Accommodating roommates or boarders have varying effects on your homeowners insurance depending on your insurance company and living arrangement. There are lots of factors to be considered therefore it is advisable to contact your insurance company before going ahead to rent out that extra room.
Of course, calling your insurance company asking them questions about roommates and boarders might tip them off to your plans, however, it is safer to be open with your insurance firm to avoid them denying your claim or canceling your policy.
But before you make that call let’s go over a few talking points to ensure you ask the right questions and get the best deal.
Generally, having a roommate move in doesn’t have any effect on your homeowners insurance policy, provided you are living on the property. Most insurance companies also require/advise that the roommate or boarder acquire his/her renter’s policy as their properties won’t be covered but other than that nothing else.
The Following Factors Are More Specific and Vary Greatly From One Company to the Next
Number of Roommates/Boarders
Having one or two roommates usually has no impact on your insurance policy or your premium, nevertheless, any number beyond two is a different ball game. Most insurance companies react to this by increasing your premium while others might reject your renewal after your payment runs out.
However, this rarely leads to the cancelation of policy or denial of claims, regardless of the number of roommates. Generally, insurance companies are indifferent to you renting out your rooms but the magic number is two beyond which they start getting sensitive.
Relationship with Roommates
If your new roommate is a family member or spouse that changes the situation slightly, depending on how close you are. If you have great trust in your roommate and they are family, then you can list them under your homeowners insurance and have them pay part of the premium just like any other utility.
This saves you some money as it will be cheaper than taking separate insurance policies. Nevertheless, the money saved comes at a different cost, risk. It is highly unadvisable if you don’t trust the person in question. Why? Well, in the case of a claim, the checks go out to all those listed on the insurance policy.
As a rule of thumb, anyone who doesn’t have an insurable interest in the house or who might prove difficult in remitting the claimed money to you especially when they aren’t living there shouldn’t be listed as one of the named insured.
Other Questions and Tips
A Written Lease Sometimes Come in Very Handy During Claims
If you have a written lease agreement with your roommate your insurance company is usually liable to cover the rental fee, especially if you have informed them about your new living arrangement and the number of boarders and roommate you have.
Your Roommate’s Tenants Insurance is Very Important. Why?
During a claim, your roommate’s properties won’t be covered by your homeowners insurance. You could list their properties on your insurance but that is tantamount to fraud and can lead to your claim being denied or your agreement terminated even before a claim. Of course, if your roommate is listed as one of the insured then you are permitted to list their properties on the insurance policy, otherwise, they will need their own renters insurance to protect their properties.
Insurability of Your Properties in Your Roommate’s Living Space
This is a very important fact to clarify from your insurance company. In most cases, properties in your roommate’s living space are not covered especially in cases of theft. So say, for example, you have the dryer set up in his room and he leaves with it when he is moving out. This won’t be categorized as theft and it won’t be insured. Only things within your living space are covered by your insurance policy.
Any theft within your tenant’s living space either by your tenant or otherwise will not be covered. This creates a major grey area that differs from company to company. Shared spaces like the dining, kitchen or living room is usually a point of argument especially with companies who like to shriek from paying claim settlements.
Conclusion
Renting out rooms in your house is a great source of extra income and can reduce the financial pressures of mortgage and utility payments. Nevertheless beyond the obvious factors to be considered such as security and privacy a major factor often overlooked is insurability.
With these pointers and tips, you are ready to make that call to your insurance company and get all the necessary information without the usual runaround. Clarifying every detail is necessary and advisable. You don’t want your claim denied because of one seemingly inconsequential detail.
Make the call today and forge ahead with insured certainty.
