One of the biggest and most present fears you may have as a property manager overseeing vacation rentals is trusting that your guests will respect your property and not cause any damage. 

However, as even the best guests can accidentally break items or worse, you’ve likely already had some bad experiences. Recent research by Rentals United shows that 90% of hosts have experienced guest-related damages, with over half managing three or more incidents in the past two years. 

The impact of property damage extends beyond physical repairs and is not just limited to cost: you can lose bookings when you ask for a security deposit or waste time negotiating compensation with guests and rental insurance companies if you don’t. If the guest is also involved in the process, such incidents may end up in a string of bad reviews that will affect your reputation as a host.

We’ve put together this comprehensive guide to vacation rental damage protection so you can choose the right protection strategy for you, making the difference between smooth operations and endless headaches.

1. No protection – The Risky Gamble 

One approach is to forego any formal protection, relying on the ability to select trustworthy guests or imposing rules and other tactics. To keep their properties safe, property managers might include strict cancellation policies, not allow parties on the property, or carefully vet guests. This strategy may seem appealing at first—no additional costs, no complicated policies—but it does not come without risks. 

If damage does occur, property managers must attempt to resolve the issue directly with the guest, asking them to cover the costs. However, there’s no guarantee that the guest will comply (especially if it’s accidental damage), which can lead to uncomfortable situations and even negative reviews.

Pros of No Protection:

• No additional costs for protection – Enables you to allocate your budget toward other areas of your vacation rental business.
• Complete control – You have control over the guest selection and screening and the handling of any damage issues that arise.

Cons of No Protection:

• High financial risk – You have to cover the costs of any damage out of your pocket. Even minor repairs can add up over time, negatively impacting your property management growth and profits.
• Potential for disputes – If significant damage occurs and the guest refuses to pay, it can lead to disputes, tension, and negative reviews, decreasing future bookings and harming your reputation.
• Unpredictability – Having no protection for property damage relies heavily on the hope that guests will behave responsibly, but there’s no way to guarantee this.

Bottom Line: While this option might save money upfront, it leaves property managers vulnerable to financial losses and complicates guest relationships.

Research shows that many property managers wait until they’ve had a negative experience before taking action. 66% of those who weren’t thinking about damage protection ended up with property damage in the last two years, while 60% of those who were just thinking about it but didn’t act on it faced three or more incidents. Waiting can be costly, so being proactive is key: protect your properties before it’s too late. 

2. Insurance – The Time-Consuming Safety Net

Rental property insurance has long been a go-to solution for property managers. It typically covers a range of potential damages, from structural damage to personal property loss. If something goes wrong, the property manager can file a claim with the insurance company to seek reimbursement for repair costs. 

However, insurance policies often come with deductibles, which means property managers must pay a portion of the repair costs out of pocket before receiving the insurance money. Filing a damage claim can be a time-consuming and bureaucratic process, requiring documentation and back-and-forth communication with the insurance company. This is a time-consuming and exhausting process for all property managers, whether you are managing five properties or 1000.

Pros of Insurance:

• Comprehensive coverage – Rental insurance offers protection against a wide range of damages, acting as a safety net that can prevent significant financial losses.
• Peace of mind – Knowing that your properties are covered can provide a sense of security, especially in the event of significant damage.

Cons of Insurance:

• Time-consuming claims process – Filing and managing rental insurance claims can be a lengthy and frustrating process, particularly for property managers with multiple properties to oversee.
• Deductibles and exclusions – Insurance policies often come with deductibles, meaning that property managers must cover some of the costs themselves. What’s worse, some types of damage may not be covered by the policy, leaving gaps in protection.
• Potential for premium increases – After filing damage claims, property managers may see their insurance premiums increase, further adding to the cost of protection.

Bottom Line: Insurance is a solid option for protection, but the time, effort, and resources required to manage claims can be overwhelming, particularly if you are a property manager with a large portfolio.

3. Security Deposits – Agree to Disagree 

Security deposits are another common option, offering a financial buffer in case of damage. Property managers who use security deposits require guests to pay a certain amount upfront to safeguard against potential damage. The deposit is refunded if the guest leaves the property in good condition. If damage occurs, the property manager can withhold part or all of the deposit to cover repair costs.

While this method can be somewhat effective, it does have downsides. The biggest disadvantage is that properties asking for security deposits see fewer bookings, being counterproductive to the goal of achieving as many bookings and as much revenue as possible. Disputes over deposit refunds may create friction, and guests can leave negative reviews if they feel that they’ve been unfairly charged.

Pros of Security Deposits:

• Immediate funds for damage repair – Security deposits provide immediate access to funds for repairs, reducing the need to dip into savings or profits. Additionally, you can set the deposit amount depending on the characteristics of your property; for example, if you have a pet-friendly rental, you may raise the price of your security deposit.
• Guests may feel responsible for your vacation rental property – Knowing that their deposit is on the line may encourage guests to treat the property with care.

Cons of Security Deposits:

• Guests hesitating to pay – Large security deposits can discourage potential guests from booking, particularly those who are budget-conscious or wary of tying up their money in deposits.
• Disputes and negative reviews – Disagreements over what constitutes as a fair amount to deduct from a security deposit can cause friction between you and your guests, possibly causing them to leave negative reviews.
• Resource intensive to manage – Depending on your local legislation and your property portfolio, managing security deposits can be time and resource-consuming and add to the administrative burden of property management. 

Bottom Line: While security deposits offer some level of protection, they can lead to fewer bookings on your property, create tension with guests, and add to your workload. If you want to keep your guests happy and minimize administrative tasks, this approach may not be the right one for you.

4. Screen & Protect – The Hassle-Free Solution for Peace of Mind

Screen & Protect, the new feature from Rentals United, provides hassle-free comprehensive protection. It safeguards properties from guest-related damages while screening and verifying guests in advance. Unlike insurance or security deposits, Rentals United’s Screen & Protect service shifts the focus to minimizing risks before they happen, so that you and your guests enjoy a smooth, risk-free, and enjoyable experience.

When someone makes a booking, Rentals United either approves the guest or alerts you if they don’t pass our verification process. We screen guests based on their past bookings made on OTAs, which provide a clear overview of their behavioral history. If, despite screening, the property still suffers damages, Rentals United can reimburse the costs. 

Nothing beats the confidence and peace of mind that comes from knowing your guests have been pre-screened, reducing the chance of problems before they arise.

Pros of Screen & Protect:

• Reduced Risk with Guest Pre-Screening: Verify guests in advance to reduce the likelihood of damages.
• Enhanced Guest Experience: No security deposits or uncomfortable discussions about damages; guests enjoy a smooth stay, leading to positive feedback and repeated bookings.
• Increase in Bookings: Having Screen & Protect in place gives you the option of removing security deposits, boosting your property’s appeal and attracting more guests.
• Full Control and Streamlined Operations: Easily monitor screening statuses for every reservation and manage protection seamlessly for all properties and channels from Rentals United’s centralized platform.
• Build Trust with Property Owners: Screen & Protect shows your commitment to safeguarding their investments, helping you build a reliable, trusting relationship.

Cons of Screen & Protect:

• Small additional cost – This can be offset by factoring it into your property management fees or adjusting your nightly rates, effectively passing the cost onto the guest. Studies have shown that this slight rate increase does not impact bookings. In fact, property managers often see an increase in bookings, as guests are attracted to properties that include protection, have good reviews and don’t ask for deposits. 

Bottom Line: Screen & Protect reduces the risk of guest-related incidents through pre-screening, enhances the guest experience by removing security deposit requirements, and seamlessly integrates with the Rentals United platform for easy management across properties. It eliminates the need for time-consuming claims, reduces guest friction, and ensures that your properties are protected with minimal effort. You can now focus on your property management goals, increase your bookings and profits, and provide exceptional vacation experiences to your guests.

How Rentals United’s Screen & Protect works:

1. Activate the Screen & Protect service in the Rentals United portal.
2. Each time a reservation is created in any of the sales channels, we automatically perform the guest screening and inform you about the verification result.
3. You sit back, relax, and welcome guests who’ve been pre-verified for a smooth stay!
4. In case of property damage, you can submit your evidence within 15 days of the check-out date.
5. Case resolution takes place in 2 working days.

Learn more about Screen & Protect.

Already a Rentals United client and want to start protecting your properties? Sign up and a member of our team will help you get started.