Renting out part of your house to a student is a popular way to help with mortgage payments by earning extra monthly income. However, welcoming a boarder into your home can affect your insurance coverage. Standard home insurance policies aren’t designed to cover the additional risks associated with a tenant living in your home. Before you make significant changes to your property, including turning a space into a rental unit, you should talk to your insurance provider. We’ll take a look at the insurance matters you need to consider before you begin sharing your home with a tenant.

Insurance for home renovations and upgrades
If you plan on renovating your home to accommodate renters, you need to tell your insurer before you begin the renovation process. Depending on your current home insurance coverage and the nature of the renovations you’re planning, you may need to purchase additional liability or builder’s risk insurance. These insurance types would protect you from liability if someone were to be injured while working on your property.

Renovations designed to make your home more attractive to prospective tenants, like adding a bathroom or basement apartment, will increase the value of your home as well as its replacement cost.

You may also want to improve your home’s security by upgrading burglar and fire alarm systems or installing higher quality windows and doors. Regular maintenance and safety upgrades can help lower your insurance premiums.

Make sure any belongings inside the rented area are insured.
While you wouldn’t keep your most prized possessions in a room you’re renting to a student; it will probably contain some of your furniture. If you’re renting out a larger area, like a basement apartment, the rented space will likely also include essential kitchen appliances and maybe other amenities like a washer and dryer. Talk to your insurance company to make sure these items are covered under your insurance policy.

Your renters should also have contents insurance.
Your insurance coverage doesn’t protect your tenants from damage to the property they keep inside their rental unit. Anyone renting an apartment or room in your home should purchase a contents insurance policy to protect their belongings from situations like theft, fire, or water damage. It’s also possible for renters to buy insurance that can cover the cost of a temporary relocation if you (their landlord) need to repair the space they’re renting.

Protect yourself from a lawsuit with premises liability coverage.
As a landlord, premises liability insurance is one of the most important types of coverage you should include in your home insurance policy. If a tenant or a guest were injured on your property, you could be held legally responsible. Maintaining the safety of your property is the best way to reduce the risk of injuries and keep your insurance premiums low. However, liability insurance will help cover your legal fees if someone has an accident on your property.

Are you renting to long-term or short-term tenants?
Whether you are renting to a long-term or short-term tenant also affects your home insurance as a landlord. A student renting a room or apartment on your property for a semester or an entire school year would be considered a long-term renter.

In contrast, a short-term rental is when someone rents a living space for less than a month. The term ultra-short-term rental applies to a space rented for fewer than five nights. Both short term and ultra-short-term rentals are usually associated with temporary accommodation services like Airbnb. Airbnb offers “Host Protection” insurance coverage to protect against third-party liability claims. Still, it’s often a good idea to protect yourself from property damage. You may need additional coverage to accommodate short-term rentals (like Airbnb tenants) because they’re considered much riskier than long-term tenants. However, even long-term tenants require additional coverage than the average home insurance policy.

Long-term rentals are generally easier to insure than shorter-term rentals. A single tenant committing to living in your home for an extended period is considered a lower risk than multiple tenants staying in your home in quick succession with a less rigorous vetting process.

Many insurance companies will place restrictions on the coverage they offer for properties with rental units, while some might refuse to provide landlord insurance altogether. However, when you live on the same property as your rental unit, insurers are more likely to offer landlord insurance. If you’re looking to rent out your entire property while you live elsewhere, you may need to find an insurance company that specializes in this type of coverage.

Some landlord insurance policies can even compensate you for lost income if damage to your home forces your renter to move out while repairs are being completed. Contact your insurance company to discuss how they can support you in your move to becoming a landlord. Renting part of your home to students can be lucrative if you have all of the necessary insurance coverage for your home, its contents, and liability protections.

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