Insurance Essentials for Renting Out Part of Your Home.

Renting out a part of your Nova Scotia home can be a great way to add a stream of income. However, it’s essential to understand the insurance implications before you welcome your tenants.

Whether leasing a basement apartment, renting out a room, or listing your property on a short-term rental platform, your standard home insurance policy likely won’t provide sufficient coverage. Let’s break down the types of insurance you should consider to ensure you’re adequately protected when renting out a portion of your home!

Homeowners Insurance

While this type of insurance protects your home’s structure, personal belongings, and liability, it’s not equipped to handle the risks associated with tenants living in your home. If renting out a portion of your home, you must modify or supplement your policy to ensure you have the appropriate coverage. Here’s why:

• Tenant-related risks: If a tenant is injured on your property or causes damage to your home, a standard homeowners policy may not cover the liability or repair costs.
• Property loss: Renters may not have the same level of care for your property, increasing the risk of accidental damage.
• Business activities: In some cases, renting out your property could be considered a business activity, further complicating your coverage needs.

Landlord Insurance

If you’re renting out a part of your home on a long-term basis (typically more than 30 days), landlord insurance is essential. Landlord insurance is specifically designed for rental properties and for risks that homeowners insurance does not. Here’s what landlord insurance typically covers:

• Property damage: This includes damage to the structure of your home caused by fire, storm, or vandalism.
• Liability coverage: If a tenant or their guest is injured on your property, landlord insurance can cover legal fees and medical costs.
• Rental income protection: If your property becomes uninhabitable due to a covered peril (like a fire or flood), landlord insurance can help cover the loss of rental income while repairs are made.

Personal Liability Insurance

Even with landlord insurance present, consider increasing your personal liability coverage. Renting out a portion of your home increases your exposure to liability risks, such as lawsuits from tenant injuries or property damage. If your landlord insurance policy’s liability limit isn’t enough to cover a significant claim, an umbrella insurance policy can provide additional liability protection. This policy kicks in when the limits of your other liability policies (homeowners or landlord insurance) have been reached, offering an extra layer of security in case of costly lawsuits.

Short-Term Rental Insurance

If you rent out part of your home on a short-term basis through platforms like Airbnb or VRBO, your insurance needs will differ. Many home-sharing platforms offer some host protection, but it’s essential to understand the limitations. To fully protect yourself, you should consider:

• Host protection insurance: This is typically offered by home-sharing platforms and provides coverage for property damage and liability. However, it often has limitations and exclusions.
• Short-term rental insurance: Some insurers offer policies specifically for short-term rentals, providing more comprehensive property damage and liability coverage. This is a smart choice if you regularly rent out a portion of your home on a short-term basis.

Additionally, be aware that frequent short-term rentals may classify your property as a business, requiring a different type of coverage altogether. Speak with your insurance provider to ensure your policy is tailored to your unique rental situation.

Renter’s Insurance for Your Tenants

Finally, though your landlord or homeowners insurance may cover your property, it does not extend to your tenants’ personal belongings. Encourage your tenants to purchase renters insurance to protect their possessions in the event of theft, fire, or other covered perils. Renters insurance also provides liability coverage for incidents like accidental damage they may cause to your property.

Renting out a part of your home can be financially rewarding, but ensuring you have the right coverage before you embark is vital. Insurance needs may vary depending on how you rent your home, so discussing your situation with an insurance expert is crucial. They can help you understand your risks, suggest appropriate coverage, and ensure your current policies are up-to-date. Contact one of our experienced Bauld Insurance advisors today to discuss your unique rental situation and explore coverage.