Sounds like the level of protection a contract adds is more perceived than actual.
Yes, it is more perceived than actual for the reason Disneynutz raised above. First, you would have the legal and financial challenge of getting a judgement. And then, IF you get a judgement (and that's a big if), you have the problem of trying to collect it.
Anyone who stiffs you is certainly not going to just pay you just because some small claims judge says they should. So you would have to hire someone to identify assets you could seize (another legal action, probably) and then actually go through the process of collection.
IMHO, the primary benefit of a contract is to ensure that both parties clearly understand their respective obligations, timelines, etc. Most rental difficulties are misunderstandings, not fraud or theft.
To the degree that your contract makes things clear, it's helpful. If you think a contract is going to protect you from loss because it gives you legal rights, you're living in a dream world.
Yes, a contract will help you...but only if you are willing to go to a considerable effort and expense to enforce the contract. For most
DVC rentals, the legal cost (with a very uncertain outcome) would be far more than the loss.