When you manage a short-term rental business, one of your main concerns is protecting your owners’ properties against potential damage caused by guests. In most cases, renters are respectful, but there’s always a chance that your properties will incur accidental damages beyond regular wear and tear. A seemingly small accident, like a spilled glass of red wine on a new sofa, may result in an expensive repair or replacement.


There are two options to protect you against damages; you can either charge a refundable security (or damage) deposit or offer vacation rental insurance.

Let’s take a look at both of these options a bit closer, starting with the security deposit option.

Pros and Cons of a Security Deposit

Most people are familiar with how a security deposit works. The guest pays a set fee determined by the host prior to check-in that will be returned to them if the property is left how they found it. The amount of a security deposit is usually between $250 and $500, or up to 10% of the total rental price.

The main benefit of holding a damage deposit is that it gives guests more incentive to leave your property exactly how they found it.

However, roughly 80% of renters would rather pay a small, non-refundable fee for insurance than a larger, refundable amount for a security deposit.

But, before we look at it from the guest point-of-view, let’s face it...deposits are an annoyance for property managers for a number of reasons:

  • Charging and refunding a damage deposit is an administrative hassle
  • Large damage deposit fees can increase how your nightly rate is presented in many listing channels, decreasing conversions
  • Withholding a portion of their deposit for either a small, but expensive incident or a controversial, disputed reason can result in customer dissatisfaction, in turn resulting in negative reviews that hurt future business

While charging a security deposit is a common and familiar practice, that doesn’t mean it’s the best option, especially with short-term rental insurance becoming more available.

Even after withholding a guest’s deposit as recompense, it can still take months to settle the situation and it may even go unresolved if the guest contests your claim through the respective channel. This often ends in paying back the guest the withheld amount, leaving your business and managed properties at risk.

Don’t be confused by different offerings that may seem like insurance for your managed properties. Several channels offer guarantees or other forms of insurance, but in reality these only protect the guest or simply act as a promise of reimbursement if the security deposit amount is maximized.

Charging a fee for vacation rental insurance is a great way to protect yourself, eliminate the need for a security deposit and provide you a number of positive benefits as well.

Why vacation rental insurance is a better alternative to charging a security deposit:

  • Reduce booking friction. Most guests prefer to pay a small, non-refundable fee for insurance than a large, upfront credit hold
  • Price more competitively. Damage deposits are perceived as a massive hidden fee by guests
  • Eliminate disputes over damages. Debate emerges when a guest expects their full damage deposit back
  • Minimize administrative tasks. Security deposits create tedious logistic work for property managers after each stay

Vacation rental insurance is the easiest way to protect your property for both you and your guests.

Explore your options

It's important that you explore your options when choosing insurance that will protect your properties against damages. You can opt to self-insure, but this comes with a high degree of risk. Or you can contract directly with an underwriter, but this is typically time intensive, requires a lot of paperwork and logistics, and it won’t be integrated into your property management software.

Another option is to use the individual channel's offering. However their offerings either protect the guest, not the property manager, or, in some cases, aren’t actual insurance policies but simply a “guarantee.”

In addition, not all channels offer integrated insurance or an insurance substitute to property managers, so you are still left vulnerable when guests book on other listing sites or directly with you.

A final option is to take advantage of Damage Protection by Assurant - an insurance offering that you can manage directly through the MyVR platform.

Damage Protection provides coverage that protects property managers across all channels and is designed and underwritten by Assurant - a publicly traded, Fortune 500 insurance provider. The most basic tier of coverage triples the protection amount of the average deposit while minimizing booking friction caused by daunting security deposits.

By enrolling in Damage Protection by Assurant, you’ll gain peace of mind that you’re protected from any damage to your properties, and your guests will be happy that they didn’t have to come up with hundreds of dollars for a damage deposit.