Airbnb and Short-Term Rental Insurance for Annapolis, MD

Annapolis is forty minutes from our office in Rockville, close enough that plenty of our clients own a second house there and treat it as a weekend place that happens to earn money. The calendar makes that easy. Naval Academy Commissioning Week in May, Plebe Parents' Weekend, home football Saturdays, the sailboat and powerboat shows in October, and a steady run of weddings and sailing regattas in between mean a well-placed house in the historic district, Eastport or Murray Hill can book its best weeks a year out.

What most of those houses do not have is a policy written for nightly guests. Here is where a standard homeowners or landlord policy falls short in Annapolis, what a purpose-built short-term rental policy does differently, and what to check before the next boat-show block fills.

Why an Annapolis rental is a different risk than your house at home

Start with the building. A historic district house might be an eighteenth-century brick townhouse with plaster walls, heart-pine floors, a steep original staircase and electrical and plumbing that have been updated in pieces over two hundred years. Rebuilding or repairing that house to match is expensive and slow, and the city's historic district review governs what you can do to the exterior. Down in Eastport the housing stock is newer, but a house on Spa Creek or Back Creek adds a dock, a slip and water at the end of the yard.

Then look at who books. Event weekends bring families of midshipmen, boat-show exhibitors, wedding parties and sailing crews, often more people than the listing allows, arriving by car on narrow streets with nowhere to park and leaving by foot after a night on Main Street. Each of those facts matters to an underwriter, and each is a place where the wrong policy leaves you paying out of pocket.

Why a homeowners or landlord policy falls short

The standard homeowners policy

Standard homeowners policies are written for a home you live in. They exclude business activity, and renting to paying guests by the night is a business to nearly every carrier. Once a paying guest checks in, claims tied to that stay (a fall on the stairs, damage from the group, a kitchen fire during their weekend) can be denied, and because an Annapolis rental is often not the owner's primary residence, a carrier can also void the policy over how it is occupied.

The home-sharing endorsement

A home-sharing endorsement is a limited add-on meant for a primary residence you rent occasionally, which does describe some Annapolis owners who rent their own house for Commissioning Week and the boat shows. Even then it is thin: contents are often settled at actual cash value and lost rental income is capped or absent. For a house rented most weekends, most versions are not available at all.

The landlord (DP-3) policy

The DP-3 landlord form we write for Maryland rental property owners is built for a long-term tenant with a lease and a deposit. On a short-term rental it typically has no coverage for theft or vandalism by the guest, because the policy treats that as property you entrusted to them. Contents coverage is limited, which matters in a furnished house. Loss of rents is based on long-term rent in Anne Arundel County, not on a boat-show week. Amenities are covered only inside the property line, so the bikes you leave for guests and the dock are a problem. And vacancy clauses can suspend coverage after the house sits empty for a set number of days, which can happen in January. Our landlord insurance guide covers the DP-3 form in more depth.

What a standard policy typically leaves out at Annapolis

What a standard homeowners or landlord policy often fails to cover on an Annapolis short-term rental, and what the Proper Policy is designed to address:

• Damage, theft or vandalism by a guest. Gouged floors, broken antiques, a missing television. Often excluded or sub-limited; no sub-limit under the Proper Policy.
• Lost peak-week income after a covered loss. Standard forms typically pay little or nothing on a second home, and a DP-3 pays at long-term rent levels. Proper's business income is based on your actual short-term rental revenue.
• Historic finishes at replacement cost. Actual-cash-value settlements depreciate what you lost. Proper's property coverage is special form at replacement cost, with no depreciation.
• Bikes, kayaks and the dock. Liability beyond the property line is usually outside a landlord policy. Proper covers provided bicycles and small watercraft on and off premises.
• Alcohol on the premises. A guest who drinks at your house and hurts someone can become your claim. Proper includes liquor liability.
• Pet-friendly listings. Dog bites and animal damage are a common exclusion; Proper includes pet and animal liability.
• A guest who refuses to leave. Not something a homeowners form contemplates; Proper includes squatter protection.
• Bed bugs and the quiet weeks. Bed bug protection is included, and the Proper Policy stays in force whether the house is booked, used by you, or vacant between guests.

How the Proper Policy is built for an Annapolis house

The policy we recommend most often for Annapolis owners is the Proper Policy from Proper Insurance, one of our carrier partners, which Terrapin places through its AmWins wholesale partnership. Proper writes a "Commercial Homeowners" policy on a Commercial General Liability form. It replaces your homeowners or landlord policy rather than endorsing it, so there is one policy and one claims department for the property. The main features: Download the Proper Insurance brochure (PDF) for a one-page summary of the coverage.

• $1,000,000 in commercial general liability as standard, $2,000,000 optional, applying on and off premises.
• Special form (all-risk) property coverage on building and contents at replacement cost, with no depreciation.
• No sub-limit on damage, theft or vandalism caused by a guest.
• Business income on an actual-loss-sustained basis with no time limit. You pick how many months to insure, based on your real short-term rental revenue rather than long-term market rent.
• Liability extended to amenities: pools, hot tubs, bicycles, exercise equipment, small watercraft such as kayaks, and golf carts, on and off premises.
• Pet and animal liability, liquor liability, bed bug and flea protection, squatter protection and invasion-of-privacy coverage.
• Coverage stays in force whether the property is booked, used personally or vacant between guests, for bookings from any platform or taken directly.

The policy is underwritten by Lloyd's of London (A+ AM Best) and Concert Specialty (A- AM Best), claims are handled in-house, and Proper, founded in 2014 with more than 200,000 policies written, is exclusively endorsed by Vrbo.

Three Annapolis scenarios, side by side

Boat-show week

An exhibitor's crew books the house for ten nights in October. They host clients every evening. By checkout the heart-pine floors are gouged, a plaster wall is cracked where a cooler went through it, and two antique chairs are gone. A homeowners policy will often point to the business exclusion. A landlord policy will often deny the damage as vandalism by someone you entrusted the property to. The Proper Policy is designed to cover guest-caused damage with no sub-limit, at replacement cost, which is what a plaster and heart-pine repair requires.

Commissioning Week

A family of a graduating midshipman books for the week. On the last night a grandparent falls on the steep original staircase and is seriously hurt. A standard homeowners policy will often fight the claim on business-use grounds. The Proper Policy carries $1,000,000 in commercial general liability as standard, with $2,000,000 available, and is designed for exactly this kind of guest claim.

The kitchen fire in April

A small fire in the kitchen closes the house for repairs through May and June. The fire damage may be covered on any policy type, subject to the deductible. The difference is Commissioning Week, Plebe Parents' Weekend and a month of wedding bookings cancelled. A homeowners policy on a second home typically offers little or no rental income coverage, and a DP-3 reimburses at the area's long-term rental rate. The Proper Policy is designed to pay the actual short-term revenue you lost, for as many months as you chose to insure.

Historic homes, replacement cost and the water

Two Annapolis-specific points. First, make sure the dwelling limit reflects what it would cost to rebuild a historic house with matching materials, under the historic district review that applies to the exterior, and not what a new-construction estimator would produce. Second, Annapolis floods. Nuisance tidal flooding at City Dock is a regular event, and houses near Spa Creek, Back Creek and the Severn carry real flood exposure. Flood is excluded from every policy discussed here, including the Proper Policy, and is written separately through the National Flood Insurance Program or a private carrier. Our flood insurance guide explains how those policies work.

AirCover, City of Annapolis licensing, and what we will ask

AirCover is a platform program, not a policy you own. On its liability piece, Airbnb is the named insured, not you. It applies only to stays booked through Airbnb, so a Vrbo guest or a repeat family who books direct is outside it. It stops at the property line, which rules out the dock, the creek and the walk back from Main Street. And it ties lost income only to guest-caused damage, which does nothing for the kitchen fire above. Treat it as a backstop.

The City of Annapolis licenses and regulates short-term rentals within city limits, and Anne Arundel County regulates them outside the city. Requirements change, so confirm the current rules with the city or county before you list or renew. Carriers expect the property to be operating legally.

When we quote an Annapolis rental we ask about the year built, the electrical and plumbing updates, whether the house is in the historic district, any dock or slip, bikes or watercraft left for guests, revenue history and platforms, personal-use weeks, and pets. If you own several properties, our real estate investor page explains how we structure a portfolio, and a personal umbrella policy can sit above the liability on your home, your autos and the Annapolis house.

Terrapin Insurance Group is an independent agency in Rockville, Maryland. Most of our short-term rental clients are Maryland, DC and Virginia families who live in the DC area and own a getaway elsewhere, from Annapolis to St. Michaels to Charlottesville. Start with the home quote form and pick the Short Term Rental option, or call and we will walk through the property together.

Frequently Asked Questions

Does my homeowners policy cover my Annapolis house if I rent it on Airbnb or Vrbo?

Usually not. Standard homeowners policies exclude business activity, so claims tied to a paying guest's stay can be denied, and if the house is not your primary residence a carrier can also void the policy over how it is occupied. The Proper Policy replaces the homeowners policy rather than adding to it.

Is a landlord (DP-3) policy enough for an Annapolis short-term rental?

Typically no. A DP-3 is built for long-term tenants: it usually excludes theft or vandalism by the guest, limits contents, pays loss of rents at long-term market rates, covers amenities only inside the property line and may carry a vacancy clause.

Will a short-term rental policy repair a historic Annapolis home at replacement cost?

The Proper Policy provides special form (all-risk) property coverage on building and contents at replacement cost with no depreciation. Make sure the dwelling limit reflects the real cost of rebuilding with matching materials under historic district review.

Will I be paid for cancelled Commissioning Week or boat-show bookings after a covered loss?

The Proper Policy includes business income on an actual-loss-sustained basis with no time limit, based on the property's real short-term rental revenue. A homeowners policy on a second home typically offers little or no rental income coverage.

Does Airbnb's AirCover protect me as an Annapolis host?

Only partly. AirCover is a platform program, not your own policy. Airbnb is the named insured on its liability piece, it applies only to Airbnb bookings, it stops at the property line and its lost-income piece is tied to guest-caused damage only.

Does the City of Annapolis require a license for short-term rentals?

The City of Annapolis licenses and regulates short-term rentals within city limits, and Anne Arundel County regulates them outside the city. Requirements can change, so confirm the current rules with the city or county before you list or renew.

This article is general information from a licensed insurance agency, not legal or tax advice. Policy terms and your carrier's decisions control; consult an attorney about your specific situation.