Should Vacation Rental Hosts Include a Damage Waiver Fee for Guests?

Whether it is a rental agreement, travel insurance, or vacation rental liability insurance, there will always be terms and conditions that can make a huge difference down the line. For example, if you have been relying solely on the insurance offered by vacation rental platforms, it might not include complete coverage for damages caused by a guest.

For this reason, many hosts opt to charge a damage waiver fee to cover damage to their property that may be caused by guests accidentally. 

Read on to learn more about a damage waiver fee and how to make it work for you. 

What Is a Damage Waiver Fee?

A damage waiver fee is standard in vacation rental properties. In short, it’s a prepaid, non-refundable fee that can be included in the total price of renting vacation rentals. 

The damage waiver fee will be used to cover accidental (in other words, unintentional), minor damages, and accidents to the property that might occur during a guest’s stay, such as spills, stains, and broken glassware. 

While the guests won’t be held responsible for the accidents, they will still need to report it to the property manager or vacation rental owner.  

To sum up the process of damage waivers, the guest will pay the property manager or vacation rental owner set damage waiver fees instead of a security deposit. Once this damage waiver fee is paid, the guest won’t be held accountable for accidental damage as long as they report it and stick to the house rules as set out in the rental agreement. 

How Much Should Guests Pay as a Damage Waiver Fee for Rental Property?

Guests may pay less for a damage waiver fee, but, depending on the company that the vacation rental owner uses, it doesn’t mean that the coverage will be minimal. The damage waiver fee generally charges anything between $35 to $100 per reservation. Factors like the type of accommodation and the duration of the guest’s stay will impact this amount. 

If your short-term rental will also provide certain equipment like gym equipment or bicycles, the damage waiver fee can also offer protection in the event of accidental damage to the equipment. With regards to the cost, it is about 10 to 15% of the standard vacation rental rate. Once again, this will cover only the cost of possible repairs and not replacement in the event of theft. 

How Can Hosts Implement the Damage Waiver Fee?

There are a number of ways in which a damage waiver fee can be implemented. For starters, you can make it mandatory or optional. As a matter of fact, you can build it into the rate so that it is actually invisible to the guest. 

However, you should pay careful attention to the language used. It is key that you do not make it sound as if it is insurance. Also, when implementing a damage waiver fee, you need to ensure that timeous reporting of any damage (even accidental) should be a condition that is clearly listed. 

Whenever you are in doubt, it is best to double-check what your state’s rules and regulations are in connection with implementing a damage waiver fee. For example, in some states, the fee may also be regulated. 

Damage Waiver Fee vs. Security Deposit: What Are the Differences?

As a matter of fact, several guests prefer to pay an additional cost for a damage waiver if it means that they won’t be charged a bigger security deposit. In addition to cost, there are a couple of other important differences between security deposits and damage waivers that guests should keep in mind.

All in all, damage waiver fees are preferred over security deposits by hosts who run a bigger vacation rental company. While some types of damage are excluded, it is much easier to manage and can minimize the chances that there will be guest conflict. 

On the other hand, security deposits are better for smaller vacation rental businesses. Not only do they give homeowners more control, but the situation can also be resolved much faster. Plus, as security deposits are typically more expensive, they can motivate guests to take special care of the property, furnishings, and equipment. 

What Specific Damages Are Excluded From a Damage Waiver Fee?

Like with any insurance policy, there are certain items that will be excluded from the primary coverage. With regards to damage waiver fees specifically, the following are typically excluded:

• Lost or stolen items
• Damage to personal items
• Damage that results from the guest failing to adhere to the house rules
• Intentional damage (which will include damage that results from a party)
• Routine maintenance
• Standard item replacements like linen

It is also important to note that if the guest fails to report the damage during the stay, the damage won’t be covered. This cost, along with other damage that is excluded by the damage waiver fee, will be charged to the guest’s account directly. 

Pros and Cons of a Damage Waiver Fee

Depending on the size of your vacation rental portfolio, the benefits offered by damage waivers can outweigh the cons. Here are some of the main factors to keep in mind when choosing between security deposits and damage waivers:

Pros:  

• Extra protection against accidental damage

Not only is this the main reason why vacation rental hosts opt to charge a damage waiver fee, but it is also the biggest benefit. As it helps to protect guests and hosts, it is a win-win for both parties. Hosts are protected against extra cleaning or repair costs that could add up to several thousand dollars, while guests can enjoy peace of mind knowing that they won’t have to end up paying more for an accident. 

• Less hassle than a security deposit

Many guests find that paying a small fee for a damage waiver instead of a security deposit is more convenient. While they will get the security deposit back if all goes well during the stay, it is usually a big sum that can quickly make the holiday more expensive. 

All in all, guests prefer to forfeit the smaller amount paid for a damage waiver fee than having to pay a much larger sum and only to wait for it to be returned after they check out. 

• No disputes with guests 

When you charge a security deposit instead of a damage waiver fee, you run the risk that there will be disputes. If you want to deduct an amount for damage caused to, for example, patio furniture, the guest might argue that it was already damaged before they checked in. 

Not only could it end up costing you money, but it can also result in a negative review and an overall dissatisfactory guest experience. 

• The lower fee could attract more guests and encourage repeat bookings

Security deposits can range anything from $250 to $500. This means that it can be as much as 10 times more than a damage waiver fee. That is a lot of money that guests could spend on other services. 

This difference in cost can be a dealbreaker. What’s more, if most of your competitors do not charge a security deposit, there is a real possibility that they will rather book a similar listing somewhere else.  

Not only can a damage waiver fee help you to attract more bookings and possibly set you apart from your competition, but it could also encourage guests to book with you again. After all, considering that they could save about $400, they can now afford to book another holiday sooner. 

Keep guests coming back with vacation rental software

While cost is a deciding factor that can help encourage guests to book your vacation rentals again, it is no replacement for an exceptional guest experience. In order to attract repeat bookings, hosts also have to make it their goal to deliver a top-quality guest experience from when they check in to when they check out. 

Vacation rental software can help guests to deliver a memorable guest experience time after time. By making routine admin tasks like calendar synchronization more efficient, a vacation rental software solution, such as iGMS, will free up valuable time that hosts can dedicate to personalizing their service.  

Even if you manage only one short-term rental property, iGMS is a worthwhile investment. 

The following are just a few examples of the routine tasks that it can streamline:

• Managing multiple accounts and listings on the major vacation rental sites
• Organizing your messages and email into a single feed and using automated templates and triggered messaging to improve guest communication
• Automating the process of guest reviews 
• Creating a website for direct bookings
• Tracking your business performance on an analytics Dashboard
• Managing direct bookings using a direct booking management toolkit
• Receiving payouts and creating invoices by connecting your Stripe account to iGMS
• Sharing cleaning daily schedules with your team and auto-assigning tasks.

Cons:

• It does not cover all types of damages

As mentioned earlier, damage waiver fees will exclude a few types of damages that are typically be included in a traditional insurance policy. That being said, it is key that vacation rental hosts have some form of agreement in place regarding potential damage. 

So, if you want to make it more convenient for your guests and hopefully attract more repeat bookings, a damage waiver fee could be the best course of action. 

• It could take longer to claim 

If you use a third-party damage waiver protection company, it could take longer to process the claim (in some instances it might take even longer than a month). 

The process for submitting a claim can also be more complicated. You often have to file a substantial number of documents timely. However, if you have charged a security deposit in the past and you felt that it was too troublesome to gather, track, and return, you might not mind waiting longer for a claim to be processed. 

Can Hosts Charge a Damage Waiver Fee and Request a Security Deposit Too?

It is not advised that you charge both a damage waiver fee and request a security deposit. After all, this will mean that you will be charging the guest twice for the same thing. Needless to say, when this happens it can lead to a lot of confusion and can ruin the guest experience. Plus, charging a security deposit on top of a damage waiver fee will replace the convenience that makes the latter option so popular among guests. 

However, you could possibly give your guests the option between the two. In other words, they can either pay the fee or the damage deposit. 

Then, for the extra coverage, you can seek a reliable insurance policy to cover any damage not covered by the damage waiver fee. 

Is a Damage Waiver a Form of Liability Insurance?

It is important to note that a damage waiver is not liability insurance. Instead, it is a nonrefundable fee that guests pay as part of their rental agreement so that they waive responsibility for accidental damage. 

Not only should vacation rental owners and property managers know the difference between a damage waiver fee and liability insurance, but they should also ensure that their guests are informed that a damage waiver fee will cover only accidental damage (and even then, terms and conditions may apply). 

Ultimately, a damage waiver fee does not offer enough coverage. So, just like car rentals might need extra insurance coverage, so too hosts will need to invest in their own liability insurance.

By having their own insurance, in addition to the damage waiver, vacation homeowners can rest assured that their business is well covered against any kind of damage caused.