Homeowners who rent out properties as short-term rentals risk significant gaps in their insurance coverage, with standard policies typically failing to account for commercial activity such as listing on Airbnb or Vrbo, the Insurance Information Institute (Triple-I) has warned in a new report.
The findings carry weight in a market that has grown rapidly. The US short-term rental sector was valued at $68.64 billion in 2024, in a report which projects annual growth of 7.4% through the end of the decade.
A Congressional Research Service primer, drawing on AirDNA data, put the national count at 2.4 million properties generating $64 billion in revenue as of 2023.
Sean Kevelighan, chief executive of Triple-I, said property owners often underestimate how rental activity changes their risk profile.
"Short-term rental activity often brings higher guest turnover and greater exposure to liability, which many standard policies aren't designed to address," he said.
Failing to disclose rental use to an insurer can lead to denied claims, reduced liability coverage, higher deductibles, or outright policy cancellation, the report found.
There is no published data isolating how often claims are denied because of undisclosed short-term rental activity, but broader industry figures point to the scale of the problem.
Research from the Dick Law Firm found that policy exclusions are the single largest driver of homeowners insurance claim denials, accounting for roughly 33% of all rejected claims.
Misrepresentation during the application process, a category that would capture failure to disclose rental use, accounts for a further 9%.
Insurers may also reclassify short-term rental properties as higher risk, the report said, potentially leading to increased premiums driven by the volume of guests and the greater likelihood of liability claims.
For owners of units in two-family or multi-unit buildings, the exposure is not confined to a single policy. One owner's rental activity can affect the shared master insurance policy, raising premiums or altering coverage terms for every resident in the building.
Compliance with local regulations adds another layer. Property owners who fail to meet zoning requirements, obtain permits, or observe short-term rental ordinances risk undermining their coverage further, Triple-I said.
The organization recommended that homeowners notify their insurance professional before listing a property and review their policy terms. It also advised owners to consider purchasing specialized short-term rental insurance to address gaps that standard commercial coverage may not fill.
