With more than 10,800 inland lakes and the longest freshwater coastline in the United States, Michigan has no shortage of vacation homes, cottages, and waterfront retreats. For many property owners, renting those homes to visitors has become an excellent way to offset ownership costs while sharing everything Michigan has to offer.
Whether you rent your property a few weekends each summer or keep it booked throughout the year, it's important to remember that a vacation rental carries different risks than a home used exclusively by you and your family. Welcoming paying guests onto your property changes your insurance needs. Unfortunately, many owners don't realize there are gaps in their coverage until something happens and they have to file a claim.
Before your next guests arrive, use this checklist to make sure your investment is properly protected.
Review How Your Property Is Insured
The first step is confirming that your insurance company understands how the property is being used. Many homeowners assume their standard homeowners policy automatically covers short-term rentals. While some policies may allow occasional rentals, regular vacation rentals are often considered a business exposure and may require specialized coverage.
If you've recently started renting your property or increased the number of rental days each year, you should take the time to review your policy with your insurance agent.
Verify Your Dwelling Coverage
Construction costs continue to fluctuate, which is why it’s important to periodically review your dwelling limits. Ask yourself:
Would my current policy fully rebuild the home if it were destroyed?
Have I remodeled the kitchen or bathrooms?
Have I added a deck, garage, dock, or other improvements?
Updating your coverage after improvements helps ensure your investment is properly protected.
Understand Replacement Cost vs. Actual Cash Value
Another important question is how your property is insured. Policies written on a Replacement Cost Value (RCV) basis are designed to cover the cost of rebuilding or repairing your home with materials of similar kind and quality, subject to policy limits and conditions.
Policies written on an Actual Cash Value (ACV) basis factor depreciation into claim payments, which can leave property owners responsible for a much larger portion of rebuilding costs.
Understanding this distinction before a loss occurs is one of the most valuable conversations you can have with your insurance agent.
Review Your Liability Coverage
Vacation rentals naturally increase liability exposure because guests are unfamiliar with the property and its surroundings. A guest could slip on wet decking, fall from a dock, be injured around a fire pit, or suffer an accident while swimming or using outdoor amenities. Even something as simple as a falling tree limb after a storm could result in a liability claim. Before the rental season begins, review your liability limits and discuss whether an umbrella policy makes sense based on your assets and overall exposure.
Consider Flood and Water Damage Risks
Not all water damage is treated the same by insurance policies. Damage caused by burst pipes or wind-driven rain may be covered under certain circumstances, while flooding from rising water is generally excluded from a standard homeowners policy. Sewer and drain backups often require a separate endorsement as well. Understanding these distinctions before a loss occurs can help you avoid unexpected coverage gaps.
Don't Forget Detached Structures
Many Michigan vacation properties include detached garages, storage sheds, gazebos, boat houses, docks, and boat lifts. These structures may have separate coverage limits or exclusions depending on how they're classified in your policy. Make sure they're included in your coverage review so they receive the same attention as the home itself.
Review Coverage for Boats and Recreational Equipment
One of the biggest draws of a Michigan vacation rental is access to the water. Whether you provide a fishing boat, pontoon, kayak, canoe, paddleboard, or personal watercraft, these amenities can make your property more appealing to guests. However, they also introduce additional risks that many property owners overlook.
Homeowners insurance typically provides only limited coverage for watercraft, and larger boats almost always require a separate marine insurance policy. If guests are permitted to use your boats or recreational equipment, it's important to understand how both your property and liability coverage respond if damage or an accident occurs. Before offering these amenities, discuss your policy with your insurance agent to make sure your coverage reflects how your property is being used.
Understand Loss of Rental Income Coverage
If a covered loss makes your vacation rental uninhabitable during peak season, you could lose weeks or even months of rental income. Some policies offer coverage for lost rental income following a covered loss, while others do not. Understanding how this coverage works before you need it can help protect both your property and your income.
Keep Documentation Up to Date
Before each rental season:
Photograph every room.
Update your inventory of furniture and electronics.
Save receipts for major purchases and improvements.
Document any high-value items inside the home.
Accurate records can make the claims process much smoother should damage occur.
Perform a Seasonal Safety Inspection
Insurance protects against financial loss, but prevention is always the first line of defense. Before welcoming guests, inspect:
Smoke detectors
Carbon monoxide detectors
Decks and railings
Dock conditions
Exterior lighting
Fire extinguishers
Stairways and walkways
Trees with damaged or overhanging limbs
Addressing potential hazards helps protect both your guests and your property.
Review Your Policy Every Year
Vacation rental properties evolve over time. Renovations, new amenities, changing rental schedules, and rising construction costs all affect your insurance needs. An annual review helps ensure your coverage continues to reflect the way your property is actually being used, not the way it was used several years ago.
Protect Your Investment Before the Next Booking
Whether you own a cottage on Torch Lake, a cabin in Northern Michigan, or a vacation home along the Lake Michigan shoreline, making sure your insurance keeps pace with your investment is one of the smartest things you can do.
Schedule a Vacation Rental Insurance Review
If you're unsure whether your current policy fully protects your vacation rental, contact Navisure Insurance Group today. Our team can review your existing coverage, identify potential gaps, and recommend solutions tailored to the way you use your property so you can focus on welcoming guests with confidence.
COREY VANDERMEER | PRESIDENT
Corey started his insurance career in the claims department for a national carrier and learned the basics of insurance coverage and how it’s applied. From there he decided to take the jump into sales and joined an independent insurance agency. Here he learned how to build coverage around the needs of each individual and cater to every client. When Corey decided to start an insurance agency he did so with the intention of simplifying the process of getting insured. With a focus on technology and simplicity; his goal was to create an insurance agency that was different from those currently dominating the market place.
When he’s not working, Corey enjoys golfing, fly fishing and spending time with his wife and kids. Together they enjoy traveling to Northern Michigan and to his wife’s hometown of San Francisco.
Frequently Asked Questions about Vacation Rental Insurance
Q: Does my homeowners insurance cover a vacation rental?
Not always. Many homeowners policies have limitations or exclusions for short-term rentals. Depending on how often you rent your property, you may need specialized vacation rental coverage.
Q: Does Airbnb or Vrbo provide enough insurance?
While some rental platforms offer host protection programs, they should not be considered a replacement for your own insurance policy. Their coverage may have limitations and exclusions.
Q: Is flood damage covered by my vacation rental policy?
Typically not. Flood insurance is generally purchased separately from a standard homeowners or vacation rental policy.
Q: Should I insure my dock and boat lift?
Yes. Docks, boat lifts, and other detached structures may have separate coverage limits or exclusions. Review your policy to ensure they're adequately protected.
Q: What happens if I lose rental income after a covered loss?
Some policies include coverage for lost rental income, while others do not. Your insurance agent can explain whether your policy provides this protection and under what circumstances it applies.