Home Insurance Articles
How Renting A Room Affects Your Home Insurance Coverage
2010-01-30
Renting out a spare room in a house sounds like an ostensibly good idea. A homeowner can generate extra income that can help offset monthly mortgage costs or simply provide extra money each month to cover expenses. Homeowners should exercise caution, however. Renting out a room could violate local zoning laws or homeowners' association rules. What's worse, it could create a gap in the home insurance coverage that could wind up costing the homeowner more than they generate through rent. If a renter turns out to be less than desirable, the homeowner could need insurance to cover damage to the home, recover unpaid rent, or for legal protection if the renter files a lawsuit.
If renting a room generates income for the homeowner, it can be considered a business operation. This changes the status of a home, just as building an addition to it would. If the homeowner does not let the insurance company know that such changes have occurred, the home insurance company can deny claims on this basis. Operating a home-based business could, and most likely will, limit the home insurance coverage in areas such as property damage, personal liability, medical payment, and identity fraud. Homeowners should sit down with their insurance agents, review their home insurance, and discuss how the home insurance coverage is specifically affected if the homeowner rents out a room.
If a homeowner begins renting out a room for money, the homeowner has become a landlord, and landlords need insurance to cover their liability issues with renters. A homeowner's insurance probably won't cover a renter who falls down your stairs and breaks a leg. The homeowner needs liability insurance to cover things such as medical costs or income loss. Landlord's insurance will cover liability issues associated with the physical area being rented, but it won't cover a tenant's personal belongings. For this, the renter needs to purchase his or her own renter's insurance. This is something a landlord would want a renter to have because it would also cover the renter's liability if he or she damaged the home of the landlord. Landlord insurance will also help ensure a homeowner's legal rights, such as evicting renters or recovering unpaid rent.
All of these various protections will change the cost of the insurance policy. Homeowners should ask for home insurance quotes that include add-ons that cover home-based businesses or landlord coverage. The latter is more specific to the types of problems and home insurance coverage that a landlord would need, but a home-based business add-on will provide some protection. The goal of the homeowner/landlord is to make sure that the home and homeowner are protected from problems that a renter could create.