Everything You Need to Know About Insurance for Vacation Rentals

70,000 short-term rental properties have not yet provided proof of the mandatory short-term rental insurance, and owners risk having their licenses revoked by the city council

There are dozens of cases of vacation rental owners who, due to a lack of knowledge or carelessness, will end up facing complicated situations—many of which could easily be avoided by purchasing the right insurance.

Today, more than ever, mandatory insurance is no longer just a legal formality; it has become a true safeguard for those who invest in this business.

But what does the law say about mandatory insurance for short-term rentals?

1. What types of insurance are actually required for my vacation rental?

As of March 2025, all AL owners in Portugal are required to have a non-contractual liability insurance, with a minimum coverage of 75,000€, covering bodily injury and property damage caused to guests or third parties.

Proof of insurance must be submitted annually through the government portal; otherwise, you risk serious penalties, including cancellation of the AL’s registration.

Many homeowners are caught off guard by the consequences of noncompliance. The latest figures are concerning: More than half of the AL licenses in Portugal may be revoked due to a lack of insurance. Lisbon, Porto, and the Algarve are the cities that appear to have the highest rates of noncompliance.

2. How can you make sure you're protected?

📌 Confirm that the policy is up to date and explicitly covers the short-term rental business

📌 Please submit proof of insurance at gov.pt, every year.

📌 Talk to a specialized mediator or broker to to ensure that you have all the relevant coverage.

3. What other types of coverage should I consider to protect my business?

There are no right answers: each AL is unique. Many customers choose to include additional coverage, such as:

📌 Support for Hosts and Guests (support in case of accidents or breakdowns—very useful if you don't live near the property)

📌 Legal Protection (essential in the event of disputes)

📌 Coverage for damage caused by guests

📌 Medical Care for Guests (for minor accidents during your stay)

These coverages aren't required, but they can make all the difference—both for your peace of mind and for your guests' positive experience.

4. Some practical examples that illustrate the risks of noncompliance:

Automatic cancellation of registration and loss of revenue

A property owner in Lisbon, who owns two vacation rentals, ignores the requirement to submit proof of insurance. He receives a notice from the city council, and because he fails to respond in time (the deadline may be as short as three to ten days), his tourist rental registration is canceled. He loses reservations and revenue and has to start the entire licensing process over, which costs him thousands of euros and damages his reputation.

Fines and Administrative Offense Proceedings

A couple in the Algarve is the subject of an inspection by ASAE. They do not have valid insurance and have been fined. In addition to having their business suspended until they resolve the issue, the financial and emotional impact has been significant. And all because of a formality that would have cost less than 100 euros a year.

Accidents Involving Guests: Direct Liability and High Financial Losses

Without insurance, the owner must personally cover the costs of accidents involving guests. In one specific case, a child fell on a poorly marked step and broke an arm. Without insurance, the owner was held liable for the medical costs and was required to pay compensation—an unexpected and heavy financial burden.

Damages to third parties and ripple effects

In a building in Lisbon, a water leak in a rental unit causes damage to the apartment below and to the common areas. Without comprehensive insurance, the owner has to pay for all the damage out of pocket—an amount far greater than the annual cost of an adequate policy.

Loss of trust and reputation

Nowadays, it’s very common for guests to share negative experiences on social media, such as last-minute cancellations due to the host’s legal issues, or situations where they didn’t receive support after an accident. In such a competitive industry, trust is everything—and a lack of insurance can undermine years of hard work.

5. Is comprehensive insurance mandatory, or is liability insurance sufficient?

It depends on the type of property.

If you own a condominium unit (horizontal property), you also need comprehensive insurance that covers at least fire, lightning, and explosion. This insurance protects your assets and, in many cases, is also required by the homeowners’ association.

For single-family homes, the law does not require it, but based on our experience, we would never recommend going without this protection.

6. Which insurance companies offer the best coverage for these Local Accommodation insurance policies?

We work with several insurance companies that offer products specifically for AL:

📌 Loyalty (quite flexible in terms of coverage)

📌 Allianz (with packages for apartments, single-family homes, and lodging facilities)

📌 Ageas Insurance (with customized solutions and competitive prices)

📌 …
The key is to always ask for quotes and compare terms, because not all policies are the same—and what seems cheap can end up costing you more.
Our advice? Don't just look at the price. Check what is (and isn't) included.

At this stage of the analysis, the assistance of a mediator such as the EXS Insurance, can make all the difference: not only do they conduct comprehensive market research, but they also have in-depth knowledge of each product, and can help you find the solution that best suits your needs.

7. In summary

Home-sharing insurance isn't just a legal requirement—it's essential protection for your business and your peace of mind
Don't take any chances: get your situation in order, protect your investment, and ensure peace of mind for both you and your guests. If you need help, don't hesitate to seek professional advice.

It’s better to be safe than sorry. After all, when it comes to vacation rentals, trust is everything.