Do Insurance Premiums Increase If You Rent Out A Portion Of Your Home?

Renting out a room in your home might be a pleasant source of income, but you also need to consider the potential rise in expenses. Your present homeowner's insurance almost definitely does not cover all potential liabilities, making insurance a crucial decision. How much of your home you rent out, where you generally dwell, and how frequently you rent out a portion of your property all affect your insurance requirements.

Property Insurance

Typically, renting out a single room in your home for a brief period will not affect your homeowner's insurance premium. Suppose you want to rent the room for more than a couple of months. In that case, you may need to add a relatively affordable "unit rented to others" rider to your existing policy. Another factor to consider is your residency. If you regularly reside in the home in which you are renting a room, your homeowner's insurance remains in full force. Suppose you dwell elsewhere, and the house is occupied only by the tenant. In that case, even if she only occupies a single room, you may require a landlord's policy.

Policies of Landlords

Three plans for landlords offer varying levels of protection. Typically, a basic DP-1 policy covers fire and vandalism as "named dangers." A DP-2 provides coverage for extra hazards, like weather damage and collision damage, if an automobile collides with your home. A DP-3 policy covers everything not expressly prohibited. Exclusions include things like acts of war. According to the website HomeownersInsurance.net, most landlords select the all-inclusive DP-3 coverage.

Gray Zones

During the summer, the owner of a big vacation home may occupy one or two rooms while renting out the other area. Owners of additional residences typically get homeowner's insurance with a "unit rented to others" rider and a minor premium increase. When the income from summer renters is large, as is often the case with desirable beach rentals, and the majority of the house is rented out for the whole summer, a rider may no longer be adequate. Consider requesting a real estate attorney to evaluate your present insurance coverage.

Additional Insurance Needs

In the event of a fire or theft, your homeowner's insurance and tenant rider will cover your losses but not those of your tenant. It is advisable to discuss this with your tenant at the outset, ensuring that she is aware that she must obtain separate renters insurance in order to be insured.