The outcome of a future claim is largely shaped by decisions made long before a loss occurs
The Wall Street Journal recently published an analysis showing that the five largest home insurers — State Farm, Allstate, Liberty Mutual, USAA, and Farmers Insurance — closed more than 44% of claims last year without payment. That figure is up from 36% a decade ago. Shortly after, Weiss Ratings reported that 15 large U.S. carriers closed at least 50% of homeowner claims with no payment in 2025, with some exceeding 60% and 70% non-payment rates.
The numbers are striking. They have generated significant coverage and considerable frustration among property owners who feel they paid premiums for protection that is not being delivered.
But the data carries an important caveat that does not appear in most of the coverage about it. The Wall Street Journal's own methodology note acknowledged that not every claim closed without payment represents a bad-faith denial. Their analysis captured claims that fell below a policy's deductible, claims that were withdrawn by the homeowner, and losses that the policy simply does not cover. The data does not include specific denial reasons, and insurers define and count claims differently.
That nuance matters — not to defend carriers, but because it points to something STR property owners can actually act on. A meaningful portion of claims that close without payment close for reasons that had nothing to do with bad faith and everything to do with how the property was insured, documented, and maintained. Understanding which reasons those are is the first step toward doing something about them.
Why Claims Close Without Payment
The reasons a valid property claim gets closed without payment cluster into a predictable set of categories. Not all of them are within the property owner's control. Some are. For STR operators specifically, the controllable categories represent significant exposure.
The loss fell below the deductible. This is the most common reason claims close without payment, and it affects a growing number of property owners as carriers have shifted toward percentage-based deductibles in high-risk markets. In Florida, coastal North Carolina, Texas, and other hurricane-exposed markets, wind deductibles of 2%, 5%, and 10% of insured value are common. On a property insured for $400,000, a 5% wind deductible means the owner absorbs the first $20,000 before the carrier contributes anything. Many smaller losses — a wind event that removes shingles, hail damage to HVAC equipment, a fallen tree — come in below that threshold. The claim closes without payment because the deductible was never met, not because anything improper occurred. The owner, who did not fully understand their deductible structure, experiences this as a denial.
The cause of loss was excluded. Flood is the canonical example. Flood is excluded from virtually every standard property insurance policy and requires a completely separate flood insurance policy. When storm surge or rising water causes damage and the property owner files against their property policy, the claim is denied — not improperly, because flood was never covered by that policy. The owner often does not know this until the denial arrives. A similar dynamic plays out with ordinance and law coverage, sewer backup, and a range of other perils that are excluded from standard forms but available as endorsements or separate policies.
The risk was not fully disclosed. This is where STR operators face a category of exposure that most residential property owners do not. A homeowner's policy is underwritten for personal residential use. When a property is used as a commercial short-term rental, that use constitutes a material change in risk from what the carrier priced. If the property owner never disclosed the rental activity, the carrier may deny a claim on commercial activity exclusion grounds — particularly if the claim involves a paying guest. The same logic applies to undisclosed amenities. A pool, hot tub, fire pit, dock, or trampoline represents a material change in liability exposure. Carriers that discover undisclosed high-risk amenities during a claim have grounds to deny or limit coverage based on the misrepresentation.
The loss was attributable to maintenance failure. Property insurance covers sudden, accidental losses. It does not cover the gradual deterioration of a structure or the failure of a property owner to maintain the asset in reasonable condition. A roof that fails after decades of deferred maintenance is not a covered claim — it is a maintenance expense. A deck that collapses because of rotted joists that were present well before the loss event is not a covered structural failure — it is a maintenance failure. Carriers inspect properties and investigate claims. When they find evidence that the loss was the foreseeable result of deferred maintenance, they deny coverage on wear-and-tear or negligence grounds. In STR properties that cycle through heavy guest use, the wear-and-tear exclusion applies to a broader range of conditions than it would in a lightly used personal residence.
The documentation was insufficient. This is the quieter reason. A claim requires documentation of what existed before the loss, what was damaged, and what the restoration requires. In properties where no pre-loss documentation exists — no photographs, no inventory, no records of recent upgrades — the burden of establishing what was there before a loss falls entirely on the owner's memory and assertion. Carriers that dispute the scope of a claim can do so with relative ease when there is no documentation to support the owner's position. This is not bad faith; it is the predictable consequence of filing a claim without the records to support it.
The Specific Risk for STR Operators
Residential property owners face a version of all of the above. STR operators face the same list with several additional layers of exposure.
The undisclosed-use problem is more acute in STR operations because the gap between what a homeowner's policy covers and what an operating short-term rental actually requires is larger than most owners realize. An owner who has been listing on Airbnb for two years, receiving five-star reviews, and generating meaningful income may have a homeowner's policy that has never been updated to reflect any of that. They believe they are covered. When a guest is injured and a claim is filed, they find out they are not.
The amenity disclosure issue is particularly relevant in STR markets. Properties with pools, hot tubs, fire pits, outdoor kitchens, docks, and recreational equipment are exactly the properties that command premium pricing on Airbnb and VRBO. They are also the properties that carriers underwrite with the most scrutiny. A host who adds a hot tub without notifying their carrier, or who purchased the property with a pool that was never specifically disclosed, may have a coverage gap that only becomes visible at the worst possible time.
The wear-and-tear exposure is compressed in STR properties because guest turnover accelerates the degradation of surfaces, fixtures, and structural elements compared to a personal residence. A deck that would last 20 years in residential use may show meaningful wear at 8 years under high-occupancy rental conditions. The carrier's standard for what constitutes a maintenance failure versus a sudden accidental loss does not adjust for STR use. The bar is the same, and the wear is faster.
Florida deserves a specific mention. Citizens Property Insurance — the state's insurer of last resort, and the carrier that covers a significant portion of Florida coastal STR properties — closed 61% of homeowner claims without payment in 2025, according to Weiss Ratings. For a host who was transferred to Citizens after private carriers exited the Florida coastal market, that is a meaningful data point about what to expect when a claim is filed. It is also a reason to understand exactly what policy you are holding, what it actually covers, and whether supplemental coverage is warranted.
The Claim Starts Before the Loss
This is the framing that most property owners have exactly wrong, and it matters more for STR operators than for almost any other category of property owner.
Most people think about insurance claims as something that happens after a loss. You have a loss, you call your carrier, you file the claim, and then the process determines the outcome. That mental model is understandable, but it is incomplete. The outcome of a claim is substantially shaped by decisions and actions that precede the loss by months or years.
The policy you hold determines what is covered. If flood is not in your policy when the surge arrives, no documentation or good faith filing will produce a flood payment. The amenities disclosed at underwriting determine whether the carrier has the full risk picture. The maintenance records you have kept determine whether the carrier can attribute a loss to deferred maintenance. The photographs you took last spring determine whether the scope of a structural loss can be documented. The disclosure you made — or did not make — about rental use determines whether a guest-involved claim lands on covered commercial operations or excluded activity.
None of these factors are determined at the moment you file. They were determined earlier. The claim process only reveals what they were.
What To Do Before a Loss Occurs
The practical steps that reduce claim denial exposure in STR operations are not complicated, but they require doing them before they are needed.
Conduct an annual policy review with specific STR questions. Ask your agent to confirm, in writing, that your current policy covers your property's use as a commercial short-term rental. Confirm that all amenities — pool, hot tub, dock, fire pit, outdoor kitchen, recreational equipment — are specifically disclosed and covered. Confirm what your deductibles are in dollar terms, not just percentage terms. Confirm how income loss is calculated in the event of an extended covered repair. These answers should come from the policy language, not from a verbal assurance.
Document the property with photographs at least annually. A comprehensive photo set, taken after any significant repair or upgrade and at minimum once per year, provides the baseline record that a claim requires. Photograph every room, every exterior surface, every amenity, every appliance. Date the photographs. Keep them stored somewhere other than the property itself. The photos taken six months before a fire are worth considerably more in a claim than the description provided six months after one.
Maintain a basic repair and maintenance log. Roof replacements, deck repairs, plumbing work, HVAC service, structural repairs, electrical work — record when it was done, who did it, what it cost, and keep the receipts or invoices. This log does two things. It demonstrates that the property was maintained in good condition, which directly counters a wear-and-tear denial. And it establishes the condition and age of specific systems, which becomes relevant when the scope of a loss is disputed.
Disclose amenities fully at renewal. If you have added a hot tub, a fire pit, a deck, a pool, or any other high-risk amenity since your last policy renewal, disclose it to your carrier before the next renewal. If you are not certain whether a specific amenity was previously disclosed, ask your agent. Undisclosed risk is one of the cleanest grounds for a carrier to deny or limit a claim, and it is entirely avoidable.
Understand what your policy excludes before you need it to cover something. Every policy has an exclusions section. Reading it before a loss is an investment of twenty minutes that may save considerable money and frustration later. Pay specific attention to: flood and water intrusion exclusions, commercial activity exclusions, vacancy and unoccupancy exclusions if the property sits empty between bookings for extended periods, and ordinance and law exclusions if the property is in a market with significant code compliance requirements.
Keep records of guest safety communications. If a guest is injured and a claim is filed, one of the first questions involves what the host communicated about known hazards. A written guest safety packet, distributed before arrival and placed inside the property, establishes that the host provided reasonable safety information. The absence of that communication becomes a factor in claims that involve guest injuries on amenities the host never instructed guests to use safely.
The Context Worth Holding Onto
A 44% non-payment rate sounds alarming, and in some cases it represents exactly the kind of carrier behavior that frustrates property owners justifiably. Carriers have raised deductibles, tightened coverage terms, and exited markets in ways that have left many property owners with less protection than they believed they had.
But a meaningful share of that 44% reflects something else: losses that were not covered because they were never supposed to be, claims that could not be substantiated because the documentation was not there, and exposures that were not insured because they were never disclosed. Those cases are not carrier bad faith. They are the predictable consequence of an information gap between what the owner had and what they needed.
For STR operators, closing that gap is operational work that belongs in the same category as property maintenance and safety compliance. It does not require a loss to motivate it. It requires only recognizing that the claim process rewards preparation that happened before the loss — and does not compensate for preparation that did not.
Threshold STR provides professional risk audits and coverage placement for short-term rental operators. A structured audit reviews your current policy against your actual operations, identifies coverage gaps, and produces a documented record you can use going forward. ThresholdSTR.com