The Insurance Clause Every STR Management Agreement Should Have (With Sample Language)

Most owners read the fee section of a management agreement twice and the insurance section never. That is backwards. The management fee decides how much you earn in a good month. The insurance clause decides who pays when a guest falls down the stairs, a pipe floods the downstairs unit, or a fire closes the home for four months.

This post walks through the insurance clause every short term rental management agreement should have: what it must require, the one sentence about commission income that most contracts leave out, what owners should push back on, and a sample clause you can hand to your attorney. It pairs with our guides to the Airbnb management contract and our short term rental management agreement template, which cover the rest of the document.

Why the insurance clause exists at all

Start with an uncomfortable fact. Your property manager's own liability insurance almost certainly does not cover injuries at your home. The standard property manager liability exclusion (a sample form in the industry is numbered PM 154) removes coverage for bodily injury or property damage "arising from any premises that you manage." According to Proper Insurance's program materials, that exclusion is the normal condition of a property management company's business insurance, not a rare one. The manager's policy protects the manager's office, its staff and its professional services. It does not protect your house. That is the business insurance reality for firms that manage properties for others.

Disclosure: the coverage framework in this article draws on program materials shared with Surge by Proper Insurance. Surge is not currently compensated by Proper, and owners are free to use any insurer that meets the coverage requirements below.

So when a guest is hurt at your rental property, the policy that responds is yours. That is the whole reason the management agreement needs insurance requirements in writing. The clause protects property managers and owners alike: it makes sure the right liability insurance and property insurance exist, that it is big enough, that the property manager is attached to it, and that nobody finds out it lapsed after the claim.

There is a second problem. Most homeowners policies were never built for paying guests. The Texas Department of Insurance home insurance guide puts it plainly: most policies will not pay for damages or injuries that occur during short term rentals, and you may need to buy more coverage. Landlord (DP-3) policies and their liability insurance have similar coverage gaps because they assume lease agreements, rent collection and a tenant who stays for a year, not a rotating set of guests. The clause forces the conversation about a proper commercial short term rental policy before the first booking, not after the first claim. Our short term rental insurance guide covers the three layers of insurance coverage in depth.

What the clause must require

A good insurance clause in a property management contract or property management agreement is short, specific and measurable. Here are the six things it should require of the property owner's insurance, and why each one matters.

Requirement	Minimum we recommend	Why it is there
Commercial general liability insurance	$1,000,000 per occurrence	Pays for bodily injury, medical expenses, legal fees, legal defense and settlements when a guest or visitor is hurt
Property coverage	Special form ("all risk"), replacement cost	Rebuilds or repairs the rental property and contents at today's prices, not depreciated value
Business income coverage	Actual loss sustained	Replaces lost bookings while the home is unrentable after a covered loss
Manager named as additional insured	On the liability policy	Puts the property manager inside your legal defense instead of suing you for it
Certificate of insurance (COI)	At onboarding and each renewal	Proof the coverage exists, with limits and dates the manager can verify
Notice of cancellation	30 days written notice to manager	Prevents the rental property from being listed with no insurance in force

1. Commercial general liability insurance, $1M per occurrence minimum

This is the line that matters most. General liability insurance pays when someone else is hurt or someone else's property is damaged because of your rental property: a guest who slips on a wet pool deck, a child who is bitten by a neighbor's dog in your yard, a visitor injured when a railing gives way. It covers medical expenses, legal fees, legal defense and any judgment or settlement up to the limit, and legal fees alone can be the largest line.

Why $1,000,000 per occurrence? Because a serious injury claim with surgery and lost wages can run past six figures quickly in medical expenses and legal fees alone, and because $1M per occurrence with a $2M aggregate is the standard limit in commercial short term rental programs. The Insurance Information Institute's business coverage overview is a good primer on how general liability coverage differs from the personal liability section of a homeowners policy. The short version: personal liability insurance was priced for your family and a few houseguests, not for 150 strangers a year.

2. Special form property coverage at replacement cost

Property insurance comes in named peril and special form versions. Named peril covers only the causes of loss listed in the policy. Special form covers everything except what is specifically excluded, which is the version you want on a rental property you do not personally occupy. Replacement cost means the insurer pays what it costs to rebuild or replace today. Actual cash value subtracts depreciation, and on a ten year old roof or a set of furnished bedrooms that subtraction is large. Commercial property coverage written this way is what turns a total loss into an inconvenience instead of a financial disaster. See why a standard homeowners policy falls short for Airbnb.

3. Business income coverage

When a covered loss shuts the home, you lose the mortgage payment's worth of bookings every month it is closed, and the property manager loses the commission on those bookings. Business income coverage replaces that revenue. The best versions pay actual loss sustained with no time limit; weaker versions cap at 12 months or a flat dollar amount. This coverage is also the hinge for the commission sentence discussed below. We go deeper on this in loss of rental income insurance for short term rentals.

4. Manager named as additional insured

Additional insured status means the property management company is covered under your liability policy for claims that arise from your rental property. Without it, an injured guest's lawyer sues both you and the property manager, each side's liability insurance carrier looks for a way out, the property manager's insurer points to the PM 154 style exclusion, and the manager's only recourse is to turn around and seek indemnity from you. Naming the property manager keeps everyone under one policy and one legal defense. Some commercial short term rental policies, including Proper's, extend liability to the property manager automatically. Our post on naming your manager as additional insured explains the endorsement and what a COI showing it looks like.

5. Certificate of insurance at onboarding and each renewal

A certificate of insurance is a one page summary from the insurer or agent that lists the carrier, policy number, coverage types, limits, effective dates and any additional insureds. The clause should require one before the listing goes live and again at each renewal. This protects both sides: the manager knows the coverage exists, and the property owner has a recurring reminder to confirm adequate coverage is still in force.

6. Thirty day notice of cancellation

Insurance policies get cancelled for missed payments, and insurance policies get non-renewed, underwriting changes and carrier exits, especially in coastal Florida and hail prone Texas. A 30 day notice requirement means the property manager hears about a cancellation while there is still time to replace the coverage, rather than discovering the gap when a claim is denied. Most carriers will add the manager as a certificate holder who receives cancellation notices at no cost.

The commission income sentence most contracts leave out

Here is a sentence almost no management agreement includes, and one that is easy to add. It concerns what happens to the property manager's commission when business income coverage pays out.

According to Proper's program materials, its Business Income - Property Managers Commission endorsement (form PI PR-400) pays the manager's lost commission when a covered loss closes the home. That commission is deducted from the owner's business income payout, so the owner is not paying extra. But it is paid to the property manager only if the management contract specifies it. If the contract is silent, the endorsement does nothing and the full business income check goes to the owner, who then has no obligation to share it. Proper describes how this works in its published case study on the commission endorsement.

Honest math on why owners should care. Suppose a kitchen fire closes your home for 60 nights and your business income coverage pays $12,000 of lost revenue. With a 20% management fee and a contract that specifies commission entitlement, the insurer pays $9,600 to you and $2,400 to the manager, exactly what each of you would have received if the nights had booked. Without the sentence, you receive $12,000 and the property manager receives nothing for two months of a property that still needs vendors coordinated, adjusters met and guests relocated. A manager who is being paid to see you through the claim tends to be a manager who shows up for it.

The sentence Proper suggests for property management agreements reads, in substance: if the owner carries business income coverage and a claim is triggered, the manager is entitled to lost commissions if the policy specifies as such. Note the conditional. It does not create a new obligation for you. It only says that where the owner's insurance policy already funds the commission, the property manager can collect it.

What owners should push back on

An insurance clause protects property managers and owners together, whatever the property type. It should not be a device for moving every financial risk onto the property owner, and a property owner should read it with that in mind. Financial risks belong with whoever controls them. Watch for these.

• Indemnity that runs only one way. Many drafts require the owner to indemnify, defend and hold harmless the manager for anything that happens at the property, including losses caused by the property manager's own negligence. Mutual indemnity is the fair version: each party covers claims arising from its own acts. You should not be paying a manager's legal defense because their cleaner left a door unlocked.
• A manager that carries no property management insurance of its own. Your liability policy covers premises claims. It does not cover the manager's mistakes in handling your money, misquoting a rate, a property maintenance vendor it failed to vet, a fair housing complaint about how a booking was declined, or a data breach of guest records. The manager should carry its own general liability insurance, professional liability insurance (errors and omissions) and, if it has employees, workers compensation. See the next section for what to ask.
• Shifting statutory and platform obligations to you. Local laws on permits, occupancy limits and taxes, and compliance with Airbnb and Vrbo rules, are things a property management company is paid to handle. A clause that makes the owner solely responsible for legal compliance while the property manager controls the listing is a mismatch of control and responsibility.
• Naming the manager as loss payee on your property coverage. Additional insured on liability insurance is normal. Loss payee on the building coverage means the property manager is on your insurance check for the roof. Say no unless there is a specific, explained reason.
• Vague coverage language. "Owner shall maintain adequate insurance" is unenforceable in both directions. Specific limits and forms protect you as much as the manager, because they define what "adequate" means before a dispute.
• Unlimited manager discretion to buy coverage on your behalf and bill you. Some agreements let the property manager purchase insurance policies and charge them back if you fail to provide a COI. A cure period (say 15 days after written notice) and a cap on what can be bought are reasonable guardrails.

None of this is a reason to avoid professional property management. It is a reason to read the paragraph, ideally alongside our line by line guide to the Airbnb management contract. A property manager with a well written insurance section is usually a manager that has been through a claim and learned from it.

Ask for the manager's certificate too

The clause covers your insurance. A good management contract also states what the property manager carries, and you should ask for their property management insurance certificate just as they ask for yours. Property management insurance is the manager's side of the same bargain. Here is what property management insurance typically includes for a property management company hired to manage properties for owners like you, and why each piece matters to you as an owner.

• General liability insurance. Covers bodily injury and property damage the manager's operations cause at its own office or in the course of business, subject to the managed premises exclusion discussed above. Most property managers bundle general liability with property coverage for their equipment in a business owner's policy (BOP).
• Professional liability insurance (errors and omissions). Also sold as omissions insurance or E&O, this is the coverage that matters most to you, and the one that protects property managers from their own mistakes. Professional liability insurance covers financial harm from the property manager's professional services: pricing errors, a missed permit renewal, a botched guest screening, mishandled client funds, or a discrimination complaint alleging fair housing violations in how a booking was accepted or declined. Fair housing claims are a real professional liability exposure for anyone who manages properties or handles tenant relations, and an owner can be named alongside the manager.
• Workers compensation. If the property manager employs cleaners, inspectors or maintenance staff and one is hurt in your home, workers compensation is what responds. The same logic applies when a prospective tenant slips during a showing at a long term unit the same manager handles: whoever controls the visit needs coverage. Without it, that injured worker's lawyer will look at the property owner's insurance next. The Texas Department of Insurance workers' compensation guide explains that Texas does not require most private employers to carry it, which is exactly why you should ask.
• Commercial auto. Staff drive to your rental property with supplies and guests' forgotten items. Commercial auto coverage keeps a fender bender on the way to a turnover from becoming your problem.
• Cyber liability. Property managers hold guest IDs, card data and your bank details in property management software. Cyber liability pays for breach response and notification costs.

Property management insurance cost is the property manager's expense, not yours. Property management insurance is also not a substitute for your own coverage; it never extends to the structure itself. A management company that carries this full stack of insurance policies is telling you something about how it runs its business operations. If the property manager cannot produce a certificate, that is information too.

Sample insurance clause for a short term rental management agreement

Below is sample language that combines the requirements above with the commission sentence. It is written for a single family or condo short term rental managed by a third party under a commission based management contract, and it drops into the insurance section of our short term rental management agreement template. Have your attorney review any contract language before you sign it. State law, your lender's requirements and your HOA can all change what belongs here.

Insurance. (a) Owner shall, at Owner's expense, maintain throughout the term of this Agreement a commercial general liability insurance policy covering the Property with limits of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate, naming Manager as an additional insured with respect to claims arising out of the ownership, use or operation of the Property. (b) Owner shall maintain property insurance on the Property and its contents on a special form (all risk) basis at replacement cost, and business income coverage with a limit of not less than actual loss sustained for a period of not less than twelve (12) months. (c) Owner shall deliver to Manager a certificate of insurance evidencing the coverage required by this Section prior to the Property being listed for rental, and thereafter within ten (10) days after each policy renewal or replacement. Each policy shall provide, or Owner shall cause the insurer to provide, not less than thirty (30) days prior written notice to Manager of cancellation or non-renewal. (d) In the event Owner carries business income coverage and a covered claim is triggered, Manager shall be entitled to its lost commissions for the period of restoration if and to the extent the policy specifies as such, and such amounts shall be paid from, and not in addition to, the business income proceeds. (e) Manager shall, at Manager's expense, maintain commercial general liability insurance of not less than $1,000,000 per occurrence, professional liability insurance (errors and omissions), and workers compensation insurance as required by applicable law, and shall deliver a certificate of insurance evidencing such coverage to Owner upon request. (f) Each party shall indemnify, defend and hold harmless the other from third party claims to the extent caused by the negligence or willful misconduct of the indemnifying party, its employees or agents. (g) If Owner fails to maintain the insurance required by this Section and does not cure such failure within fifteen (15) days after written notice, Manager may suspend rental activity at the Property until the required coverage is in force.

Again: this is a starting point for a conversation with a licensed insurance agent and a real estate attorney, not a finished document. In most states a property manager also needs a real estate license to conduct business activities like collecting rent for others, which is another line item to confirm with your state's real estate commission.

Plain English walkthrough, sentence by sentence

(a) The liability sentence

You buy and pay for commercial general liability insurance on the home at $1M per occurrence and $2M aggregate, and the manager is listed as an additional insured. "Per occurrence" is the most the policy pays for one incident. "Aggregate" is the most it pays in a policy year across all incidents. "Arising out of the ownership, use or operation of the Property" limits the property manager's protection to claims connected to your home. It does not make your policy cover the manager's other clients.

(b) The property and income sentence

You insure the structure and contents on the broadest form available, at the cost to replace them today, and you carry business income coverage for at least 12 months of actual lost revenue. Twelve months is a floor. A full rebuild after a hurricane in Panama City Beach or a flood in Houston can take longer, which is why the strongest policies have no time limit. Our Airbnb hurricane policy post covers what happens to bookings and income during a storm closure.

(c) The proof and notice sentence

You give the property manager a certificate of insurance before the listing goes live and within ten days of each renewal. Your insurer (or you) must give the manager 30 days written notice before the policy is cancelled or not renewed. Ask your agent to list the property manager as a certificate holder; most carriers do this at no charge.

(d) The commission sentence

If your business income coverage pays a claim, and your policy includes a commission endorsement like PI PR-400, the manager's lost commission is paid out of that claim, not on top of it. If your policy has no such endorsement, this sentence does nothing. It cannot cost you money the insurer did not already pay.

(e) The manager's insurance sentence

The property manager carries its own general liability insurance, professional liability insurance and workers compensation, and shows you a certificate when you ask. This is the sentence one sided drafts omit. Property managers need coverage for their own conduct, property managers need to prove it, and property managers need to keep it current. Putting it in the management contract makes it a requirement rather than a courtesy.

(f) The mutual indemnity sentence

Each side covers the other for claims caused by its own negligence. If the property manager's contractor damages someone else's property, say a neighbor's fence, the manager pays. If your unpermitted deck collapses, you pay. The phrase "to the extent caused by" matters: it allocates by fault rather than making one party absorb everything.

(g) The cure sentence

If your coverage lapses, the property manager tells you in writing and you have 15 days to fix it. If you do not, the manager can pause bookings until you do. That protects the property manager, but it also protects you from hosting uninsured guests, which is the worst outcome in this entire post.

Where the clause fits in the rest of the agreement

The insurance section works alongside the other risk paragraphs in property management agreements and property management contracts generally: the guest damage section, the security deposits or damage waiver section, and the termination section. Our management contract guide walks through each of those, and the agreement template shows how they fit together. Guest damage is a separate layer from insurance and the two cover claims differently. Platform programs like Airbnb's Host damage protection and AirCover for Hosts handle small guest caused property damage claims with their own exclusions and process, and a property manager's damage waiver program handles the rest. See damage waiver vs. security deposit vs. AirCover and how Airbnb Host Damage Protection actually pays for the details.

Two more items worth checking in the same read through. First, the agreement should say how long a guest can stay before lease terms and tenant law start to apply. Managing tenants under lease terms is a different job with different rights, and your own insurance and your tenant rules both change at that line. Second, if the manager collects revenue on your behalf, the contract should describe how client funds are held and reported, since mishandled trust accounting is a professional liability matter, not a property insurance one.

For Texas owners, our Texas STR insurance costs post and Texas Airbnb management guide cover state specifics. Florida owners should read Florida Airbnb insurance requirements and the Florida management guide, and can check carrier standing with the Florida Office of Insurance Regulation.

Quick answers

What are typical property management agreement insurance requirements?

Commercial general liability insurance of $1M per occurrence, special form property insurance on the rental property at replacement cost, business income coverage, the property manager named as additional insured, a certificate of insurance at onboarding and renewal, and 30 days notice of cancellation. Some management agreements also require the property manager to carry its own general liability and professional liability insurance.

Does the property owner's insurance cover the property manager?

Only if the manager is named as an additional insured or the policy extends coverage to managers automatically. Otherwise the policy covers the owner alone, and the property manager's own business insurance usually excludes claims arising from managed premises.

What property management insurance should my manager carry?

General liability insurance, professional liability insurance (errors and omissions) for mistakes in professional services and fair housing complaints, workers compensation if they have employees, commercial auto if staff drive for work, and cyber liability. Many bundle general liability and property coverage in a business owner's policy. Property management insurance coverage is the manager's cost, not yours.

Is an insurance broker or a licensed insurance agent required?

No, but a licensed insurance agent or insurance broker who writes short term rentals will know which carriers offer the special form, replacement cost and business income terms the clause asks for. A general agent may only offer a landlord policy, which usually will not satisfy the requirements.

What does a property manager's professional liability cover that mine does not?

Professional liability insurance responds to financial loss from the property manager's advice and services: pricing errors, permit lapses, mishandled owner money, financial reporting mistakes, errors in financial statements, and fair housing allegations. Your general liability coverage covers bodily injury and property damage at the home. They do not overlap much, which is why both need to exist.

What is the property management insurance cost to the owner?

Nothing directly. The manager pays for its own policies. The owner pays for the commercial short term rental policy on the rental property, which typically costs more than a homeowners policy because it covers business income, guest caused damage and commercial liability insurance limits. See the best insurance for Airbnb hosts for how programs compare.

Can a manager require me to use a specific insurer?

A property manager can require minimum coverage; it should not require a specific carrier. Any insurer that meets the limits and forms in the clause should be acceptable. If a manager receives referral compensation from an insurer, ask them to disclose it, as we do above.

Does a homeowners policy with a "home sharing" endorsement satisfy the clause?

Usually not. Those endorsements often cap rental days, exclude business income, and keep personal limits rather than commercial liability insurance limits. Read the endorsement against the six requirements above, or ask your agent to confirm each one in writing.

What if the manager will not add mutual indemnity?

Ask why. A property manager that carries its own liability insurance for general and professional exposures has coverage for its own negligence and should not need you to absorb it. If they still refuse, that is useful information about how they allocate financial risks and coverage gaps, and whose side of the ledger they expect losses to land on.

Get a human review of your agreement and your insurance coverage

If you are comparing managers or about to sign, we are glad to read the insurance section with you and tell you what we would change. Surge provides short term rental property management across Texas and Florida with full service starting at 15%, and every owner we onboard goes through the six requirements above before the first booking. Start with our owner's guide to Airbnb management, or reach out and send the draft over. No pitch, just a second set of eyes on the paragraph most people skip.