As folks across the country embark on adventures to soak in history, culture, and varied climates, vacation homes are hotter than the pavement in the parking lot during a heatwave. With recent wildfires out West, tornadoes tearing through the Midwest, and Hurricane Debby unleashing torrential downpours along the East Coast, it's prime time for insurance agents to give their premises accounts mainly lessor's risk, a thorough once-over, especially when it comes to vacation rental tenancies. Agents should revisit their upcoming renewals and assess general liability and property concerns in these habitational accounts. Take a look at some key considerations when reviewing coverage to shield your landlords from vacation rental exposures.
General Liability Considerations
Why do commercial landlords need general liability (GL) insurance? A GL insurance policy protects building owners renting out vacation rentals and covers third-party claims for bodily injury, property damage, and personal injury. It safeguards against financial losses from incidents such as guest injuries, damage to other tenants' property, legal expenses, and issues like negligence or privacy violations. We've all encountered a lousy landlord, so we know how common they can be!
Key Questions to Ask Yourself
What are the liability exposures? - Is the property a single condo unit, a stand-alone dwelling, or a mixed-use building?
- When rentals share space with retail businesses, mixed-use properties can be more susceptible to incidents like slip and falls, crime, and other issues. For example, many convenience stores operate 24 hours, opening exposure to late-night robberies. Consider the exposures each type of tenant will bring to the property.
How many units are there? Does the building consist of a large complex, such as an apartment building?
- Larger occupied properties, like apartments, motels, and hotels, welcome various guests, including communicable diseases and bedbugs. Besides being gross physically, germs and bedbugs lead to disgusting claims—yuck!
How frequent is the turnover? Are the rentals short-term or annual?
- High tenant turnover, expected with Airbnb and VRBOs, can increase risks, making checking for any policy exclusions related to short-term rentals essential.
What's the property's crime score?
- Properties in high-crime areas can pose additional risks. Agents can assess crime levels using relevant data sources like Bestplaces.net. The higher the crime score, the harder it will be to secure coverage.
Are pets allowed on the premises?
- While allowing Fido to stay can be a big draw for tenants, they also pose liability risks, such as dog bites. Woof! Keep this in mind, as many carriers automatically include the L333 exclusion, restricting pets or certain dog breeds, such as Pitbulls and German Shepherds. So, if a property owner allows someone to bring Fido, explain he won't be covered.
Are there pools, hot tubs, ponds, or nearby water features?
- Everyone loves a heated saltwater pool on vacation; however, in non-communal pools and bodies of water, there's an increased risk of drownings and injuries as lifeguards are usually absent. Ensure amenities are adequately secured with signage, fencing, gates, and other safety measures, adhering to local ordinances. Be sure to increase the liability limits when there are these exposures.
Pathpointer- Seek higher liability limits: Aim for markets that offer general liability limits beyond a million dollars, particularly for high-value rentals or properties generating significant income. Excess liability is the difference between exhausting a policy term and having the funds to cover costly bills and litigation.
Property Considerations
Owning property is a serious opportunity, as property values have increased by 6.6% in just the first quarter of 2024 (IdealRealtyWA, 2024). You're not going to let your million-dollar investment burn, are you? Property coverage for building owners renting to vacation rental tenants not only protects against physical damage to the building and its contents against fires but can also secure against theft, vandalism, and natural disasters. In addition, added coverages like business income compensate for lost rental income if the property becomes uninhabitable due to a covered event.
Key Questions to Ask Yourself
What security measures, such as smart locks or keyless entry, are in place?
- Leaving a key under the mat isn't the most prudent way to prevent unauthorized access and theft with vacation rentals. Check to see what safety measures building owners are enacting.
How close is the property to the ocean, river, or flood zone?
- Proximity to water can elevate risks from natural disasters, leading to a lack of standard property markets. Ensure to seek higher coverage limits and explain the cause of loss forms to your clients. Agents can find the flood zone using FEMA.
How often are inspections and maintenance performed?
- Regular upkeep affects the property's condition and risk profile, saves premiums, and mitigates losses. Check to see what loss prevention strategies your building owners are practicing.
How are damages or theft by guests handled?
- Every commercial and residential landlord should require a signed lease and instruct tenants to secure their own individual policies for long-term or annual rentals. Ask your client to see the lease and terms. Be sure to understand what terms are in place and how much the landlords require tenants to insure. This will help you determine the appropriate level of property coverage needed. For short-term rentals like Airbnb, check the company's policies.
What loss reduction and control measures does the building owner have in place?
- Features like sprinklers, smoke detectors, and modernized equipment can mitigate damage from losses and lower premiums. Make sure to ask building owners what measures they are taking.
Pathpointer- Explore Excess & Surplus (E&S) Markets: Standard carriers are shying away from lessor's risk and vacation rentals in this hard market. Are you looking to write a coastal property or know the building owner allows pets? Then, E&S is your best bet for adequate coverage. After performing your diligence search effort, find secure E&S markets to place these hard-to-write risks. Speaking of...
Enter Pathpoint, Simplifying E&S for Vacation Rentals
Let's face it: E&S insurance has traditionally been confusing and complex, even for seasoned insurance agents. However, it doesn't have to be this way! Pathpoint simplifies the E&S insurance process, providing a streamlined experience akin to the standard market. This includes instant quotes, online binding, digital signatures, and payment options with PathPay. Our markets are AM Best A-Rated or better and offer general liability limits up to $1/$2 million, excess limits up to $5 million, and property coverage up to $3.3 million per location or $5.6 million per policy, with options for wind, hail, and earthquake coverage.
With a broad appetite across 48 states, including mixed-use buildings, coastal property, new purchases, and properties with prior loss history, insurance agents can easily find coverage with Pathpoint's time-saving features. The Mix and Match Quoting feature facilitates quick package selection, offering agents multiple markets to select general liability and property coverage. Additionally, our intuitive quoting tool generates alternative property quotes even for risks that may typically be deemed ineligible, such as properties with a high brushfire score or an older roof. All options include added coverages, such as business personal property, business income, and wind deductibles.
Write More Vacation Rentals, Easily
Are you ready to write more lessor's risk vacation accounts, increase your premiums, and streamline your workflow? Consider liability coverage for accidents and property damage when reviewing new business and renewals. Then, head to Pathpoint! Our innovative technology ensures you spend more time selling policies and less time navigating declinations. Visit Pathpoint.com for instant quotes and seamless binding for your lessor's risk vacation rental business.
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Ding, L. (2024, January 17). What to Expect From the Property Market in 2024. IdealRealtyWA. Retrieved July 17, 2024, from website
Hollander, J. (2024, May 9). 50 Vacation Rental Industry Statistics that You Won't Believe. HotelTechReport. Retrieved July 17, 2024, from website
(2024, June 1). Vacation Rentals - United States. Statista. Retrieved July 17, 2024, from website