renters insurance homeowners

How Does Renting Out a Room Affect My Homeowners Policy?

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

 Namely, taking on boarders or renters may impact your insurance coverage in a big way, and your homeowner’s policy may not be enough to keep up with everything you and your new renter will need.

But how exactly does a renter affect your homeowner’s policy? Well, to better answer this question, let’s look at what a homeowner’s policy does cover 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, a homeowner’s policy works to safeguard 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. You may need an endorsement or rider in some cases 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 would need to purchase a business policy specifically designed for hotels or bed and breakfasts.

Long-Term Rentals in Your Second Home

To rent out your space for a longer commitment, you will likely require a landlord or renter’s policy. 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 will also need to take out a renter’s policy so that they can have coverage for 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, that may be covered by your homeowner’s policy. You must notify your insurance agent about the situation to ensure your coverage will suffice. 

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

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 for a time 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 for 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?

By having roommates or tenants on your property, you face increased personal liability. This is because 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, landlord’s, or renter’s 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 practically anyone who owns their own residence. It can safeguard 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 as well.

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.