damage, or every business-income scenario.
What dedicated STR insurance covers
A dedicated STR insurance policy replaces your homeowners or landlord policy. It is a commercial business policy written for short-term rentals.
Property and contents
It covers the building and contents at replacement cost. With the right policy, guest-caused damage has no sub-limit. Standard covered perils include fire, water damage, storms, vandalism, and theft.
Commercial liability
Policies carry $1M to $2M in commercial general liability (CGL) coverage for bodily injury to guests, legal defense costs, and settlements. Coverage extends to pools, hot tubs, bicycles, and exercise equipment, where injury risk is highest.
Loss of business income
If a covered event (fire, storm damage, major repair) takes your property offline, the policy covers lost rental revenue during the repair period. This matters most in peak season, when a single loss can cost months of bookings. Standard homeowners and landlord policies do not include this for vacation rentals.
Additional coverages
Bed bug protection
Pays for treatment and for lost income while the property is treated. An infestation can close a listing for days or weeks.
Squatter protection
Covers legal costs and lost income if a guest refuses to leave after the booking ends.
No occupancy restrictions
Covers STR use, mid-term rentals, personal use, and vacancy periods. You do not need to notify the insurer when switching between uses.
Sewer and drain backup
Covers damage from sewer backups and drain overflows. Most standard policies exclude this or require a separate endorsement.
Pet and animal liability
Covers damage or injury caused by pets you allow or by a service animal. This matters for pet-friendly listings, which often charge higher nightly rates.
How much does STR insurance cost?
A dedicated commercial STR policy typically costs $1,500 to $3,500 per year. Several factors affect pricing:
Home-sharing endorsements on existing homeowners policies cost $75 to $100 per year, but limits and eligibility vary by insurer, so read what the endorsement covers before you rely on it. They are not enough for a rental you run as a business.
The premium is a deductible business expense that reduces your taxable rental income. At $1,500 to $3,500 per year, it is small next to a denied $100,000+ claim. Include it in your operating expenses from day one.
Include insurance in your deal analysis
Add insurance to your expense projections in our free Deal Analyzer and see how it changes your returns.
Open Deal AnalyzerSTR insurance vs homeowners vs landlord insurance
Homeowners insurance is written for owner-occupied homes. It is the cheapest option but leaves STR hosts the most coverage gaps. It excludes business use, typically does not cover guest-caused damage, and denies claims related to rental activity. If your insurer finds out you rent short-term without telling them, they may cancel your policy entirely.
Landlord insurance is written for properties with long-term tenants on leases. It covers the building, provides landlord liability protection, and may include loss of rent coverage. Many landlord policies exclude short-term rental activity (stays under 30 days). If your policy does not explicitly permit nightly rentals, the insurer will deny your claims.
Dedicated STR or commercial insurance is written for nightly rentals. It covers all booking channels, includes commercial liability and loss of business income, and allows LLC ownership. It covers the most and costs the most, and it closes the gaps the other two policies leave.
When you need dedicated coverage
You need a dedicated STR insurance policy if any of the following apply:
You rent your property more than 14 days per year on any platform
You take direct bookings outside of Airbnb (no AirCover on direct bookings)
You list on multiple platforms (Vrbo, Booking.com, direct website)
Your property has high-risk amenities (pool, hot tub, waterfront, fire pit)
Rental income is a large part of your finances
You own the property through an LLC
If you treat STR hosting as a business, you need business insurance. DSCR lenders may also require proof of adequate insurance coverage before they approve the loan.
How to choose a policy
STR insurance policies differ. When you compare them, check the following:
Commercial policy, not an endorsement
Make sure the policy is written as a commercial business policy, not a homeowners endorsement. Endorsements have much lower coverage limits and more exclusions.
All booking channels covered
Verify the policy covers all booking sources: Airbnb, Vrbo, Booking.com, direct bookings, and any future platforms. Some policies cover only specific platforms.
Guest-caused damage limits
Check for sub-limits on guest-caused damage. The best policies have no sub-limit, covering damage up to the full property coverage amount.
Loss of business income
Confirm that the policy pays lost rental revenue when a covered event takes the property offline. For STR owners, this is one of the most valuable coverages.
Replacement cost valuation
Look for replacement cost valuation on building and contents, not actual cash value (ACV). ACV subtracts depreciation from the value of your belongings and pays less on claims. Replacement cost pays what it costs to replace the items.
Liability limits
Standard CGL coverage starts at $1M. Properties with higher-risk amenities or higher-value locations should consider $2M. Ask whether you can raise the limit.
LLC ownership
If you own the property through an LLC, verify the policy allows LLC ownership. Commercial STR policies generally support this. Homeowners endorsements typically do not.
Get several quotes and compare coverage details, not just price. A cheaper policy with major exclusions costs more in the long run. When you calculate your total startup costs, include the first year's premium in your budget.
Pricing tools like PriceLabs can raise your rental income, which makes the premium a smaller share of revenue.Partner link. STR Numbers may earn a commission.