Renting a room in your home can be a helpful source of extra income, and more and more people across the country are doing it. Unfortunately, many homeowners, often out of fear of a higher premium, choose not to tell their insurance provider that they are renting out a portion of their home. But in order to fully protect yourself against potential damages and loss, it’s extremely important you understand what your home insurance policy covers and doesn’t cover if you choose to rent out a room.
Before renting a room in a house that you own, you must check with your city’s laws regarding zoning and renting property, since you may need to obtain a permit or license from the city before you can legally rent out a room. The website for your city’s housing or permits department are a good place to begin your research as to what exactly you need to do before renting out a room in your home.
Next, contact your insurance provider and tell them how often you’re renting the room and how many people you estimate will be renting it in the course of a year. With some policies, you may be completely covered so long as you don’t rent to more than two renters at a time, and see no increase in your premium. Other polices may offer coverage only in limited circumstances while others may not provide any coverage at all.
Your home insurance policy may have a clause that says your provider can deny any claims related to “business (or commercial) activities” in your home, and it’s likely that collecting rent for a room in your home constitutes a “business activity.” Your policy’s liability coverage, which protects you from lawsuits in the event that you cause injury to another person, may not cover bodily injury or property damage you might cause while operating as a landlord in your home. Keep in mind that each insurance company defines “business activities” differently, so check with your provider to see whether or not you are covered. You may need to purchase extra coverage or a landlord’s insurance policy.
Finally, be aware that Airbnb, the popular website that connects renters and homeowners (“hosts”) to travelers in need of a place to stay and looking to avoid the expense of a hotel, does not offer an actual insurance policy that covers accidental damages or injuries caused or sustained by paying guests. Before becoming an Airbnb host, check with your renters or home insurance provider to see if you are covered in the event of a guest slipping on soap in the shower or falling down a staircase.