Key Insurance Terms Every Property Manager Should Know

There’s a lot short-term real estate property managers need to know about insurance, including insurance terms. We’ve made a brief glossary of the most common insurance terms managers may come across while arranging for coverage.

Adjuster

The adjuster is the insurance company representative who’s responsible for evaluating damage in the event of a claim. They will study your claim report, inspect the property, talk to witnesses and others who may be involved, and study evidence to estimate how much the insurer pays out, if anything. At CoverCat, we use experienced adjusters that understand your business, and make sure you include pictures in the event of a claim.

Aggregate Limit

An aggregate limit is the maximum amount an insurer can pay out for all claims on a policy during a defined period, often one year. As soon as their payouts hit the aggregate limit, the insurer stops paying on claims. At CoverCat, the limits are determined by the length of the guest’s rental agreement.

Claim Form

The claim form is a document that notifies insurers of losses or damages to one’s property. It typically includes information about the cause of damage, a description of how much damage there is, supplementary evidence, and any additional information. Submission of the form marks the start of the claims process. Specialized service providers, such as CoverCat, offer this digitally so that the necessary information is pre-filled as much as possible and it is clear which information still needs to be supplied.

Depreciation

Depreciation refers to the decline in the value of a given property or asset spurred by normal wear and tear or age. Insurers include depreciation when they’re considering the actual cash value of the property, which may affect the amount of the claim payout.

Endorsement or Rider

An endorsement or rider modifies a current insurance policy to address the unique needs of a property. The endorsement might address policy terms, coverage, additional risks, conditions, or exclusions. Common endorsements among short-term rental properties include hot tubs and pools coverage and coverage for bed bugs.

Excess

In Europe, the term “excess” is synonymous with “deductible.” It’s how much a short-term rental property manager must pay out of pocket for claim damages before insurance company payments kick in. 

Exclusions

These are events or conditions that an insurance policy excludes from coverage. Exclusions often found in short-term rental property policies include wear-and-tear, intentional damage, acts of war, manager or owner negligence, unapproved renovations, theft, natural disasters, and more.

Guest Verification

Guest verification refers to the screening process a short-term rental property manager uses to confirm the identity of guests before they check in. CoverCat offers guest verification services to lighten the load of property managers.

Liability Insurance

This is one of the core coverages of short-term rental insurance. It can help if a short-term, paying guest is injured on your rental property and you are found legally liable. For example, if a guest injures themselves and sues you, your short-term rental insurance’s liability coverage will protect you financially. Short-term rental insurance is for short-usage cases, not year-round rentals to the same tenants. Often, home owners think they are already covered through an existing policy which might not be the case. Your short-term rental business is often seen as a commercial activity that requires specialized coverage. At CoverCat, our liability coverage is usage based which means premium is only charged if a guest is present. 

Mitigation of Loss

Loss mitigation refers to measures that a policyholder takes to reduce damage or prevent additional losses after a claim event. They can include guest verification, installing smart technology, ongoing maintenance, and other steps. If the insurer believes the manager has not been doing enough in this area, they may decide to lower or even cancel coverage.

Perils

Perils are the events or risks that may be covered in an insurance policy — injury, vandalism, property damage, and so on. Policyholders must comprehend what perils are covered and which are not. They may decide to fill coverage gaps for full protection.

Policy Schedule

The policy schedule is a part of an insurance agreement that defines the specific terms of coverage. It covers coverage limits, excess, risks, and relevant dates. It’s a compact guide for policyholders so they’re clear on what they can expect if a claim is filed. 

Premium

A policyholder makes regular payments — to keep their insurance coverage intact. These payments are collectively known as the premium. Rates are established according to a few factors, including the excess amount, coverage amounts and limits, the policyholder’s risk history, and other points. At CoverCat, we provide a usage-based solution where the premium is calculated based on the length of your guest’s stay.

Reservation of Rights

A reservation of rights letter is a notice an insurance company may send to policyholders while claims are being investigated. It asserts the carrier’s right to deny the claim according to the conditions outlined in the policy. Reservation of rights states that the insurer is not bound to pay the claim until investigation and evaluation of the claim is finished. 

Subrogation

An insurer might seek to limit losses and exposure in a claim by pursuing reimbursement from the parties most responsible for damage or losses. This process is called subrogation. It allows an insurer to mitigate their loss while the stated parties are held accountable for their actions (or inactions).

Total Loss

When the cost to repair or renovate a damaged property exceeds coverage limits or insured value, the insurer may declare it a total loss and pay the entire amount of coverage. This is more cost- and time-efficient than repairing the damage over time, usually springing from devastating or destructive events.

Underwriting

Underwriting is the routine in which an underwriter evaluates the proposed coverage of short-term rental properties. It includes appraising the properties, evaluating the policyholder’s history, level of risk, and more. Underwriting determines the insurance terms, premium amount, coverage limits, and even the decision to deny coverage. 

Vacancy Rate

Vacancy rate refers to the percentage of time a rental property goes unrented or unoccupied. It has a direct bearing on the premium, policy terms and conditions; properties with high vacancy rates may be deemed risky for damage or theft, as they’re not regularly kept up and are less secure. At CoverCat’s usage-based insurance, we don’t look at your vacancy rate.

CoverCat: Helping Property Managers With Insurance Terms

CoverCat helps short-term rental property managers understand insurance terms, setting up policies that cover their businesses’ unique needs. We also offer guest verification services. To learn more, contact us online or call.