352. Damage Waivers Explained: What They Cover (And What They Don't)

**Tim Hubbard** (0:00)
Damage waivers sound like free protection. You charge your guests at your short term rental a little bit extra, and you get some extra insurance in case something's broken. But does this actually work? The challenge here is that the wrong setup can actually shrink your bookings instead of just protecting your property. So today we're gonna dive in to all the details about damage waivers, how you set them up, if you actually need them, and if they really actually protect your short term rental.
Welcome to Short Term Rental Riches. We'll discuss investing in real estate, but with a specific focus on short term rentals. Quick, actionable items to acquire, manage, and scale your portfolio.
I'm your host, Tim Hubbard.
Welcome back to the show. I'm happy you're here again. So what exactly is a damage waiver? Well, quite simply, it is an additional fee that your guest is going to pay when they make a reservation at your property. And if they damage something, they will be covered up to that policy limit, which is usually $3,000 to $5,000, which means they could be off the hook for damages. But you as a host, you get insured on that reservation from that damage waiver company. You'll find that this is extremely common in typical vacation rental markets like Panama City Beach or Destin, Florida, or the Smoky Mountains. And a lot of companies, like Casago, for example, or Evolve Vacation Rentals, make this a required fee. And so on thousands and thousands of listings, this just shows up automatically, and the guest has to pay it. Now, this wouldn't cover any sort of, like, intentional damage from your guest, but we'll get into a list of the things that it does and does not include here in just a second. First off, let's talk about just how it works. So, let's say a guest accidentally damages something. They break a lamp. Well, it works very similar to any damage policy, like error cover, or now booking.com has their own damage policy where you need to provide some evidence, right? So, hopefully, your turnover process at your short-term rental has a lot of really good documentation with your housekeeper. Where they're taking photos, you can simply attach photos. The more evidence you have, the easier it will be to win your case. Of course, things like a receipt, or if you don't happen to have one, finding the exact current price on Amazon could do the trick. So, you submit your evidence, you file a claim on behalf of the guest's damage. The guest doesn't actually have to be involved in this process, aside from just giving you any information that you need to submit the claim. And so, you file the claim. The two most common companies that you'll hear out there today are Wavo and Safely, and they both work essentially the same way.
Maybe there's some fine print that's a little bit different. The costs are pretty much the same as well. Now, if you have your property managed by a large property manager, it's very likely that they are actually the ones providing this damage waiver. So, it's not technically insurance, so they're not required to have those licenses. It's a damage waiver. And the larger the management company, the more that risk is disbursed, right? And so, they can become the one providing this option for you. And so, if you're working with a company like Evol Vacation Rental, for example, this is another profit margin. We'll talk a little bit more about that in just one second. So, in a nutshell, that's really the process. There's some damage, you get some evidence, you file a claim with the damage waiver company, and you get paid. Let's talk about the actual coverage now and what you might expect to be charging a guest.
This really depends on your market, right? And so, if you're in a vacation rental area where everyone charges a $50 damage waiver, which buys the guest $3,000 of damage protection, well, you can probably get away charging the same thing. But remember, all of these fees that we tack on to the reservation make our total reservation costs higher. And that means if we're less competitive in the market, we're going to have lower visibility.
Our property is not going to show up as easily, and our chance of getting booked declines. The alternative to this, which I highly recommend, if your average daily rate is really less than $200 or $300 a night, I would go with a deposit. I did a whole episode on that. You can check it out at strriches.com, the correct way to set that up. But for those of you interested in charging a damage deposit, if you don't already have one now, or maybe you already have one, but you're not quite sure what it covers, well, I'm going to read off my list here for the things that it typically does cover and the things it typically does not cover. So any sort of accidental damage to the property, this could be scratches, spills, you know, scuffs on the wall, holes in the wall, broken glasses, those types of things, or damaged furniture, minor content damage. You always got to check the fine print on your policy for these things, but it's possible it could actually include theft as well.