Vacation Rental Insurance: AirCover Is Not Enough

A common and terrifying mistake made by new Airbnb hosts is assuming their standard homeowner's insurance policy covers their vacation rental business.

It does not.

Running an Airbnb is running a commercial hotel business out of a residential property. If a guest trips down the stairs and sues you, or if a guest accidentally burns the kitchen down, a standard homeowner's policy will immediately deny the claim because you were operating an undisclosed commercial enterprise.

Here is the insurance setup you actually need to protect your short-term rental.

The Myth of AirCover

Many hosts rely entirely on Airbnb's "AirCover" for Hosts, which offers $3 million in damage protection and $1 million in liability insurance.

AirCover is great for small things, but terrible for catastrophes.

• If a guest breaks a $300 lamp, AirCover (via the Resolution Center) will usually reimburse you quickly.
• If a guest burns the house to the foundation, relying on Airbnb's internal corporate policy to rebuild a $600,000 asset is extremely risky. Furthermore, AirCover only protects you if the booking originated on Airbnb. If you take a Direct Booking or a Booking.com reservation, AirCover provides zero coverage.

The Solution: Commercial STR Insurance

You need to cancel your standard homeowner's policy and purchase a dedicated Commercial Short-Term Rental Insurance Policy.

Companies like Proper Insurance, CBIZ, and Safely specialize in writing policies specifically for vacation rentals.

These policies are essentially three policies wrapped into one:

1. Commercial Property: Covers the physical building against fire, wind, hail, etc.
2. Commercial Liability: Provides $1M or $2M in liability coverage if a guest slips on the ice in your driveway and sues you for medical bills.
3. Business Income (Loss of Use): This is crucial. If a tree falls on the house and it takes 6 months to repair, the insurance company will pay you the projected revenue you lost during those 6 months.

Cost Expectations

Because you are carrying commercial liability, a dedicated STR policy is more expensive than a standard homeowner's policy. Expect to pay 20% to 50% more annually than you would for a standard home policy. (e.g., If your home policy was $1,500/year, expect a Proper Insurance policy to run $2,000 to $2,500/year).

This is simply the cost of doing business, and it is entirely tax-deductible (see Vacation Rental Tax Deductions).

What about Umbrella Policies?

Some hosts keep their standard homeowner's policy and try to add a cheap "Umbrella Policy" for extra liability. This does not work. An umbrella policy sits on top of an underlying policy. If the underlying homeowner's policy denies the claim because it was an undisclosed commercial activity, the umbrella policy will also deny the claim. You must fix the underlying policy first.

Do I need an LLC?

Insurance is your first and most important line of defense. An LLC (Limited Liability Company) is a secondary layer of protection designed to separate your personal assets from your business assets if the insurance limits are exhausted.

Read our full guide on Do You Need an LLC for Airbnb? to understand when to incorporate.

Further reading

• Airbnb Resolution Center Guide
• Why You Need a Direct Booking Website
• How to Start an Airbnb Business

Frequently asked questions

How do I manage cleaning between guest turnovers? Use a standardized cleaning checklist, hire a reliable cleaning team, and automate scheduling using your PMS or channel manager. Set minimum stay requirements if your cleaners need advance notice. BookBed can automatically notify cleaners when a checkout occurs.

What insurance do I need for a vacation rental? At minimum, you need a short-term rental or landlord insurance policy that covers guest injuries, property damage, and loss of income. Standard homeowner's insurance typically excludes commercial rental activity. As a rough starting point, expect to budget somewhere in the $1,000–$2,500/year range depending on property value, location, and coverage limits — get quotes from STR-specialist insurers for your actual numbers.

How do I handle maintenance issues remotely? Build a network of local contractors (plumber, electrician, handyman, locksmith) and create a shared contact list. Use a smart home system for remote monitoring (leak sensors, temperature alerts, smart locks). Have a local co-host or property manager as backup for emergencies.