As Airbnb hosts, our houses often serve as both homes and places of business. Some of us even have multiple properties that we rent out, and for others it could simply be a spare bedroom. No matter your situation, it is important to realize that you are, in fact, running a business, and you should have your business properly insured.
Many hosts do not realize that their standard homeowners insurance does not cover their Airbnb! This is especially concerning for those that live in their rental property, as your insurance can actually go so far as to cancel your policy if they find you are running a business out of your home.
So how do Foremost and Proper Insurance compare? Proper Insurance is a complete replacement for your current homeowners insurance. Foremost is a “landlord policy”. Proper allows you to select a coverage amount, whereas Foremost has a base policy and allows you to select add-ons based on your needs. Both have liability coverage, but Proper’s is bundled with the commercial insurance and Foremost’s is supplemental.
|Complete replacement for standard homeowners insurance||“Landlord” insurance policy|
|Host can live at the property||Property cannot be host’s dwelling|
|Underwritten by Lloyd’s of London Insurance||Underwritten by Farmer’s Insurance|
|Legal defense costs bundled in commercial liability insurance||Liability insurance is supplemental, optional coverage|
|Select your own coverage amount||Base coverage with a variety of add-ons|
Proper Insurance Review
Proper Insurance is strong, popular choice for short-term rental insurance. Proper was founded by a select group of employees from a competing insurance company who had a specific vision for catering to the short-term rental insurance market.
Underwritten by Lloyd’s of London, a company with over 325 years of insurance experience, Proper allows clients to feel secure in their investment. After all, it would not be easy to find another established company on the market with comparable levels of experience. According to their website, Lloyd’s insures the majority of both FTSE (the top 100 market share companies in the UK) and Dow Jones companies.
Being a business that is exclusively designed for the short-term rental market, it makes perfect sense that HomeAway and VRBO exclusively endorse Proper Insurance and no other comparable agencies. If you’re curious as to whether Proper is the right fit for your Airbnb insurance needs.
Proper Insurance designates their policies as commercial insurance. Don’t worry, this doesn’t mean that your home and personal liability won’t also be covered. In cases where the host lives at their rental, Proper adjusts your coverage amount to build in personal homeowners insurance as well.
Another convenient feature of Proper Insurance is that they accept a variety of business statuses as the Name Insured. For example, you may be a sole proprietor if you are casually renting out a spare room in your home.
You might be an LLC, or even a corporation, depending on how many properties you manage and how many employees you have. None of this will affect your ability to be insured, making Proper an attractive option for a variety of clients.
Proper’s business liability coverage is very comprehensive. Similar to Foremost, any business revenue that is lost due to damages or require repairs is covered. Obviously, as hosts, our income is the driving factor behind operating our Airbnbs. If this income is not protected, the cost of the insurance policy may not even be financially viable.
Income insurance is a great feature, but it is especially important for those who have a very limited timeframe in which they make most of their income. For example, if your main business is done during the summer months and a flood makes your rental unusable, your entire season’s income could be lost if not for income insurance. The income of property managers is also insured under Proper’s policy.
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Proper does not impose vacancy or standard occupancy restrictions, unlike many of their competitors. Additionally, they do not restrict their policy to homes that are strictly rental properties. This allows hosts to insure a dwelling that also functions as their own home, unlike Foremost, which only has policies for strictly rental properties.
The ability to choose how much of your income you’d like to insure is another benefit that Proper offers. Hosts who earn comparatively less than others can pay a lower premium in order to insure less income. This allows hosts to lower the cost of their policy and to tailor it to their specific needs.
Like all building insurance policies, Proper covers the physical structure of the building and the costs associated with repairing or replacing it. They also cover possessions inside the home, which is very appealing in a rental property where strangers flow in and out regularly.
A major selling point for some vacation homeowners is that they can also cover off-premise circumstances such as swimming pools, boats, recreational areas, and more. Many of these activities are what draw guests to your Airbnb, but they can also hold the greatest potential for risk and injury. If you neglect to get these things covered, it’s possible that you could be liable for damages.
An unfortunate aspect of renting is the possibility of guests bringing unwanted things onto your property. Perhaps the most dreaded unwanted guest of all is bedbugs. These stubborn, persistent pests are famously hard and costly to get rid of. On top of that, your guests will certainly not be happy if their vacation is hampered by these undesirable visitors.
Thankfully, Proper does offer an optional bedbug enhancement to their short-term rental policies. This will help you offset the cost of ridding your home of unwanted pests, and their income insurance will protect your finances while you do.
While Airbnb does offer all hosts some form of insured liability protection, many feel more secure with a third-party’s financial backing as well. Proper does include legal defense in their commercial liability budget, so you’ll have extra protection in case of a legal dispute. However, this does mean that if you end up using a large portion of your commercial insurance on something else, there may not be much left over for legal issues.
Proper Insurance Pros and Cons:
- Choose your income insurance amount
- Optional bedbug enhancement
- No occupancy restrictions
- No time limit on business income claims
- Liability insurance bundled as part of commercial insurance, not separate
- If dwelling is the host’s residence, the policy is more expensive
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Foremost Insurance Review
Foremost Insurance is another option for Airbnb hosts looking to ensure that their rentals are covered. Founded in 1952, Foremost was originally heavily focused on mobile home insurance. They are now a member of the Farmers Insurance Group of Companies and offer a variety of coverage options, including landlord insurance.
Unlike Proper, whose policy replaces your standard homeowners insurance, Foremost provides landlord insurance. This type of coverage is specifically catered to rental properties, as the name suggests, but unfortunately this means that it excludes properties where the host resides. For instance, if you rent out your home or a room in your home, Foremost’s policy is not for you. However, if your rental is not your primary residence, Foremost has some great options to look into.
Foremost structures their policies starting with standard base coverage. This includes the expected protection from damages to the building itself. Customers can then add on different coverage options to build a custom policy that suits their needs. For example, clients can choose to insure lost rent income so that, in the event of a covered circumstance, they can still receive the income they would have normally.
Things like water damage from sewer and drains, flood protection, “other structure” protection, and more can also be added. This way, if you live in an area not at all prone to flooding, you are able to save money by electing to not pay for flood insurance that you’ll never use.
Conversely, this does mean that clients must be cautious when deciding which additions are right for them. If something is left out, Foremost only covers “named perils” that are specifically outlined in their base coverage. This could mean that the host is on the hook for damages that aren’t made explicit in their contract.
Foremost does place some stricter limitations on rental terms than some of their competitors. For instance, they restrict the length of a rental to 5 continuous months to the same renter. They also restrict each building to 4 living units. Neither of these is likely to be a concern to most hosts, but they are factors to consider if you have a larger rental with many separate units or renters who stay for a significant portion of the year.
Foremost Insurance Pros and Cons:
- Discounts for Landlord Association Members and property managers
- One policy for multiple properties
- Covers older and lower value homes
- Covers homes under renovation and “fixer uppers”
- Does not cover properties where the host lives
- “House”-type buildings only (no mobile homes, tiny houses, etc.)
- Restrictions on living units and rental time length
Both Proper and Foremost offer different insurance coverage options suitable for many short-term rental needs. If you manage several properties that you do not live at, Foremost could be a good landlord insurance option. However, many Airbnb hosts do live at their rental property. For these cases, I recommend getting a quote through Proper Insurance. They offer the most comprehensive short-term rental coverage that specifically caters to markets like Airbnb.