If you have renters in your home, be they tenants or roommates, in a scenario where you are the owner, and they're the renter, you are technically a landlord. Your home insurance is going to be affected in different ways. Here's what you need to know:
- Many providers will allow up to two roommates with no changes being made to your policy.
- Three or more roommates will usually raise your premiums. Again, different insurers have different rules in this regard, but three is the most common cut-off for free pass roommates and tenants.
- It's generally a good idea for every renter to have their own renters insurance and liability coverage. Your policy might cover your possessions, but not theirs’. Further, if your roommate is sued for something that happened on your property, and they do not have liability protection, then you might become the next viable target for a lawsuit.
- You will need a lease for all insurance-related matters. Many roommate/tenant scenarios are fairly informal. You rent a room out to a friend who's struggling to find a place of their own, a cousin who just flew into town, and you might not want to bring a lot of paperwork into the situation. But you should at least write up a lease with every new tenant to make sure that you have documentation should you need to file a claim. It should clearly list the responsibilities of each tenant.
- If someone moves in but is not technically paying rent, then they're simply a long-term house guest. In this case, all of the same rules apply as with any guest, even if they're staying for more than just a few nights. That is: You are responsible for the additional liability you invite into your home with another person. If they have their property stolen, there may be no recourse for filing a claim as they are not officially a resident of the home. Therefore, they would only be able to make a claim on their own homeowners insurance, if they even have one. This is where the lease comes in handy.
You are technically a landlord when you have roommates in a home that you own, no matter how informal the arrangement. While your home insurance needs may not be as extensive as if you were renting the entire house out to another family, you do have more things to consider than the average homeowner. If you want to rent out that spare bedroom, just make sure to be up front with your insurance provider so that they can let you know what you need to do.