I’m Renting Out A Room In My Home. Will That Impact My Insurance?

Home insurance services are designed to protect your property and belongings against theft, fire and weather damage. Your insurance allows you to recoup the cost of damages or stolen items after an unforeseen event. If you own a rental property, your insurance for that space will be different from that of the space in which you live. However, if you are planning on renting out a room in the property you live in, it will affect your insurance.

Traditional Home Insurance

When you meet with your broker to use their insurance services, they will offer traditional home insurance. This coverage is designed to give you peace of mind. For example, if your home is damaged by a fire, your insurance will cover the cost of repairs. Furthermore, your insurance will cover the cost of replacing any items that were damaged such as laptops, televisions, furniture, art, jewellery etc. Living expenses may also be covered if you are unable to live in your house while it is being repaired. Your policy will also include liability coverage to protect you if someone falls on your property. However, your home insurance policy may not cover you if you rent out a room in your house.

Renting Out A Room Affects Your Policy

Renting out a room in your house can offset your mortgage payments. If you’re struggling to make ends meet or looking for extra cash, having a tenant allows you to collect rent as a new income source. However, it’s important to note that your insurance policy will change because most traditional home insurance services are not set up to cover room rentals. You will need to meet with your broker and discuss your options. Your broker may suggest amending your current policy to cover the room rental or scrapping your old policy altogether to create a comprehensive new one. Moreover, there is a chance that your premiums may go up with your new policy if it includes a clause for the room rental.

Commercial Insurance For Room Rentals

If you are simply renting out one room to a university student or single person, you are not operating a business. But, if you are renting out multiple rooms or will be having a rotating number of guests week in and week out like a hotel or bed and breakfast, you need to purchase commercial insurance. Why? Because you are technically running a business out of your home.

Some People Are Good, Some People Aren’t

You have probably seen the news reports detailing the damage done to rental properties, especially those who rented out their places through AirBnB. The people that rented out their homes had no way of knowing if those they rented to would respect their property. In most cases, people are decent and don’t trash someone’s home while they’re staying there for the weekend. Yet, there are some bad apples that damage your property and disappear without a trace since they booked the room with a fake name and stolen credit card.

This isn’t to say that you shouldn’t rent out a room in your house but do a thorough background check on the person you are hoping to have move in. Ask potential tenants for government issued identification such as driver’s license, passport or Ontario health card. Perform a credit check and ask for proof of employment so you know they have a steady source of income and won’t skip out on the rent. In addition, ask for references from their previous landlords. If you are renting to a university student who has never lived away from home before, you can speak to their parents and have them act as co-signers on the rental agreement/lease.

You need a rental agreement/lease and cannot act in good faith. This will protect you if your tenant ruins the room or doesn’t pay.

Don’t Keep It A Secret

When renting out a room in your home, tell your insurance company. Many feel that disclosing this information isn’t important when in fact, it’s crucial. Unfortunately, not everyone is going to treat your property with respect. If you don’t tell your insurance broker that you have rented out a room and that person causes damages, you will not be covered.

For more information about WB White’s commercial and residential insurance services, give us a call at 416-736-6500 or fill out a contact form here.