A lake house on Possum Kingdom that pays for itself on summer weekends. A Galveston condo that books solid from spring break to Labor Day. A garage apartment in East Austin that covers the mortgage. Short-term rentals are everywhere in Texas now, and most of them are insured on a policy that was never written for nightly guests. Here is what actually needs to be in place, where the platform protection stops, and how to buy the right thing.
Why the policy you already have probably does not work
There are two policies a short-term rental usually ends up on by accident, and neither fits.
A homeowners policy is written for the family that lives there. It excludes business use of the home and treats renting the place out as exactly that. Most carriers tolerate the occasional guest and nothing more, and the words that do the work are occasional and incidental. A home that is listed, photographed, priced and booked thirty weekends a year is not incidental, and an adjuster does not need to look very hard to find the listing.
A landlord policy, the dwelling form most rentals sit on, is written around a tenant with a lease. It assumes one household in the property for months at a time, people who know where the water shut-off is and who notice when the roof starts leaking. Nightly guests are the opposite exposure: strangers, no lease, high turnover, luggage and parties and a hot tub. Many dwelling policies exclude short-term or transient occupancy outright. Others are silent, which is not the same as covering it. Our Texas landlord insurance guide covers what a standard rental policy does, and short-term use is the point where it stops.
The way owners usually discover the gap is at claim time: a guest’s fall, a kitchen fire during a bachelorette weekend, a busted pipe found by the next check-in. That is the most expensive possible moment to learn what your policy thinks you do with the house.
What the platforms protect, and what they do not
Airbnb and Vrbo both offer host protection programs, and both are worth having. Neither is a substitute for a policy you hold.
- They apply to platform bookings only. A direct booking, a repeat guest who texts you, a friend of a friend: none of that is covered by anyone.
- The damage programs are not insurance policies. They are the platform’s own terms, with their own exclusions, their own claims process, and their own definitions of what counts. You cannot read the policy because there is not one.
- They are secondary. The liability programs generally expect your own insurance to respond first, which means they assume you have some.
- They do not cover the building when nobody is in it. A hailstorm in April, a frozen pipe in January, a tree through the roof between bookings: those are property losses with no guest attached, and they are the losses most likely to be large.
- They do not replace your income while the place is being repaired, and they do not cover the furnishings you bought to make the listing look the way it does.
Treat platform protection as a backstop for guest-caused damage on platform stays. Everything else is yours to insure.
What a proper short-term rental policy covers
Coverage built for this exposure looks closer to a small hospitality policy than to a homeowners policy, and it is written around how the property actually operates:
- The dwelling, at replacement cost, with the wind and hail deductible and roof terms that matter on every Texas property. Those mechanics are the same ones that drive a landlord policy’s price; our guide to what landlord insurance costs in Texas walks through them.
- Contents and furnishings. Unlike a long-term rental, you own everything in the house: beds, linens, the television, the kayaks, the espresso machine. A dwelling policy carries little or no contents coverage because a long-term landlord usually has little in the house. A short-term rental policy is sized for a furnished home.
- Liability for guest injuries, with limits that reflect a steady stream of strangers using a pool, a dock, a staircase or a fire pit. Amenities are the liability exposure; a lake house with a boat lift and a hot tub is not the same risk as a townhouse.
- Loss of income when a covered loss takes the property off the calendar, including the bookings you had to cancel.
- Guest-caused damage, theft and vandalism, which standard dwelling forms treat narrowly or exclude once the occupant is not a lease-holding tenant.
- Bed bugs, squatters and the other things that only happen to properties with high turnover, where available.
Some of these policies are written on personal-lines paper with a short-term rental endorsement. Many are written as small commercial policies, because that is honestly what the exposure is. Which one fits depends on how the property is used, which is the next section.
Three set-ups, three ways to insure them
You live there and host a room or a garage apartment. This is home-sharing, and it is the easiest case. Several carriers offer a home-sharing endorsement on the homeowners policy that extends coverage to the hosted space and the guests in it. The policy stays a homeowners policy; you disclose the hosting and pay a modest addition. Do not skip the disclosure: an undisclosed listing is the thing that turns a routine claim into a coverage dispute.
A second home you use and also rent out seasonally. A Hill Country place or a coastal condo that the family uses some weeks and rents the rest. This needs a secondary or seasonal dwelling policy that specifically permits short-term rental, or a short-term rental policy that permits owner use. The mistake here is insuring it as a plain second home and letting the rental income stay quiet.
A dedicated short-term rental that you never occupy. This is a business, and the clean answer is a policy written for short-term rentals, usually commercial in structure, with property, liability, income and contents on one contract. If there is a property manager, the policy should know that too.
The Texas specifics
Hotel occupancy tax. Texas treats a rental of fewer than 30 consecutive days as a hotel stay for tax purposes. The state rate is 6 percent, cities and some counties add their own, and Airbnb collects the state portion automatically while other channels leave it to you. The Texas Comptroller publishes the rules. This is tax, not insurance, but it is the clearest sign that the state regards your listing as a lodging business, which is also how an insurer will see it.
City rules are local and they change. Texas has no statewide short-term rental law. Registration, permits, caps and zoning limits are set city by city and are litigated regularly. Check the ordinance where the property sits before you buy the sheets, and keep a copy of your registration with the policy file; an insurer may ask.
Weather is still the biggest risk. Guests are the new exposure, but hail, wind, freeze and flood remain the claims that cost the most. A coastal property may need its wind and hail written separately through the state windstorm pool, and flood is a separate policy everywhere. A Galveston or Port Aransas rental has the same coastal mechanics as any other coastal home, with a calendar full of strangers added on top.
HOA and condo rules. Many Texas condo associations restrict or prohibit short-term rentals, and the association’s master policy covers the building, not your unit’s interior, your furnishings or your liability. Read the declarations before you list.
Questions to have answered before you call
- How many nights a year is it rented, and do you ever stay there yourself?
- Which platforms, and do you take direct bookings?
- Maximum guest count, and what amenities are on the property: pool, hot tub, dock, boat, bikes, fire pit, trampoline.
- Who manages it, and who handles turnover and maintenance?
- What the furnishings would cost to replace, roughly, and what the house would cost to rebuild.
- What your lender requires, if there is a mortgage. Some loan documents prohibit short-term rental entirely.
- Whether the property is registered with the city, where registration is required.
The bottom line
A short-term rental is a small business that happens to be a house. Insure it like one: a policy that knows about the guests, covers the furniture, replaces the income and carries liability sized for the amenities. If you are hosting today on a homeowners or landlord policy, the fix is usually a phone call and a modest premium change, and it is far cheaper than finding out at claim time. Call us at (469) 513-3379 and tell us how the property is actually used; we will quote coverage written for it. You can also start from our landlord insurance page or, for lake and coastal properties, our specialty coverage page.