Canadian summers and falls are synonymous with cottage getaways, Airbnb bookings, and short-term rental opportunities. But before you hand over the keys to your vacation home, it’s time to talk about something most people overlook: short-term rental insurance.
Renting out your property short-term can be a great way to earn extra income. However, it also comes with risk. Property damage, liability claims, injuries, theft, and even fire hazards can turn a dream rental into a financial nightmare, especially if your home insurance doesn’t cover rentals. (Spoiler alert: Many homeowner policies don’t.)
Whether you’re renting your cottage for a few weeks this summer or turning a secondary residence into a full-time income stream, this blog will walk you through everything you need to know about short-term rental insurance, the most common risks, and how to protect yourself before guests arrive.
Why Home Insurance Often Isn’t Enough
If you rely on your standard home insurance coverage, you might assume your property is fully protected. But here’s the catch: most home insurance policies are designed for primary residence use only.
Once you start renting your home or cottage to guests—even for a few days—your insurer may consider it a business activity. That means any claims made during a rental period (like property damage or personal injury) could be denied outright.
Some homeowners also assume Airbnb’s Host Guarantee or similar platforms provide full protection, but these are not substitutes for proper insurance. They often include fine print and limited coverage, and don’t always pay out on liability claims or guests' property damage.
In short, if you’re planning to rent your cottage or home temporarily, you might not need residential property owner insurance, but Airbnb insurance, or short-term rental insurance designed to protect you from the specific risks that come with opening your doors to short-term guests.
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What Is Short-Term Rental Insurance?
Short-term rental insurance is a specialized form of rental insurance that protects property owners from the unique risks of hosting guests in a home or vacation property for a short time. It typically covers both property damage and liability, including costs related to:
- Accidental damage caused by guests
- Structural damage to your home or belongings
- Stolen items or vandalism
- Medical expenses if a guest is injured on your property
- Legal fees or lawsuits related to negligence
- Loss of rental income due to covered damage
Unlike traditional home insurance, short-term rental policies are tailored for owners who rent on platforms like Airbnb, Vrbo, and Booking.com. Depending on the insurer and your property usage, they can be purchased as standalone policies or as riders on existing plans.
Vacation Rentals Come with Real Risks
Let’s be honest, most vacation rentals go off without a hitch. However, it only takes one bad weekend to put you in a difficult financial situation! Here’s what you need to know about short-term rental liability and risks:
The most common cottage rental risks include:
- Fires from outdoor BBQs or indoor fireplaces
- Water damage from leaky pipes or unsupervised showers
- Slips and falls on decks, stairs, or docks
- Damage to antique furniture or expensive decor
- Guests injuring themselves and holding you liable
Furthermore, even if a guest causes the damage, you could still be held responsible as the property owner, especially if your existing home insurance policy excludes short-term use. That’s why you need vacation rental liability coverage designed for these scenarios.
Liability Coverage: Why It Matters
When it comes to vacation rental liability, many homeowners think, “I trust my guests — they’ll be careful.” But here’s the thing: liability coverage isn’t just about your trust in people. It’s about protecting yourself if something goes wrong.
If a guest trips on a loose patio stone and breaks their ankle, they could sue. If a fire breaks out and damages a neighbour’s home, you might be responsible for damages caused to someone else’s property. These incidents can lead to major liability claims, even if they weren’t your fault.
Without the right insurance coverage, these claims could cost tens of thousands in legal fees, medical expenses, or settlements. That’s why short-term rental policies typically include personal liability protection as a core feature.
Does Airbnb Insurance Cover You?
While platforms like Airbnb (which has over 200,000 active Canadian listings) offer some protection through programs like AirCover, it’s important to understand what they don’t cover:
- Intentional damage or theft
- Liability beyond certain limits
- Damage to shared or communal areas
- Delays in claims processing or denials based on technicalities
In short, Airbnb insurance is not a replacement for proper insurance. It should be treated as supplemental protection, not your primary safety net.
What Kind of Coverage Do Vacation Rental Owners Need?
Every property and rental arrangement is different, but here are a few common elements most vacation rental owners carry in their policy:
- Property Damage Coverage—To cover damage caused by guests, pets, or accidents
- Vacation Rental Liability Coverage—To protect you from lawsuits or liability claims
- Loss of Rental Income—If damage prevents you from renting out your place
- Contents Coverage—For furniture, appliances, electronics, and personal items
- Short-Term Rental Endorsements—To extend or modify your home insurance
For owners with multiple properties or full-time rentals, a landlord insurance policy, a personal umbrella policy, or a business policy may be appropriate to expand coverage limits.
Can You Add This Coverage to Your Current Policy?
In some cases, yes, you can add an additional policy, but it depends on your insurance carrier and homeowner policies. Some insurers allow for short-term rental endorsements, while others may require switching to a commercial or business insurance model.
This is why it’s crucial to work with experts who understand the nuances between home insurance, rental property coverage, and business operations.
At KASE Insurance, we help clients compare options, evaluate costs, and find the right insurance coverage that meets their specific needs, without paying for things they don’t!
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Tips for Protecting Your Vacation Rental
Before you list your home or cottage, here are a few smart steps to protect your vacation home and peace of mind:
- Get the right policy: Don't assume your current policy covers short-term use—confirm with your insurer or broker.
- Screen your guests: Use platforms with good screening tools, and read reviews carefully.
- Document your space: Take photos or video before and after each stay in case of a claim.
- Set house rules: Be clear about expectations to minimize risky behaviour (e.g., no parties, no smoking).
- Work with experts: Choose an insurance partner that understands vacation rental insurance and the legal landscape in Canada.
Rent With Peace of Mind Through Short-Term Rental Insurance
Short-term rental insurance is one of the smartest moves you can make as a cottage owner, host, or property investor. While platforms like Airbnb have normalized vacation rentals, they haven’t eliminated the real risks that come with them.
The last thing you want is to be left without insurance protection after an accident, lawsuit, or damage claim. Before you rent, review your policy and make sure it’s built to handle more than just everyday use.
At KASE Insurance, our team specializes in custom coverage solutions, including:
- Short-term rental insurance for cottages, condos, and investment homes
- Advice on navigating Airbnb and Vrbo insurance gaps
- Flexible policies that evolve with your business activity
- Support with claims, renewals, and comparing policies over time
Whether you’re a first-time host or seasoned property manager, we’ll help you build the right protection so you can rent with confidence.
Want help figuring out your short-term rental insurance options? KASE Insurance is here to guide you every step of the way. Contact us now!