MALVERN, PA — The Insurance Information Institute is warning that homeowners who rent properties on a short-term basis may face gaps in insurance coverage, including denied claims or policy cancellation, if they fail to notify their insurers.
The industry group said standard homeowners insurance policies typically do not cover commercial activity, including short-term rentals, creating potential risks for property owners as the practice grows in popularity.
“It’s important for homeowners to understand the potential for coverage gaps to arise when residential dwellings are used for commercial purposes,” said Sean Kevelighan, chief executive officer of the Insurance Information Institute.
Kevelighan said short-term rentals can increase exposure to liability due to higher guest turnover, which many standard policies are not designed to address.
The report said insurers may also charge higher premiums for properties used as short-term rentals, reflecting the increased risk of damage or liability claims.
In addition to insurance considerations, property owners must comply with local zoning rules, permits, and short-term rental regulations, as noncompliance can further affect coverage.
The group said the risks extend to multi-unit properties, where one owner’s short-term rental activity can impact shared master insurance policies.
Such activity may lead to higher premiums or changes in coverage terms for all residents in the building, according to the report.
The Insurance Information Institute advises homeowners to notify their insurer, review policy terms, and consider purchasing specialized short-term rental insurance to address potential gaps.
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