Tips for reviewing the insurance policy?

Question

Looking for an insurance policy for an STR in Asheville, NC. Based on the recommendations in this forum, I got quotes from Proper, CBiz, and Foremost. As kind-of expected, Proper quote is double of CBiz and triple of Foremost quote. In order to compare them apples to apples, I'm planning to review them and also talk to the insurance agent of all three companies.

My questions:

1. What should I look for in the insurance that are must-haves and should compare it?

2. What questions should I be asking the insurance agent to understand what they are offering and what to add / remove from the policy?

3. Are there experts in our group here who can help compare the quotes?

Sarah B. · Answer

I would love that info also, if you don’t mind.

Sarah Kensinger · Answer

We actually know of many hosts that used the lost rents policy. Right now, a host in MA lost 5 figures in bookings due to a guest flooding the property. Proper covered every little thing including the lost booking amount.

Mark S. · Answer

@Amit Shukla No one has mentioned the claims paying ability if the insurance company. You want to make sure whoever you go with has excellent ratings and is able to stand behind their policies, especially in the event of a major catastrophe. Insurance companies are under extreme stress right now, although most still have strong reserves. ￼￼

Mitch Davidson · Answer

Hi @Amit Shukla. Here's my 2 cents. When shopping for such a policy recently, after looking at tons of them for clients I worked mortgages for, I chose to avoid the priciest options like Proper. I felt like I was too unlikely to use some of their extra stuff, such as lost rent. And I also realized that I wouldn't make a claim unless I had a major loss anyways, as it'd likely make my premium skyrocket (and would perhaps make the provider not want to renew at the end of the year). I've seen quite a few people use Auto Owners for STR policies recently. I'll message you contact info for a local agent that can give you several options to consider.

Michael Baum · Answer

I have been working on a post about insurance and it is very complicated.Proper is very expensive but it is very comprehensive. That doesn't mean it is better than others depending on your needs.So, I recommend getting a full quote from Proper. Then use it as a baseline of the best coverage then check everything against it. You want solid replacement coverage. We are at $400 per sqft to rebuild. You would want cash replacement for downtime due to damage. We have up to 50k in replacement revenue for downtime.If you have a pool, you want that specialty coverage of course. If you are on a lake, you want coverage for that (we are and do). We added dock coverage even though we don't have a dock.Other things to think about is coverage away from the house. We have that kind of liability for the time people are out and about. I figure that if I recommend something, like a boat rental or digging for garnets, that a slick lawyer could come back around and sue if something happened while doing that experience.There is a ton more to go over but a good agent can help. Also, don't forget to look at all insurers. Many companies are offering STR coverage.I will also say don't listing to a single person who tells you AirBNB and VRBO 1m dollar guarantee is insurance. It isn't. It has value but you don't want to rely on it for anything more than fixing stuff the guest broke or snagged. It isn't insurance.

Justin Melton · Answer

I’m an insurance agent and not sure about “special coverage for a pool.” You need to disclose that you have a pool obviously but not sure there is separate or specific coverage for that, same with the dock. With general liability you have exclusions. If not excluded, then it’s generally covered. That’s where proper I think gets many clients is they specify things that actually don’t need specified. If you had a $1,000,000 General liability policy with a $500,000 sub limit for a pool for example, this is to your disadvantage-not advantage. All this being said, insurance contracts are complicated and I’m by no means an attorney, just giving my .02.

Michael Baum · Answer

Hmm, Proper and others have pool liability coverage that is specialized for STRs. Like the dock liability insurance which is specialized for waterfront properties. At least that is what I have found in my research.I am by no means an expert on insurance. I am just someone who would be willing to pay an extra $100 a year to not worry about a specific issue if offered.I will work to find out more.

Justin Melton · Answer

I think that is kind of puffery. They are charging you maybe a separate charge if you have one but I just don’t buy there is a “special” or “extra” liability because you have a pool. Same with a dock. Just because you don’t see a specific charge for it doesn’t mean it’s excluded. Some companies may have guidelines that they won’t insure STR if they have a pool but if you disclose it and it’s not excluded-it should be covered on the general liability. Just my .02 and once again police’s do vary from company to company so obviously do your due diligence!

Mitch Davidson · Answer

@Sarah Kensinger. That's great feedback. Thanks for sharing. For me, the extra $20K/yr still wasn't worth being covered for a rare event like that. At a larger scale though I'd maybe feel differently.

Sarah Kensinger · Answer

This is not insurance at all! Especially if you read the fine print. It can help for certain damages, but you must follow the process carefully to be approved. If a STR has a typical homeowner's policy and just Aircover, and the property burns or a tree falls on the home, it will not be covered at all because it was operating as a business under a homeowner's policy.