Should I charge a security deposit?
Yes, absolutely. But also make it easy for your guests to pay and easy for you to refund at the end of the rental, with minimum transaction fees.

Bear in mind that security deposits made by credit card or PayPal can easily be voided – and usually just after your guest vacates your property. So make sure you take the security deposit in cash or it’s transferred directly to your bank account.

If you have visitors from overseas, make sure you can accept payment in non-Australian currencies. Whatever payment system you choose, ensure you have it set up well in advance to avoid any waiting periods or losing any bookings.

How much should my security deposit be?
The security deposit amount is up to you but it should, at a minimum, cover your insurance deductible. That way, if you need to make an insurance claim you’re not out of pocket. The security deposit should be higher for properties with a greater value or with more inclusions. In addition, consider what other property owners in your area are asking for as a security deposit.

You can never be sure, and accidents do happen, so you need to consider an amount that is appropriate based on the value of your property and your comfort level.

What are my rights to charge guests for damage they cause?
You should make it clear before you accept any booking that any and all damage that a guest may cause, whether accidental or through their negligence, may be charged to them. If you take a security deposit, you are entitled to take any damage out of that amount.

Remember, glasses get broken accidentally and plates get chipped in everyday use, so use your discretion in how much and what you decide to charge guests for. Normally you should charge for more substantial damages or damages that need repair as a result of your guests’ stay. Consider what you would expect to be reasonable if you were a guest in a holiday rental and use that as a guide.

The easiest and quickest way to manage the final inspection of your property is to use a checklist when the guest is leaving. Sometimes items are forgotten or guests move items such as lamps or chairs – having a list ensures you don’t forget to check everything.

Inspections are also best done as close as possible to the guests’ departure, so you can rectify and address any items that have been broken, damaged or are missing.

What type of property insurance do I need?
Holiday Rental Property Insurance is not the same as Home and Contents Insurance or Landlord Insurance. And if you try and claim for damage by your holiday rental guests under ‘normal’ property insurance, your insurance company will probably reject your claim!

You need to have specific Holiday Rental Insurance to cover you for damage to your property while rented to a holiday rental guest. There are many insurers who offer Home and Contents or Landlord Insurance, but there are only a few insurers in Australia who offer short-term rental or Holiday Rental Insurance. So be careful and check your insurance policy.

And most insurance policies require you to have a Holiday Rental Agreement with your guests too. So don’t cut corners, cover yourself and use a Holiday Rental Agreement.

Call your insurance company and ask them these questions:

Is my property covered under my policy for short term (under 3 month) holiday rentals?
Do I need a formal short term rental agreement with my guests?
If I use a rental agent to manage my properties, and they sign the agreements with the tenants, am I covered?
 

Source Article: Security Deposits, Should I charge a security deposit?, How much should my security deposit be?, What are my rights to charge guests for damage they cause?, What type of property insurance do I need?