Renting out your basement or a bedroom? Taking in boarders? Thinking of putting your house on a home-sharing app?
In these circumstances you have changed the risk profile of your living arrangement, and this has insurance implications. Therefore, you need to talk to your insurance representative before making any of these changes to ensure you have the right coverage.
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Your home insurance policy only covers property, contents and personal liability for you, your spouse, and your dependants. It does not include your tenant’s contents or personal liability.
Failing to provide full disclosure relating to occupancy may void your home insurance policy. If, for example, a tenant accidentally starts a fire in your basement, and your insurance provider was unaware that you had a tenant, your policy could be voided. This would leave you without coverage at a time when you need it most.
With short-term rentals especially, your tenants may not feel invested in the property, or compelled to care for it, elevating the risk of possible damage.
Having the appropriate coverage as a landlord will protect you. It replaces lost rental income if tenants must vacate the premises due to damage from an insured loss. And it covers defence costs if a legal claim is issued against you due to tenants or their guests sustaining personal injury or damages on the property.
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Tell your insurance representative before your living arrangement changes, and keep a written record of that notification.
Be aware that if you own a rental property you don’t live in, you need a separate insurance policy. Speak with your insurance representative about the coverage you need.
Carefully screen your prospective tenants. This screening should include a background check, interviews and references. There are plenty of horror stories of landlord-tenant relations gone wrong; do what you can at the outset to avoid one happening to you.
Have a rental agreement that clearly sets out the rental conditions.
Ensure the rental agreement requires the tenant to have insurance for their possessions and liability. This ensures they understand you are not insuring their possessions or actions. Require the tenant to provide proof of insurance annually.
Taking these provisions with prospective tenants may narrow the list of applicants, but it is worth it: it helps ensure that you and your tenant clearly understand the contractual arrangement between you, and it will provide both of you with peace of mind in the event of a loss.
