Airbnb and Short-Term Rental Insurance for Ocean City, MD

For a lot of DC-area families, the Ocean City condo or bayside house started as a place to spend two weeks in July and turned into a business. Rentals cover the mortgage and the condo fees, and the owner checks the calendar from Bethesda or Arlington. What usually does not get the same attention is the policy sitting behind it.

Most Ocean City rentals we review are insured on a standard homeowners or condo policy, or on a landlord form, none of which were written for a steady stream of weekly guests. Here is where those policies fall short at the beach and what a purpose-built short-term rental policy does differently.

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

Start with the building. An oceanfront condo and a bayside single-family house have very different exposures, but they share a few: salt air that shortens the life of everything mechanical, a wind season that runs from late summer nor'easters through hurricane season, and a flood exposure that is baked into the address. Bayside houses add docks, boat slips and bulkheads. Condo buildings add shared pools, elevators and balconies.

Then look at the calendar. Ocean City is a summer market, opened by Senior Week in June and followed by a long off-season when a unit may sit unused for months. Your guests are families on a weekly rental, groups of recent graduates, and bachelor and bachelorette parties, often with more people in the unit than the listing allows. Each of those facts is a place where the wrong policy leaves you paying out of pocket.

Why a homeowners, condo or landlord policy falls short

Standard homeowners and condo unit-owner policies

Standard homeowners and condo (HO-6) policies are written for a home you live in. They exclude business activity, and renting to paying guests by the week is a business to nearly every carrier. Once a paying guest checks in, claims tied to that stay (an injury, damage they cause, a fire during their week) can be denied, and because an Ocean City unit is almost never 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. Contents are often settled at actual cash value, lost rental income is capped or absent, and most versions are not available on a second home rented every week from Memorial Day to Labor Day.

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 weekly beach 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 unit furnished for eight. Loss of rents is based on long-term rent in Worcester County, not on a peak July week. Amenities are covered only inside the property line, so the bikes and the dock are a problem. And vacancy clauses can suspend coverage after the unit sits empty for a set number of days, which describes most of the off-season. Our landlord insurance guide covers the DP-3 form in more depth.

What a standard policy typically leaves out at Ocean City

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

• Damage, theft or vandalism by a guest. The Senior Week group that wrecks the unit. Often excluded or sub-limited; no sub-limit under the Proper Policy.
• Lost summer 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.
• Pool and balcony injuries. Business exclusions can leave you exposed; Proper extends liability to pools and applies on and off premises.
• Bikes, kayaks, paddleboards and docks. Liability beyond the property line is usually outside a landlord policy. Proper covers provided bicycles and small watercraft on and off premises.
• Pet-friendly listings. Dog bites and animal damage are a common exclusion; Proper includes pet and animal liability.
• Bed bugs after a full summer. Almost never covered on a standard policy; included under Proper.
• A guest who refuses to leave. Not something a homeowners form contemplates; Proper includes squatter protection.
• The off-season. Vacancy clauses can bite from October to April. The Proper Policy stays in force whether the unit is booked, used by you, or vacant between guests.

How the Proper Policy is built for a beach rental

The policy we recommend most often for Ocean City 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, condo 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. If you own a condo unit, ask us how the policy coordinates with your association's master policy; the structure differs from a single-family house.

Three Ocean City scenarios, side by side

Senior Week

Twelve graduates book a unit listed for eight. By checkout there is a broken slider, a stained carpet, a cracked bathroom vanity and a missing television. A homeowners policy will often point to the business exclusion. A landlord policy will often treat the guests as people you entrusted the property to and deny the vandalism. The Proper Policy is designed to cover guest-caused damage with no sub-limit, at replacement cost.

The August storm

A tropical system pushes through in late August. Wind strips part of the roof, water gets into the top-floor units, and the building is closed for repairs through Labor Day. The wind damage itself may be covered on any of the policy types, subject to the wind or named-storm deductible. The difference is the cancelled weeks. A homeowners policy on a second home typically offers little or no rental income coverage. 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.

The pool, the bikes and the dock

A guest's child is hurt at the pool, a guest crashes one of the beach cruisers you leave in the storage unit, or someone falls off the dock behind a bayside house. A standard or landlord policy will often fight each on business-use or off-premises grounds. Proper's liability is written to follow the amenities you provide, on and off premises.

Wind, flood and the storm deductible

Two things to get straight on any Ocean City policy. First, 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 flood carrier. On a barrier island with the bay on one side, that is not optional. Our flood insurance guide explains how flood policies work and why the waiting period matters. Second, coastal policies commonly carry a separate wind or named-storm deductible larger than the standard one. Know yours before the season, not after the storm.

AirCover, the Town of Ocean City license, 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 pool deck, the beach and the dock. And it ties lost income only to guest-caused damage, which does nothing for the August storm above. Treat it as a backstop.

The Town of Ocean City licenses and regulates rental properties within town limits, and Worcester County regulates short-term rentals outside them. Requirements change, so confirm the current rules with the town or county before you list or renew. Carriers expect the property to be operating legally.

When we quote an Ocean City rental we ask about the year built, building type, roof age, pool, dock or boat 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 beach place.

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 Ocean City to St. Michaels to Virginia Beach and Sandbridge. 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 condo or homeowners policy cover my Ocean City unit if I rent it on Airbnb or Vrbo?

Usually not. Standard homeowners and HO-6 condo policies exclude business activity, so claims tied to a paying guest's stay can be denied, and because the unit is typically a second home, a carrier can also void the policy over how it is occupied. The Proper Policy replaces the homeowners or condo policy rather than adding to it.

Is a landlord (DP-3) policy enough for an Ocean City weekly 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 that affects the off-season.

Does short-term rental insurance cover hurricane and nor'easter damage in Ocean City?

The Proper Policy provides special form (all-risk) property coverage, which includes wind, subject to the policy's deductibles. Flood is excluded from every policy discussed here and must be written separately through the NFIP or a private flood carrier.

Will I be paid for cancelled summer 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, and a DP-3 pays at long-term rent levels.

Does Airbnb's AirCover protect me as an Ocean City 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 Town of Ocean City require a license for short-term rentals?

The Town of Ocean City licenses and regulates rental properties within town limits, and Worcester County regulates short-term rentals outside them. Requirements can change, so confirm the current rules with the town 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.