Damage Waiver Options for Short-Term Rental Property Managers

Guest damage is inevitable in short-term rentals (STRs). Property managers typically handle it using one of three methods: keeping claims off statements, self-insuring via damage waivers, or passing all claims through to owners. Each approach has pros, cons, and different communication strategies for owners.



What Is a Damage Waiver in Short-Term Rentals?

A damage waiver is a fee charged to guests to cover accidental damage during their stay. It’s most often applied to minor issues like broken dishes, stained linens, or a cracked lamp.

Damage waivers can be:

  • Third-party insured: The PM pays for external coverage.
  • Self-insured: The PM keeps the fee and covers repairs directly.

Many PMs earn a small margin by charging guests and purchasing lower-cost third-party coverage.



The 3 Main Ways Property Managers Handle Guest Damage

1. Keep Claims Off the Owner Statement

How it works:

  • Property Manager covers the repair cost upfront and files the insurance claim.
  • Both the expense and reimbursement stay off the owner’s statement unless the claim is denied.
  • If denied, the expense appears on the next owner statement.

Pros: Clean, simple statements with minimal owner confusion.
Cons: Requires careful internal bookkeeping.

How to explain to owners:
“We have insurance that covers accidental damage. You’ll only see a charge if the claim is denied. Our goal is to handle as much as possible behind the scenes.”

2. Self-Insure via Damage Waivers

How it works:

  • Guests pay a non-refundable damage waiver fee per stay or per night.
  • The PM keeps this revenue and uses it to pay for accidental damage repairs.
  • Owners are not involved unless costs exceed the waiver pool.

Pros: Faster resolution, fewer admin headaches, and full control.
Cons: Requires monitoring to ensure claims don’t exceed funds.

How to explain to owners:
“Instead of a large security deposit, we charge a small damage waiver fee to cover minor accidents. For anything bigger, we’ll work with you to find the best solution.”

3. Pass All Claims Through to Owners

How it works:

  • Manager charges the owner for the repair immediately.
  • If insurance reimburses the claim, the PM credits the owner later.

Pros: Full transparency, no out-of-pocket risk for the PM.
Cons: Statements can become overly detailed and confusing, especially if insurance payouts are delayed.

How to explain to owners:
“When damage occurs, we process it through insurance and bill you for repairs. Any approved reimbursement is credited once we receive it.”



Third-Party Damage Waiver Providers

If you prefer external coverage, these providers are popular in the STR industry:

  • Safely – Up to $1M in damage & liability coverage, fast claims.
  • Waivo – Guest damage coverage with PMS integration.
  • SUPERHOG – Combines guest identity verification with protection.

Your PMS may also offer its own built-in damage waiver option.

Recommendations

  • Want clean statements, have frequent claims, and don’t want to shoulder the risk? Go with Option 1 (what most of our clients do).
  • Low claim volume & want control? Choose Option 2 and self-insure.
  • Owners want full detail and want to minimize out of pocket risk? Use Option 3.


FAQs

What’s the difference between a damage waiver and a security deposit?
A damage waiver is a non-refundable fee that covers certain damages. A security deposit is refundable if no damage occurs, but funds are held upfront.

Can damage waivers cover intentional damage?
Generally no - waivers cover accidental damage. Intentional or negligent damage is usually excluded.

How much should I charge for a damage waiver?
Most operators charge $40-$60 per stay, depending on the property size, risk profile, and what’s covered, although these can certainly vary.