Renting out part of your home can be a great way to make extra cash for many homeowners. However the chance for property damage may go up, and you'll need to see if you're properly protected with your current homeowners insurance if you make this decision. Whether you need landlord insurance or if your homeowners insurance will still cover you will depend on your current homeowners insurance company and a few additional factors.
To be safe, you'll need to call your insurance agent to determine if you can keep your or expand your current coverage. We recommend you do this because in the event of tenant damage, your homeowners insurance policy may not cover damages in the event that you did not disclose that you're renting out a room.
Your homeowners insurance agent will consider a few factors in determining what type of coverage you may need on the call:
After determining the information above, it's up to your insurance company on how they want to proceed. This could mean that your policy will still cover you without raising your premium, your premium could go up, you may have more limits on your coverage, or in some cases, your homeowners insurance policy will no longer cover you at all. While this can be a difficult situation to navigate, it's better to determine this before something happens to your property.
In the event that your homeowners insurance policy is cancelled because you are renting out a room, you'll want to look into landlord insurance, which is designed for property owners who need property and liability insurance for their rental property. Landlord insurance has the added benefit however of protecting you in case of the loss of use of your home resulting in you losing your rental income. A standard homeowners insurance policy will only cover you for the replacement cost of the house, and potentially the cost of where you need to stay in the interim, however a landlord insurance policy can also cover the lost of income you may face during this time.
When considering if you need to require renters insurance from your tenants, you'll want to consider a few factors:
A standard renters insurance policy will not only cover your tenant's personal belongings if a covered loss such as a house fire occurs, but also will provide liability insurance in the event that something your tenant does leads to a third party needing medical expenses covered. While your landlord insurance covers legal fees and medical expenses as well, filling claims can lead to increased premiums on your own insurance.