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Category: Rental Insurance

What Are the Evolving Risks for Vacation and Cabin Rentals?

Posted on by Jon Blankenship

Vacation and cabin rentals continue to grow in popularity, with platforms like Airbnb and Vrbo making short-term stays more accessible than ever. However, as the industry grows, so does the complexity of its risks for vacation and cabin rentals. Property owners face a range of challenges, from natural disasters to liability concerns, necessitating robust insurance solutions tailored to this evolving niche. This blog explores the latest trends in risks and insurance for vacation rental property owners and provides actionable advice to safeguard your investment.

Key Risks for Vacation and Cabin Rental Owners

Operating a vacation rental offers lucrative opportunities, but it also comes with unique risks. Whether it’s an unforeseen natural disaster or damages caused by a troublesome guest, property owners need to be prepared.

1. Property Damage

One of the most common risks involves damage to the property itself. Vacation rentals often see high turnover, increasing the likelihood of wear and tear. Additionally, some renters may not exercise due caution, leading to significant damage. For example:

  • Case Study: A vacation rental owner in Colorado reported over $50,000 in damages after a renter threw an unsanctioned party resulting in broken furniture, stained carpets, and structural damage.
  • Trend: Damage due to misuse is pushing owners to seek policies offering stricter guest screening requirements and rental agreement safeguards.

2. Liability Concerns

Property owners are legally responsible for the safety of their guests. Injuries due to accidents, such as slips and falls, could result in hefty litigation costs. This poses a risk not just to the property but to the financial health of the owner.

  • For instance, failing to remove snow and ice adequately during winter months has led to lawsuits by injured guests in regions rife with seasonal rentals.
  • Liability cases have driven the growth of policies that include higher personal injury coverage thresholds.

3. Natural Disasters

Properties in areas prone to hurricanes, wildfires, floods, or earthquakes face significant financial exposure. These disasters not only cause physical damage but also result in substantial revenue loss due to cancellations or the property being uninhabitable for months.

4. Regulatory and Legal Challenges

Evolving regulations on short-term rentals are introducing additional risks. Cities and municipalities are increasingly creating stringent rules regarding safety codes, taxes, and operational permits. Failure to comply can result in penalties or forced closure.

5. Cyber Risks

With digital platforms at the core of booking and managing rentals, cyber threats like data breaches are becoming more prevalent. Property owners handling client credit card numbers and personal data are particularly vulnerable.

Emerging Insurance Solutions for Vacation Rentals

The good news for rental property owners is that the insurance industry is adapting. Tailored solutions are emerging to address these specialized risks, ensuring peace of mind for property owners.

1. Short-Term Rental Insurance

Traditional homeowner’s insurance policies often exclude coverage for short-term rentals, leaving owners vulnerable. Short-term rental insurance addresses this gap, offering protection for occasional or frequent rentals.

  • These policies combine general property protection with added liability for temporary guests.
  • Many also include “loss of revenue” guarantees for cancellations due to loss of use caused by covered damage.

2. Enhanced Natural Disaster Coverage

Given the growing frequency of natural disasters, many insurance providers now offer expanded policies to cover damage from floods, wildfires, and hurricanes. Providers are also introducing parametric insurance options, which pay out quickly when specific conditions, such as a Category 3 hurricane, are met.

  • Example: A coastal rental owner can purchase a parametric policy that provides immediate compensation when a hurricane exceeds pre-determined thresholds, bypassing the often-lengthy claims process.

3. Liability Protection for Short-Term Rentals

Standard liability coverage often falls short when it comes to short-term rentals, particularly if there are unique hazards on-site like hot tubs or pools. New policies offer specialized liability protection, such as:

  • Pool or playground-related injury protection.
  • Guest intoxication liability for accidents caused by guests.

4. Cyber Liability Insurance

To address emerging cybersecurity threats, insurers are starting to provide cyber liability policies for rental hosts. Coverage includes:

  • Costs related to ransomware attacks or security breaches.
  • Liability for leaked guest data, including legal fees and fines.

5. Bundled Policies for Flexibility

Many insurers now provide tailored packages bundling multiple types of coverage, including property, liability, and disaster insurance. These comprehensive policies simplify coverage while offering cost savings when compared to piecing together standalone options.

The Bottom Line

The vacation rental market offers abundant opportunities, but with those opportunities come growing complexities in risk and insurance. Our team has expertise in the cabin and vacation rental insurance market that will help us identify your risks and options. Contact Brandon Patterson on our team at brandon@ownbyinsurance.com to get the help you need!

A Homeowner’s Guide to Additional Living Expense Insurance

Posted on by Jon Blankenship

Life can be unpredictable, it’s one of the many reasons that insurance is necessary. But as a homeowner, it’s also essential to prepare for the unexpected. Whether it’s a fire, flood, or storm that temporarily renders your home uninhabitable, knowing your insurance covers more than just repairs can provide significant peace of mind. This is where additional living expense (ALE) insurance comes into play.

If you’re unfamiliar with ALE insurance or how it works, this guide breaks it down step-by-step, ensuring you have all the information needed to safeguard your family in challenging times.

What Is Additional Living Expense Insurance?

Additional Living Expense insurance is part of your homeowners, renters, or condo insurance policy. It covers the extra costs you’ll face while your home is being repaired or rebuilt after a covered event, such as a natural disaster or fire. These are costs you wouldn’t normally incur if you were able to live at home.

Examples of expenses covered by ALE:

  • Hotel accommodations or temporary rental housing
  • Increased food costs due to dining out
  • Storage fees for your belongings
  • Laundry services if you don’t have access to a washer and dryer
  • Pet boarding fees
  • Relocation or transportation costs

ALE coverage typically ranges from 10% to 20% of your home’s dwelling coverage limit. For instance, if your homeowners insurance covers $300,000 for your dwelling, your ALE coverage would likely fall between $30,000 and $60,000.

Benefits of ALE Insurance for Homeowners

Having ALE insurance ensures you and your family can maintain stability and comfort during tough times. Here’s why it’s essential:

  • Financial Relief: Covers unexpected out-of-pocket expenses, like paying for a hotel or temporary apartment.
  • Maintains Normalcy: Allows you to uphold your usual standard of living, even away from home.
  • Stress Reduction: Eases the logistical and financial burdens of displacement, letting you focus on getting your home back to normal.
  • Protects Your Budget: Home repair costs alone can be overwhelming; ALE ensures additional living expenses don’t add to the stress.

How Additional Living Expense Insurance Works

To better understand how ALE coverage functions, imagine this scenario:

A water pipe bursts in your home, causing significant flooding. The damage requires months of repairs, leaving your home uninhabitable. During this time:

  1. You move into a nearby hotel, which costs $150 per night.
  2. Since you no longer have a kitchen, you eat out, spending an additional $300 each week.
  3. You board your dog because pets aren’t allowed in the hotel, which costs $100 per week.

These expenses are above your usual budget, and ALE coverage reimburses these additional costs. However, you must keep receipts and documentation for all expenses as the insurance provider will need proof to process your claim properly.

Pro Tip: ALE insurance covers only the difference between your standard living costs and your temporary increased expenses. For example, if you usually spend $100 per week on groceries but now spend $300 eating out, only the extra $200 is reimbursable.

Key Differences Between ALE and Loss of Use Insurance

Though ALE and loss-of-use insurance are similar, they aren’t interchangeable.

  • ALE Insurance specifically covers the additional costs incurred due to displacement, such as food, lodging, and travel.
  • Loss of Use Insurance covers broader expenses, such as loss of income if you were renting part of your home to a tenant. It’s more commonly included in homeowners insurance policies.

Knowing the distinctions ensures that you aren’t left with gaps in coverage.

Common Exclusions to Be Aware Of

While ALE insurance is a valuable safety net, there are certain circumstances it typically won’t cover:

  • Vacant Properties: If your home wasn’t occupied at the time of the incident.
  • Maintenance Issues: Damage caused by gradual wear and tear or lack of maintenance isn’t covered.
  • Uninsured Events: For example, if flooding occurs and your policy doesn’t include flood insurance, ALE won’t apply.
  • Illegal Activities: Claims related to incidents stemming from unlawful behavior are excluded.
  • Government Actions: If you’re displaced due to government-mandated actions, coverage likely won’t extend.

To maximize your coverage, review your policy carefully and ask your provider about potential exclusions.

The Bottom Line

Additional Living Expense insurance is a crucial yet often overlooked aspect of homeowners insurance. It ensures your family can maintain a sense of normalcy during a crisis, covering extra costs when life circumstances temporarily uproot you.

While no one hopes to need ALE coverage, having it offers tremendous peace of mind. By being proactive, knowing your policy’s limits, and keeping meticulous records, you can protect your family and finances when the unexpected occurs.

For more helpful insurance tips or to explore coverage options that fit your lifestyle, contact Brandon Patterson on our team today at brandon@ownbyinsurance.com.

How Claims Impact Your Insurance Premiums

Posted on by Ownby Insurance Service

Your insurance premium is based on many factors, from the type of coverage you choose to your overall risk profile. But one aspect that often surprises policyholders is the impact of claims on their premiums. Whether you’ve recently filed a claim or you’re thinking about it, it’s important to understand how claims can influence the cost of your coverage.

Loss History: A Snapshot of Your Risk

Your loss history, or claims history, is a critical factor insurers use to determine your premium. This is essentially a record of all the claims you’ve filed in the past. Insurers view this as a representation of your risk level – policyholders who have filed multiple claims are generally seen as more likely to file additional claims in the future.

Each insurer has its own thresholds for how claims history impacts your premiums, but generally, past claims can lead to higher premiums.

Why Does Your Loss History Matter Impact Your Insurance Premiums?

Your loss history paints a picture for your insurer. For example:

  • If you’ve experienced multiple incidents, it could indicate a higher likelihood of future claims.
  • A long history of claims, even if they’re for relatively small amounts, can label you as a higher-risk policyholder.

While you can’t change your past claims, being aware of how your loss history is assessed can influence your approach to future claims.

Claim Frequency and Size Matter

Number of Claims

In insurance, the old saying “the fewer, the better” rings true. Filing multiple claims within a short time – even for small amounts – can signal a higher risk level to your insurer. Insurers often see frequent claims as an indicator of risk-prone behavior, even if the claims themselves are low-cost.

To manage your premium effectively:

  • Avoid filing claims for minor damages that fall close to or just above your deductible.
  • Consider whether the cost of repairing or replacing an item out-of-pocket is more affordable in the long run.

Claim Size

The size of the claim matters just as much as the number. Large claims require significant payouts from the insurer. When an insurer has to pay a big settlement for a loss, the chances are your premium will move upward to reflect the cost.

For instance, a single high-value claim – such as a major accident or property damage – might have a bigger impact on premiums than several smaller claims.

The Impact of Your Deductible Choice

Your insurance deductible – the amount you agree to pay out-of-pocket before your insurance kicks in – also plays a major role in claims and premiums. Filing claims for damages that barely exceed your deductible can lead to higher premiums in the future, meaning you’re left paying more overall.

The Value of a Claims-Free Credit

Insurance providers often reward policyholders who don’t file any claims over a certain period. This is commonly known as a claims-free discount or credit. Maintaining a claims-free record demonstrates a lower risk level, which insurers may reward with a reduced premium or special discounts.

Filing a claim could result in the loss of this credit, which can significantly increase your premiums in the long term. Depending on your provider, the impact of losing a claims-free credit can sometimes outweigh the benefit of filing a minor claim.

“Then Why Do I Even Have Insurance?”

All this doesn’t mean you should avoid filing claims entirely. Insurance exists to protect you in situations where the losses are too great to bear out-of-pocket. However, carefully evaluating the situation and considering the long-term implications can help you balance coverage with premium stability.

Smart Tips to Manage Insurance Claims and Premiums:

  1. Review Your Policy Carefully
    Understand your deductible amount, what types of incidents are covered, and how claims may impact things like claims-free discounts.
  2. Weigh Filing a Claim Against Out-of-Pocket Costs
    If the repair or replacement cost is close to your deductible, it may save you money long-term to pay out-of-pocket rather than file a claim.
  3. Keep Your Loss History in Mind
    Evaluate how additional claims could impact your overall risk profile and premiums.
  4. Focus on Preventative Measures
    Take steps to avoid future incidents, such as securing your home, maintaining your property, or installing safety features. Proactively reducing risks can help keep your premiums manageable over time.
  5. Bundle Your Insurance Policies
    Many insurers offer discounts for bundling, which can offset increased premiums due to claims.
  6. Ask About Claims Forgiveness
    Some insurers offer “claims forgiveness” features, where your first claim won’t impact your premium. Consider whether this add-on is available and worth adding to your policy.

When to File

Ultimately, balancing the cost of a claim versus the long-term implications for your premium is key. By thinking strategically and being proactive, you can ensure your insurance remains both effective and affordable. If you’re unsure, discuss the deductibles and potential impacts of filing the claim with our team and we’ll help you understand your options – but we won’t make the choice for you. That’s your decision!

On the Horizon: Cabin and Vacation Rental Insurance Trends as 2025 Draws Near

Posted on by Ownby Insurance Service

If you are a vacation rental owner, cabin rental owner, or rental property owner, understanding the current trends in the insurance market is essential to managing and protecting your investment. The landscape in 2023 is shaped by a series of challenges and shifts that are important to consider when evaluating your insurance options. Here’s a detailed look at the trends and challenges facing the cabin and vacation rental insurance market today.

The Market Trends

We’ve all heard talk of inflations impact on our economy, and although it is down from a peak of 9% in mid-2022, its effects continue, including homeowner and vacation rental insurance markets. Elevated prices for building materials and construction labor have persisted along with the timeframes for that works completion. This adds up to make rebuilding or repairing properties a costly endeavor. For rental property owners, this means higher expected costs and the need for adequate insurance coverage to mitigate potential financial impacts.

Increased Costs Due to Natural Disasters

Natural disasters and severe weather have become a prominent concern in the cabin and vacation rental insurance market. In 2023 alone, there were 28 severe weather events with estimated costs ranging from $1 billion to $10.5 billion. Unfortunately, vacation and cabin rental properties are frequently in areas with higher risk for natural disasters because of the correlating natural beauty of those areas. Forests, mountains, and coasts are amazing, but can also be inherently risky. Rental property owners, particularly those in high-risk areas, should assess their policies to ensure sufficient protection against these increasingly common events.

Challenges in the Insurance Marketplace

Insurance companies’ willingness to provide property insurance remains low, especially in regions with a history of significant losses. This cautious stance has led many insurers to exit markets deemed too risky, leaving property owners with fewer options. Consequently, those remaining in the market may face increased premiums or restricted coverage terms.

Growth of the Excess & Surplus Insurance Market

With traditional insurers pulling back, the excess & surplus (E&S) insurance market has expanded to fill the gap. While E&S insurers can offer more specialized coverage options, they often come with higher rates and/or reduced coverage compared to standard insurance policies. Additionally, different regulations governing E&S insurance can complicate decision-making for property owners unfamiliar with these policies and their restrictions or language.

What Rental Property Owners Can Do

Given these trends and challenges, vacation and cabin rental owners should take proactive steps to safeguard their assets:

  • Regularly Review Insurance Policies: Ensure that your coverage is up-to-date and accounts for current rebuilding costs and potential natural disaster risks.
  • Explore Additional Coverage Options: Consider E&S policies if traditional insurance is unavailable, but be mindful of the potential trade-offs in terms of cost and coverage.
  • Stay Informed About Market Changes: Keep abreast of news and developments in the insurance sector to anticipate and adapt to changes that may affect your coverage needs.

Talk with those that understand this market and can help guide you. Brandon Patterson and our experienced team can help you navigate the cabin and vacation rental insurance market. With knowledge, property owners can better position themselves to protect their investments and maintain financial resilience in the face of unforeseen events.

Reach out to Brandon today at brandon@ownbyinsurance.com for help with your coverage needs!