Security deposit alternatives for vacation rentals, Airbnb and Vrbo
Built for portfolios, not one landlord and one tenant
Deposits were designed for one landlord and one tenant. You're running hundreds of stays a year. Replace held money with a damage waiver program — less friction for guests, more margin and fewer disputes for you.
By Andrew Bate, Co-founderReviewed by Stuart BateUpdated
In short
The best security deposit alternative for a vacation rental is a guest-paid damage waiver program: guests pay a non-refundable $69–$199 fee at booking instead of a $500–$1,000 hold, accidental damage is covered up to program limits, and insurance responds above the manager's retention. It converts better at checkout, ends chargeback disputes over withheld deposits, and turns damage protection into revenue.
Four ways deposits work against you
A $500–$1,000 authorization at checkout is exactly the moment price-sensitive guests abandon. A modest damage fee reads as normal; a large hold reads as risk.
Real damage doesn't respect the deposit amount. Anything above the hold becomes a negotiation, and anything you withhold invites a chargeback dispute you may lose months later.
Every contested deposit is a story your homeowner hears. Slow recoveries and dispute threads erode the confidence that keeps owners in your portfolio.
Held money is returned. A waiver fee is revenue — collected on every reservation, only partially consumed by actual damage, and predictable enough to model.
Switching off deposits, step by step
Most portfolios complete the transition inside a month, without touching in-flight reservations.
- 1Set your damage fee ($69–$99 per reservation on lower-ADR homes, $99–$199 on higher) and remove deposit requirements from your listings
- 2Update your rental agreement and guest communication — Velaris provides program language that explains the waiver in plain terms
- 3Connect your PMS so every new reservation enrolls automatically across Airbnb, Vrbo, and direct bookings
- 4Fund your escrow with about six weeks of expected damage costs — the money stays yours and is reviewed quarterly
- 5Handle damage through one consistent workflow instead of per-guest deposit fights
Model the revenue side with the program calculator — it compares a fee-based program against what you hold and pay today.
Security deposit alternatives for Airbnb hosts
Airbnb has largely removed the deposit as an option: most hosts may not charge one, on or off the platform, and Airbnb directs them to AirCover instead. AirCover's Host damage protection is a reimbursement program Airbnb administers — 14 days to claim, wear and tear excluded, Airbnb decides — and it exists only on Airbnb bookings.
The route professional operators use is the software-connected exception: a fee disclosed in Airbnb's fee field, collected through the PMS, that funds a damage program you control. The guest sees a modest, non-refundable line at checkout instead of a hold; you keep the revenue and run one claims process for Airbnb and every other channel.
- Keep AirCover as the free backstop on Airbnb stays
- Disclose the damage fee in the fee field so it is visible at checkout
- Document damage at turnover — your program, not Airbnb's 14-day clock
Security deposit alternatives for Vrbo hosts
Vrbo gives you a choice per listing: let the guest buy Property Damage Protection — $59 for $1,500 of coverage, $89 for $3,000, $119 for $5,000 — or set a refundable damage deposit, which Vrbo holds as a card on file up to $5,000. Either way you have 14 days after checkout to report damage, and the protection stops at the Vrbo booking.
A program fee does the same job with three differences that matter at portfolio scale: the fee is yours rather than the guest's purchase from Vrbo, the limit is your retention and the insurance above it rather than a $1,500–$5,000 tier, and the same rule applies to the Airbnb and direct bookings Vrbo's products never see.
- Set the guest damage fee once in your PMS; it applies to every Vrbo reservation
- Leave Vrbo's liability program in place — it costs nothing and covers third-party claims on Vrbo stays
- Compare the tiers with a program on the Vrbo damage protection page
Deposit vs. waiver, by the numbers
Take a 1,000-reservation year on homes averaging four-night stays, with damage running $3.50 per night. Same guests, same damage — two very different businesses.
| Feature | Refundable deposit | Damage waiver program |
|---|---|---|
| Guest pays at checkout | $500–$1,000 hold, released later | $99 fee, non-refundable |
| Collected across the year | $0 retained | $99,000 in fee revenue |
| Expected damage (4,000 nights at $3.50) | $14,000, recovered guest by guest — if the dispute holds | $14,000, paid from program funds below your retention |
| Program administration | Staff time on holds, releases, and disputes | $9,000 ($9 per reservation) |
| A $20,000 flood | Capped at the deposit held | Insurance responds above your retention |
| Left for retention and margin | Nothing — the money went back | About $76,000 before insurance premium |
Figures are illustrative; the program calculator runs the same model with your reservations, fee, and damage history. The mechanics of the fee, the retention, and the insured layer are on the damage waiver program page.
How to explain the change to guests and owners
The switch is a communication exercise more than an insurance one. Three pieces of copy do almost all the work.
“A $99 damage waiver replaces a refundable security deposit. It covers accidental damage during your stay up to the program limit, so there is no hold on your card and nothing to wait for after checkout.”
Velaris provides the clause language: that the fee is non-refundable, what it waives, what it excludes (intentional damage, events), and how damage above the limit is handled.
Owners hear one thing: recovery is no longer capped at a deposit, dispute threads stop, and every stay carries documented coverage they can see.
Where deposits still show up
Some channels let guests choose a deposit product, and a few owner contracts or HOAs still specify one. Keep a deposit only where a channel or contract requires it, and run the waiver everywhere else through your PMS so the rules — and the guest experience — stay consistent. See the glossary on security deposits and Vrbo damage protection.
Deposit-alternative questions
What's the best alternative to a security deposit for a vacation rental?
For professional operators, a guest-paid damage waiver program: guests pay a non-refundable fee at booking (typically $69–$199 per reservation), accidental damage is covered by the program up to its limits, and insurance responds above the manager's selected retention. It removes checkout friction, ends chargeback disputes over withheld deposits, and turns protection into a revenue line.
Do guests actually prefer paying a fee over a refundable deposit?
Guests prefer certainty. A visible, modest fee at checkout is a known cost; a large hold on their card is an unknown risk that may take weeks to release. The fee model is now the norm across professional operators precisely because it converts better and generates fewer support conversations.
What happens if damage exceeds what a waiver would cover?
That's the difference between a standalone waiver and a program. In a Velaris program, everyday damage is funded by fee revenue below your retention, and insurance responds above it. A deposit caps you at whatever was held; a program scales to the loss.
Can I keep deposits on some channels and use a waiver on others?
You can, but consistency is the point: one set of rules, one guest experience, one damage workflow across Airbnb, Vrbo, and direct. Because Velaris enrolls reservations through your PMS, the waiver applies uniformly — including the direct bookings platform protection never covers.
Can Airbnb hosts charge a security deposit?
Mostly no. Airbnb's help center says most hosts may not charge a security deposit, on or off the platform; Airbnb points hosts to AirCover instead. The exception is software-connected hosts — operators booking through a PMS — who may collect a deposit off-platform only if it is disclosed in Airbnb's fee field so guests see it at checkout. That same disclosure route is how a PMS-run damage fee appears on Airbnb bookings, which is why a damage waiver program is the practical security deposit alternative for Airbnb.
What's the best security deposit alternative for Vrbo?
Vrbo already offers two: the guest can buy Property Damage Protection ($59, $89 or $119 per stay for $1,500, $3,000 or $5,000 of coverage), or you can set a refundable deposit that Vrbo holds as a card on file. Both cover one Vrbo stay at a time and give you 14 days to report damage. A program fee you set through your PMS replaces both with one rule across every channel, no per-stay cap below your retention, and revenue that stays with you. See the full Vrbo damage protection comparison.
How do platform deposit and damage tools fit in?
Airbnb's AirCover and Vrbo's damage products only apply to bookings made on those platforms, on their terms, with their claim processes. A waiver program is channel-independent: your rules and your limits everywhere you sell. Many operators keep platform protection as a backstop while running their own program as the primary layer.
Works with your PMS
Ready to retire your deposits?
Bring your current deposit policy and damage history. We'll design the waiver program that replaces it — fee, retention, escrow, and coverage.
Design My Program