It depends on how big the damage is. Small breakages are usually sorted out directly with the guest or simply absorbed as a cost of doing business. Larger damage goes through the platform's own protection scheme first, and anything beyond what that covers, or anything the platform will not touch, falls to your own insurance. There is no single system that handles all of it, which is exactly why hosts get caught out.
Three different things, not one
The security deposit. Airbnb does not hold a deposit in the traditional sense on most bookings, it runs a request-for-payment process instead: you report the damage with evidence, the guest is asked to pay, and if they refuse or do not respond in time, Airbnb can step in. Booking.com and Vrbo vary in how they handle this, and some direct-booking setups still use a genuine upfront deposit held against the stay. Whichever system applies, a deposit or damage request is really only useful for damage that is clearly the guest's fault, clearly priced, and reported quickly.
Platform host protection. Airbnb's AirCover for Hosts and similar schemes on other platforms promise to cover certain damage caused by guests during a stay. These are worth having and worth using, but they are contractual protections from the platform, not an insurance policy. That distinction matters in practice: cover can exclude categories of loss, cap the amount paid, and depend on you following the platform's own reporting process within a set window after checkout. Miss the window or fail to provide the evidence they ask for, and the claim can simply be refused, with no appeal beyond the platform's own review.
Your own insurance. This is the part most hosts underestimate. A short-let insurance policy, the kind we cover in more detail elsewhere on this site, is what responds to damage that is bigger than a platform scheme will pay, damage from a guest booked outside the platform, or damage where fault is genuinely unclear. If you are letting on a policy that was never written for short-term guests, or relying on Airbnb's cover as your only safety net, you may find there is nothing behind either of them when something significant happens.
What actually happens with small damage
Most damage on a short let is minor: a broken glass, a stained sheet, a scuffed wall. Reporting every one of these through a formal platform process is rarely worth the time it takes, both for you and for the guest, and most hosts simply replace the item and move on. Some fold this into the cost of running the property the same way they budget for cleaning, rather than chasing every guest for a few pounds. This is a judgment call, not a rule, and it is worth deciding in advance roughly where the line sits for your property, so a cleaner or manager knows when something is small enough to absorb and when it is worth reporting properly.
What actually happens with real damage
For anything beyond minor, the sequence that works is: document it immediately, before the next guest arrives and before anything is cleaned or moved, with photos and a clear description. Report it to the platform through whatever process it has for damage claims, within whatever window it sets, because a late report is the single most common reason a claim gets refused. If the platform's process does not fully cover the cost, or the booking came from outside the platform entirely, that is where your own insurance policy takes over, and this only works smoothly if the policy was actually written for short-term letting in the first place.
This is also where a management company earns its fee in a way that is easy to overlook. Reporting damage properly, with the right evidence, inside the right window, on the right platform, is an administrative job that has to happen fast and correctly or the claim goes nowhere. An owner running a property alone, dealing with this for the first time while also trying to turn the flat around for the next guest, is the person most likely to miss a deadline or send the wrong evidence.
What guests are actually liable for
A guest is generally liable for damage they cause beyond normal wear and tear. They are not liable for a boiler failing, a leak from a neighbouring flat, or something that was already faulty before they arrived, and trying to pursue a guest for that kind of thing tends to go nowhere and does real damage to your reviews. The distinction between guest-caused damage and ordinary wear is not always obvious, and it is worth being honest with yourself about which one you are actually looking at before you open a claim.
What to actually have in place
Check what your platform's damage protection actually covers and how quickly you need to report something, before you need to use it. Take photos of the property between every stay if you can, or have your cleaner do it, so there is a clear record of condition before the next guest checks in. And make sure the property's insurance policy is written for short-term letting specifically, because that is the layer that catches everything the deposit and the platform do not.
If you want to know whether your current setup actually covers you properly, send us the postcode and we will tell you honestly what is missing.
This is general information about how damage is typically handled on a short let, not legal or insurance advice. Platform terms and insurance policy wording both vary and change. Check the current terms of the specific platform you list on, and confirm your policy's position on guest damage with your insurer or broker.