Once in a while we have clients tell us they’ve decided to rent rooms in their home. This isn’t exactly the same as renting the house out altogether, because you’re still in it. What you’ll find is that as long as you are still occupying the home, most homeowners insurance companies won’t have a problem with your decision to rent a room to a roommate or boarder. There are, however, a couple of things you’ll need to keep in mind.
Loss of Use
Call your insurance agent and ask what would happen if you were not able to rent your room to a roommate or boarder. If, for example, there was a fire, you would theoretically lose the ability to provide the tenant a living space and this could result in a break in the lease. Ask your agent if this is covered under your policy and what other scenarios you will want to consider.
Maximum Number of Roommates
Most insurance companies will not restrict you from having one or two roommates or boarders. However there may be necessary coverages that result in additional premium. If you own a huge house and plan to run something that is more like a boarding house, with 4 or 5 tenants, you’ll want to talk to your insurance company because the scope of your use of the household has changed significantly and you may need to restructure your policy and/or consider commercial insurance.
Regardless of the number of tenants, you should take a look at the personal liability and medical expenses portions of your homeowners policy. These sections cover you in the event you are sued if someone is injured on your property. The standard is usually $1,000,000 but the limit can go up to $5,000,000. If you have a boarder, you may want to consider increasing this coverage limit as you will have more people in and out of your house.
Your homeowners insurance policy covers your dwelling and personal belongings, but it will not always cover the personal property of your tenant. Your tenant will have to purchase his/her own renter’s insurance coverage to protect their belongings from fire, theft, or other accidents. His/her renter’s insurance policy will also include personal liability and medical expense coverage. This is important because you’ll want to make sure renters are able to take care of claims against them if they are found negligent in an accident in your home.
Every insurance company handles these situations differently. Call your insurance professional to discuss and double check before opening your home up to others.