Protecting Your Short-Term Rental in Tennessee: Insurance 101 for Pigeon Forge, Gatlinburg & the Smokies

Owning a Smoky Mountain cabin or other rental property is an incredible investment. Hosting those properties on Airbnb, Vrbo, or with a local property management company can turn those mountain views into steady income. But short-term rentals also come with risks that typical homeowners policies don’t fully address.

So let’s take a look at what coverage you actually need as a short-term rental property owner, what Tennessee and local jurisdictions expect, and how to protect your income—and your guests—so you can host with confidence.

Do I really need special insurance for an Airbnb or vacation rental property?

In most cases, yes. Standard homeowners policies often don’t cover business activity like short-term hosting. As reported by the National Association of Insurance Commissioners (NAIC), most homeowners or dwelling policies are not designed to cover accidents arising from short-term rentals and coverage can be denied even if the policy doesn’t list a specific exclusion for short-term rentals. Home-sharing can create coverage gaps a typical homeowners policy may not fill.

What does Tennessee require for short-term rentals?

Tennessee’s Short-Term Rental Unit Act requires short-term rental providers (or the marketplace on their behalf) to maintain at least $500,000 in liability insurance and comply with life-safety requirements (smoke alarms, CO alarms, sprinklers where required), according to the enacted legislation.

Keep in mind that local laws will also apply. In Sevier County, outside of city limits, the county operates a Short-Term Rental Unit inspection/permit program with applications and annual compliance administered through the Fire Marshal’s Office. In the City of Sevierville an annual short-term rental permit is required, including a life-safety inspection managed through the Fire Prevention Bureau.

Bottom line: Make sure your vacation rental property meets both state and local requirements, and that your insurance limits align with those laws.

What about protection available through Airbnb and Vrbo?

Platform programs can help, but they’re not a substitute for your own policy. Airbnb AirCover includes $3M Host damage protection and $1M Host liability insurance. While Vrbo provides $1M in primary liability insurance for eligible stays processed through their checkout platform.

These coverages are great, but they do have exclusions, limits, and coordination rules. You’re going to want to have dedicated short-term rental coverage tailored to your property and risk assessment to complement the coverage provided through these platforms.

What coverages should Smokies hosts consider?

Property (Building & Contents). Covers the dwelling and your host-provided contents (furnishings, appliances) for covered perils. Homeowners forms are often not built for short-term rental exposure—ask about short-term rental/vacation rental or commercial packages.

Liability (state minimum & beyond). Tennessee’s act expects at least $500,000 in liability protection. Many owners target $1M or more for peace of mind—especially with decks, hot tubs, and mountain terrain.

Loss of Rental Income (Business Interruption). Replaces income if a covered loss (like a fire) sidelines your rental. This is a key gap when you rely on rent to cover the mortgage.

Premises-specific risks. Hot tubs, fire pits, steep driveways, wildlife, and multi-level decks are common in the Smokies. Ensure they aren’t excluded and follow local safety requirements.

Umbrella Liability (optional but smart).  Adds an extra layer of liability protection above base limits—often cost-effective relative to the coverage it provides.

How much insurance do I need for a Gatlinburg or Pigeon Forge Rental?

Start with the $500,000 liability benchmark in state law, then right-size to your property and risk profile:

• Consider $1M+ total liability (policy + umbrella).
• Insure the building to replacement cost (not just purchase price).
• Add loss of rental income if bookings service your mortgage.
• Confirm amenities are covered—not excluded.

The Smokies are unique, and so are the insurance needs of cabins, chalets, and condos in Pigeon Forge, Gatlinburg, and Sevierville. As an independent agency, Sparks Insurance shops multiple carriers to tailor coverage to your property, amenities, revenue goals, and local compliance needs.

Our Pigeon Forge office is your local short-term rental insurance specialist. Contact us today for a review of your current insurance coverage on your vacation rental property. We’ll help you line up the right policy, the right limits, and the right endorsements—so you can host guests with confidence.

REFERENCES: 

Tennessee Short-Term Rental Unit Act (SB1086)

Sevier County, TN – Short-Term Rental Unit program (Program info)

Sevier County, TN – STR program (Deadline update)

City of Sevierville – STR permit & inspection (Fire Prevention Bureau)

NAIC – Home-sharing and coverage gaps (Consumer Insight)

Airbnb AirCover – program details (Overview)

Airbnb AirCover – Host Damage Protection

Vrbo – $1M Liability Insurance (Program page)

Vrbo – Liability Insurance (Claims)