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

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 going to dive into 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 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 Dest, 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 air 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 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, the two most common companies that you'll hear out there today are WEO 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 dispersed, right? And so, they can become the one providing this option for you. And so if you're working with a company like Evolve

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 onto 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 strries.com. The correct way to set that up. But for those of you interested in charging a damaged 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. Really easy to check our policies these days. is just plug it into an AI tool like chatbt or claude and ask it what am I protected by with this policy. Some other things bodily injury

claims tied to a guest incident. So this is just one layer of protection, right? We want to make sure at the very highest level that the property itself is in an entity structure that you are comfortable with. if it's under your personal name and not an LLC, for example, and you happen to get a lawsuit at the property, well, someone could go after everything under your personal name. Whereas, if it's in an LLC, the liability is limited to that property or whatever that LLC owns, hence

the name limited liability company, right? And so, you want to make sure that your entity level is set up correctly first. But, of course, you want to verify all that with an asset attorney. I am not an attorney myself. So that's the the top top view. Then you want to make sure you have really good property insurance, right? That covers a short-term rental. You have protections through the OTAAS. So like air cover, Booking.com, and this damage waiver is just one more layer of protection aside from

the guest verification and things that you're doing on the reception site. Some common exclusions, damage from rule violations. So this could be someone potentially smoking in your property when you have a rule posted that it's a non-smoking home. Bringing pets into a non-pet friendly property. Damage that is not reported during the stay or is only reported after checkout. Again, check with your policy, but they've got some fine print in these things. Guest personal items that are lost or stolen. Again, another exclusion. Situations involving serious negligence

or unauthorized parties. So, these policies, I mean, they get you right. They've got this stuff in the fine print. However, we have had pretty good luck filing a lot of these claims. It has gotten more and more difficult as more people have jumped onto the claims process. So, my recommendation, if you're in a market and you have an average daily rate where it's justified, then feel free to go ahead and charge a damage deposit. If you find that some of your claims are getting declined and

you have a really good documentation process, well, then you might want to consider going back to an deposit option. In order to actually charge the damage waiver, you'll need to make sure you have a payment processor set up like Stripe. Most people aren't charging this damage waiver on top of an Airbnb reservation because they already have air cover. And so these companies like Wave Own Safely will actually let you pick which channels you want to be insuring. So if you're looking for a little bit more

peace of mind, damage waiver can be some extra protection. It can also include excessive dirtiness. So, if someone's child drew all over your wall with crowns or things like that, those are some pretty common cases that you can win with a damage deposit. The question does come up pretty often, if I charge a damage waiver, does that mean my guests are actually going to cause more damage because they can get away with whatever they want? Not really. The answer from the properties that we work with

in dozens and dozens of markets, we haven't really seen a correlation there. In fact, most of the properties that we have damage waiverss on, it's very rare that we're actually filing a claim. And so for you property managers out there, this is potentially another profit center, right? You need to make sure you know how many reservations are coming in and what your average claim cost would be and how often you're actually having a claim. But if that number is a lot lower than the amount you're

charging the guest, well, that can be a great profit center for you. And I know a lot of large property management companies do this. I have a lot of friends with larger property management companies that are doing this as well. Just to wrap it up here again, make extra certain that you are not doing your property a disservice by charging a damage waiver and raising the reservation price too much. Just take a look at your competition. See if they are charging it. And if they're not,

and if you have a low average daily rate, then please go back to a deposit. This isn't going to raise that total reservation amount. You will still have protection and you will get more bookings. I hope this gave you a little bit more insight into damage waiverss. If you have other tips on filing your claims, we would love to know those. Share them with us here so that we can share them with the rest of the world. And until next time, I hope you have a

fabulous week.