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How to keep your short-term rental insurance costs low

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There’s no doubt that a comprehensive insurance plan is necessary for operating in the short-term rental industry. Basements flood, fires start and catastrophes happen. Without the right coverage, you could wind up paying astronomical amounts in repairs and damages for a single incident. But those premium payments can still feel like a major drain on cash flow, especially if you’re trying to devote all available resources to growing your business.

Fortunately, there are ways to protect your properties while keeping insurance costs low. Read these tips to find out how:

Understand what you're paying for

To justify your insurance costs, it's important to understand what you're paying for. Short-term rental insurance prices vary company-to-company as insurance providers offer plans based on the level of risk your business is exposed to.

And risk level can be influenced by a number of factors, one of the most relevant being the location of your properties. Are they located in an urban centre that has a high crime rate? Are they in a quiet, rural countryside? Are they in a location that encounters frequent weather calamities, like typhoons or forest fires? The higher the risk, the higher your premium.

The cost of your insurance fees will also be impacted by the type of coverage you choose and the frequency of that coverage. Some companies will insure your property 24 hours a day, 365 days a year, while other companies may offer a plan that only covers you when a guest is staying in the property. The latter is typically cheaper but also leaves you more vulnerable to incidents that could happen outside your hours of operation.

How to keep your costs low

Make the right judgement calls

The reality is that insurance rates fluctuate. The more claims you make to your insurer, the higher your premium gets. To prevent your rates from going up, don’t report every incident to the insurance company. According to aha insurance, claims should only be filed for major incidents, like fires, floods, theft or other substantial damages to your properties.

In the case of minor incidents, be more discerning. A claim may not be worth it, aha insurance says, if the damages cost less than your deductible, your deductible is only slightly more than the cost of repairs, you've filed another claim in the last seven to 10 years and this isn't a serious incident, or if the damage was caused by poor maintenance. In any of these cases, you're probably better to pay out of pocket. Consider setting aside a small portion of revenue to cover minor incidents.

Maintain your properties

The same way your car requires an occasional tuneup to keep it running smoothly, your properties also require maintenance to keep them operational and risk-free, especially in the eyes of your insurer. For instance, carbon monoxide and smoke detectors need to be changed every 10 years, the outside of your building should never have loose shingles or cracks in the walkway, and even trees on your property need to be inspected by a professional every year or so—a rotten branch could easily fall and injure a guest or damage your property.

Make sure you or a team member is regularly checking your properties. You want to catch maintenance issues before they turn into major problems. Regular property maintenance reduces the chances of damages, which also reduces the risk of claims and increased insurance premiums.

Screen your guests

To reduce claims and minor incidents, risk mitigation at the outset is key. To accomplish this, you need to screen your guests. As a property manager, this means it’s your responsibility to verify the identity of anyone who enters your property and learn about their travel plans to either de-risk the reservation or cancel it. If you don’t screen your guests, you're more likely to see parties, damages, fraud and theft, which could all result in insurance claims.

It should also be noted that if an insurance company feels your business poses too much of a risk, they are not obligated to insure you. By showing the insurance company you have safety measures in place, like guest screening, they're more likely to offer you a plan at lower rates.  Prove to your insurer that, as a business, you've done your due diligence and are in control of your guests and their behaviour.

To find out how to properly screen your guests, check out our guide.