If you’re looking to make a little extra money every month and have a spare room in your house, you may consider renting it out. This can be a great way to bring in passive income, but it may affect your life more than anticipated.

 Taking on boarders or renters may significantly impact your insurance coverage, and your homeowner’s policy may not be enough to cover everything you and your new renter will need.

But how exactly does a renter affect your homeowner’s policy? To better answer this question, let’s look at what a homeowner’s policy covers and how the term of a rental can affect the coverage you need before diving into a few specific questions about personal liability, loss of use, and more.

What Does a Typical Homeowner’s Policy Cover?

A standard homeowner’s policy can provide a wide range of coverage to protect your home. Most commonly, it protects both the structure of your home and your personal belongings. 

Structurally, your policy can protect your home and any outbuildings you may have, including garages, tool sheds, and gazebos, so long as stipulated disasters like fire, hail, hurricanes, and lightning cause the damage.

A homeowner’s policy can also protect your personal belongings for approximately 50-70% of the coverage amount you have on your house’s structure. These personal belongings may also cover items you store outside of your home’s premises, trees, and plants,  and expensive items you own like jewelry, silverware, furs, and art.

Short-Term Rentals in Your Primary Residence

If you’re looking to rent out a space in your primary residence for a short time, you may be able to use your homeowner’s insurance policy for coverage. This short time usually must be limited to a week or a few weekends. However, depending on your policy, you can expect one of two results:

• In the first instance, a homeowner’s or renter’s policy will cover damages and liabilities as long as you notify your insurance company about the situation. In some cases, you may need an endorsement or rider to secure coverage.
• If you rent out space in your home regularly, these rentals can constitute a business that would negate homeowner’s coverage from applying. Instead, you must purchase a business policy designed for hotels or bed and breakfasts.

Long-Term Rentals in Your Second Home

You will likely require a landlord or renter’s policy to rent out your space for a longer commitment. The landlord policy will work to protect the property from physical damage caused by covered incidents like fire, lightning, wind, and snow, as well as any rental-related personal property you leave on site, like lawnmowers or appliances.

However, your tenant must also take out a renter’s policy to cover the personal possessions they keep on-site.

How Many Roommates Can I Have Without Additional Coverage?

If you are merely renting out a room or rooms to boarders, your homeowner’s policy may cover you. You must notify your insurance agent to ensure your coverage will suffice. 

Note that this will typically only apply if you have two or three roommates. If you have more than three, you may need to restructure your policy or take out additional coverage.

What if I Face Loss of Use?

If your home is damaged due to weather activity, fire, or other damages, you may lose access to the structure while it is being repaired. That would mean that any tenants or renters of your house will also be out of the home for the duration of any repairs that need to happen, and this can constitute a break of the lease agreement between the two of you, resulting in potential legal action.

You may be required to pay for your tenant’s hotel accommodations if they are put out of the home due to a loss-of-use incident, so make sure to speak with your insurance agent about your coverage in these scenarios to ensure you’re protected.

What Do I Do About Personal Liability?

Having roommates or tenants on your property increases your personal liability. There is an increased chance that you will be sued for injuries or deaths sustained on the property.

Unfortunately, personal liability is not covered in the majority of homeowners’, landlords’, or renters’ policies, so you will need to take out additional coverage to offset expenses for damages and medical expenses.

Key Takeaways

Homeowner’s insurance is an excellent option for anyone who owns their residence. It can protect you against a laundry list of potential damages and drastically reduce the financial payouts you may have to make in case of a disaster. 

However, a homeowner’s policy can’t protect you from everything–especially if you have live-in roommates, tenants, or other residents on one of your properties. In that case, you may need to consider taking out a landlord insurance policy and having your tenants apply for renter’s coverage.

Note that every situation will be different, and the best way to figure out what coverage and policy types will be best for you is by talking with your local agent and reviewing your options together.

If you have any more questions about homeowners policies, renters, or insurance, reach out to our top-tier team today! We’d love to help out however we can.

FAQs

Does renting out a room affect my homeowner’s insurance policy?

Yes, renting out a room can impact your homeowner’s insurance policy, as it changes how your home is used and the level of risk involved.

What changes should I make to my homeowner’s insurance policy if I rent a room?

You may need to update your policy to reflect the additional risk of having a tenant. This might involve adding landlord or rental property insurance coverage to protect against liabilities associated with renting out part of your home.

Does homeowners insurance cover damage caused by tenants?

Standard homeowners insurance typically covers damage to your home caused by covered perils, but it may not cover damage caused by tenants or their belongings. Landlord insurance may offer additional protection for rental properties.

Do I need additional liability coverage if I’m renting out a room?

Yes, renting out a room increases your liability exposure, so you may need additional liability coverage to protect against potential lawsuits or claims from tenants or visitors.

What happens if my tenant is injured while renting a room in my home?

If a tenant is injured, you could be liable for medical expenses and other damages. Liability coverage in your homeowner’s insurance policy may help protect you.

Are there any restrictions on renting a room in my home under my homeowner’s insurance policy?

Some homeowners insurance policies may have restrictions or exclusions related to renting out rooms or operating a home-based business. Reviewing your policy and consulting with your insurance provider to ensure compliance is essential.

Should I require my tenant to have renters insurance?

Requiring your tenant to have renters insurance can provide an additional layer of protection for both you and the tenant. Renters’ insurance can cover the tenant’s personal belongings and provide liability coverage for their actions.

How can I ensure adequate insurance coverage when renting out a room?

Working with an experienced insurance agent or broker can help you assess your insurance needs and customize a policy that provides appropriate coverage for your situation.