An increasing number of people are renting out their homes or extra rooms to earn extra income. Before you jump on the bandwagon, however, you need to know how the issue affects your homeowners insurance. For example, who will pay for the damage if your renter damages your kitchen? To unravel the mystery of renters and homeowners insurance, you first need to answer the following questions:
How Often Will You Rent It Out?
This is one of the primary questions your homeowners insurance company will need you to answer. For example, a few insurers have no problem with you renting out a spare room once or twice. Most of them will just require you to notify them or get an endorsement first.
However, if you make a habit of it, then your regular homeowners insurance package may not cover accidental damages. Renting out your home or rooms regularly means you are engaged in the rental business. As such, you need a business policy like those targeted at bed and breakfast establishments.
For How Long Will You Rent It Out?
It's not just the frequency of the renting that matter; even the duration may be of significance to your insurance carrier. For example, you may need a landlord policy for a long-term renting even if you are only planning to do it as a one-time thing. The transition from short-term to long-term depends on your insurance company's policy. For example, some companies view anything longer than four weeks as long term.
Will You Vacate the Home?
Whether or not you vacate the home will also be of consequence to your insurance company. For example, the endorsement option is usually only available if you continue living in the same house as your renters. For example, if you have a spare room that you occasionally rent out to vacationers, then you may endorse your regular coverage to cover damages caused by renters. However, if you move out (for example to rent out the entire house), then you will most likely need a separate policy for it.
What about Your Renter's Personal Properties?
Lastly, it also matters what type of coverage you are looking for. A standard homeowners insurance policy covers your (the policyholder's) dwelling unit, its contents and liabilities. Therefore, damages to your renter's personal properties aren't covered. To avoid potential disputes with your renters encourage them (some people make it a requirement) to buy renters insurance before they move in.
Have a candid talk with your insurance company before renting out your home. Know what your policy covers so that you can purchase additional coverage is needed.