The good news…you probably can rent your basement apartment without jeopardizing your homeowners insurance or even having to pay a higher premium, as long as you continue to live in the home and don’t rent to more than two roomers or boarders. But before you place that ad, you should check with the city to make sure that you abide by any required local ordinances, such as having a separate entryway for your tenants or smoke and carbon monoxide detectors.
Your current homeowners policy covers the entire structure, including the area that is rented, your property (furniture, clothing, electronics, appliances, etc.,) and liability coverage in case someone is injured while at your home or their property is damaged up to the policy limits. It does not cover your tenant’s personal property and belongings. And, since they are occupants of the home, they are not eligible to file liability claims against you if they are injured due to your negligence. Tenants are completely left out of the home’s insurance coverage. To remedy this, all renters need to obtain their own renter’s insurance policy and it is good practice to require proof of renter’s insurance before a lease is signed.
Renter’s insurance covers a tenant’s personal belongings, but also includes personal liability coverage and loss of use, allowing the tenant to find temporary lodging in case their rental is uninhabitable. This takes the financial threat off the renter. The structure or home is not the tenant’s responsibility, but everything within their rented space or stored on your property are.
Renters insurance typically provides coverage for the following situations:
The typical homeowner insurance policy includes four types of essential coverages:
Having extra income is great. But a tenant living in your home may increase your own risks. It is recommended that you increase your homeowners liability limits to $500,000. We also recommend that you buy an umbrella policy with a limit of at least one million. This extra policy will cost less than fifty cents a day and will protect you against any added liabilities a tenant could cause.
If you’re ready to take on a tenant in your home, talk to the agents at Foundation Insurance Group, serving Virginia and the greater Louisville, Kentucky metro area to make sure both you and your renter have the right insurance to protect your property. Foundation Insurance Group agents are always happy to review your homeowners insurance policy and discuss your options to limit your exposures. Contact us today.