Tennessee is one of the most attractive short-term rental markets in the country, and Williamson County sits right in the middle of it. Between the tourism, the music, the history, and a steady stream of visitors to Franklin and Nashville, plenty of homeowners are turning a spare room, a guest house, or an investment property into income on Airbnb and Vrbo.

It can be a smart move. But there's a coverage gap underneath most short-term rentals that hosts don't find out about until they file a claim and it gets denied.

If you rent your place out, even occasionally, here's what you need to know to protect it.

The Gap Nobody Warns You About

Your homeowners policy is built around one assumption: that the home is yours, used as a residence, by you and your family. The moment you start collecting money from paying guests, you've introduced business use and standard homeowners policies specifically exclude business activity.

That means if a guest is injured on your property, or a guest damages the home, or a kitchen fire starts during a paid stay, your homeowners carrier can deny the claim outright. Worse, carriers can treat undisclosed rental activity as a misrepresentation and non-renew the policy entirely.

"But Airbnb covers me." This is the second trap. Platform protection programs like Airbnb's AirCover are helpful, but they are not a substitute for your own insurance policy. They come with conditions, exclusions, claim limits, and payout disputes — and they don't protect you the way a policy written in your name does. Treat them as a backstop, never as your coverage.

Homeowners vs. Landlord vs. Short-Term Rental: 3 Different Policies

This is where a lot of confusion lives. There are really three coverage tiers, and they don't overlap the way people assume:

1. Homeowners insurance covers a home you live in for personal use. No paying guests.

2. Landlord (rental dwelling) insurance covers a property you rent to a long-term tenant; someone on a lease for months at a time. It's built for stable, residential occupancy, not a revolving door of weekend visitors.

3. Short-term rental insurance is built specifically for transient, paying guests staying fewer than 30 days. It blends the property protection of a dwelling policy with the liability protection of a commercial policy.

Here's the catch most hosts miss: if you have an investment property and you assume your landlord policy covers Airbnb guests, it often doesn't. Many landlord policies exclude short-term, transient occupancy just like homeowners policies exclude business use. Short-term renting is its own animal, and it needs its own coverage.

"I only rent it a few weekends a year"

We hear this constantly, and it doesn't get you off the hook. From an insurance standpoint, business use is business use — the first paid guest is enough to put a standard homeowners claim at risk. Occasional renting actually tends to be the most dangerous situation, because those are exactly the hosts operating on a homeowners policy that was never designed for it.

The frequency doesn't determine your exposure. The activity does.

What a Proper Short-Term Rental Policy Covers

A policy built for hosting typically includes:

Commercial general liability - protection if a guest is injured and sues. Many Tennessee cities require limits of $1 million per occurrence (more on that below).
Building and property coverage - for the structure itself.
Contents and furnishings - the furniture, linens, appliances, and decor you've put into the rental.
Loss of rental income - replaces income if a covered event makes the property unrentable.
Guest medical payments - for smaller injury claims, without a lawsuit.
Optional add-ons - guest-caused theft or damage, amenity liability (think hot tubs, kayaks, bikes), and more, depending on the carrier.

Because we're an independent agency, we can place this with carriers who specialize in short-term rentals instead of forcing your property into a policy that wasn't meant for it.

Tennessee and Local Rules Every Host Must Know

Coverage is only part of operating legally. Tennessee's Short-Term Rental Unit Act protects hosts by limiting how far local governments can go in restricting rentals — but cities still set their own permit, zoning, and insurance rules, and they vary a lot across Williamson County and Nashville.

A few that matter most around here:

Franklin defines short-term vacation rentals as units rented in their entirety for fewer than 21 days and requires a city permit plus a business tax registration before you list. Zoning rules, including any owner-occupancy or per-lot limits, depend on your specific district and were updated as of January 2026. If you're grandfathered under an older permit, those protections remain in place unless the property is sold, transferred, sits vacant as a rental for 30 consecutive months, or accumulates three violations. Before you list anything new, confirm your zoning status directly with Franklin's Building and Neighborhood Services at (615) 550-6727 rules vary by location and the ordinance was recently rewritten.
Brentwood effectively prohibits short-term rentals in single-family residential districts for stays under three months, and the city actively enforces it with citations. If you're in Brentwood, confirm your situation before you list anything.
Nashville (Metro) requires a permit from Metro Codes before you list, distinguishes between owner-occupied and non-owner-occupied permits (the latter restricted to certain non-residential zones), and requires proof of liability insurance with limits of at least $1 million per occurrence to obtain that permit.
Taxes apply statewide: Tennessee's 7% sales tax plus local hotel/motel taxes that vary by county. Most platforms collect some of these automatically, but verify what your platform actually remits for your property type — you may still have a filing obligation.

Two takeaways: first, local rules change, so always verify the current ordinance with your city's planning or codes department before you host. Second, in several markets that $1 million liability requirement isn't optional — it's the price of admission to a permit, and the right policy gets you there.

Protect the Income and the Property

A short-term rental can be a great asset. It can also be the thing that quietly voids your homeowners policy and leaves you personally exposed to a six-figure liability claim. The fix is straightforward: the right policy, written for how the property is actually used.

If you're hosting on Airbnb or Vrbo — or you're thinking about it — let's review what you have and close the gaps before a guest ever checks in.

Holt Insurance Agency has helped Middle Tennessee families and property owners protect what they've built since 1946. We'd be glad to help with yours.

Call us at 615-221-7094 or Get Started Here.

Airbnb and Vacation Rental Insurance in Tennessee: What Hosts and Landlords Must Know