How do you protect your assets? Coverage questions!

[Roy H.]

I'm researching coverage and the last thing I need is someone getting an injury on an STR. So I want to be as bulletproof as possible.

If you want to protect yourself in case a renter gets hurt on your property, is a basic STR insurance policy enough (Proper, Foremost, etc.)?

Is 1M enough coverage? Or should you opt for 2M?

Do you do anything else to protect yourself? Should you form an LLC? Or is that useless?

Do you make them sign a liability waiver?

Is there anything else you can do to protect yourself and your assets?

Also, is it true that the AirBnB policy is trash?

[Collin Hays]

Originally posted by @Luke Carl:

What you need is a rental agreement. “Break your leg... not my problem” 

We just settled a claim for $250,000 on a slip-and-fall at a property we manage near Gatlinburg.  A guest claimed that she slipped on one of the stairs leading up to the cabin, fell down, and broke her leg.  It was all highly suspicious, but here are a few nuggets that I can share from this 18-month ordeal:

- Initially, the claimant sued the homeowner and my management company, but they later dropped their suit against the homeowner.  I suspect it is because the homeowner didn't manage the property and/or the claimant's counsel felt that my property management company had deeper pockets.  Who knows.

- You can put anything you want in a rental agreement, but you can't indemnify yourself by saying "you're on your own at my house, tough luck."  That just doesn't work in the courts.  I don't care what you have in your rental agreement, if it appears that you may have been negligent in some way, that rental agreement isn't worth what it's written on.  MOST LAWSUITS ARE GOING TO CLAIM EITHER NEGLIGENCE OR GROSS NEGLIGENCE, AND A RENTAL AGREEMENT DOESN'T CHANGE THAT.

- This slip and fall occurred during the rain supposedly, and the steps were wood.  Wood gets slippery when wet.  Not sure what we could have done, other than those strips of sandpaper tape you put down for traction.

- This was an arduous and stressful ordeal. Yes, we had insurance and the insurance co., settled and paid, but heck, you never know what could happen in the courts system - we could have been sued for everything we own.

If you are self-managing, here are my takeaways:

1.  Yes, a rental agreement is important, but don't count on it saving your arse.  It won't.

2.  Do a thorough risk management analysis of your home. Check the obvious things.  Smoke detectors, carbon monoxide detectors, well-lit stairways and entries, timer switches on fireplaces, updated outlets in the bathrooms and kitchens to prevent electrocution, etc.   It would be worth your while to have a risk management person come out and do a walk-around.

3. Carry the maximum limits on your short term rental policy. And that has to be a commercial policy. If you are managing a STR with a standard homeowners policy, you've got lots of hiney showing. Get that fixed asap.

4.  Carry an umbrella policy on you personally.  These are cheap and add a layer of protection.

5.  If you have a claim, get the insurance co. involved IMMEDIATELY.  Anything you say or do before then can and will be used against you, I assure you.

6.  Using a property management co. reduces your exposure significantly, at least it did in this case!! :(

7.  Your insurance might or might not cover the claim.  Trust me, they will do anything in their power NOT to cover the claim.  If you are found to be guilty of gross negligence, you might be getting ready to write a check.