I currently am renting out the basement of my home. Are my tenants covered under my homeowners insurance?
UPDATED: Aug 14, 2013
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Asked August 14, 2013
Your tenants have fewer rights living on your property than a man who stops by to visit now and then. Since they occupy the property, they are not eligible to file liability claims against you or the property, but since they are not your immediate family, their personal property is not covered under your home insurance. And if the home burns down, they cannot file a loss of use policy or expect your insurance to pay for alternative lodging. In short, tenants without their own renters insurance are completely left out of the home's standard coverage.
Renters insurance is actually a specialized type of homeowners insurance. Instead of covering the structures and property, a renter's policy covers only the liability and personal property aspects. If the home burned down, a renter's policy would provide for loss of use, allowing the tenant to find temporary lodging while they determined the next course of action. Their property would be covered up to the limits of the policy, and if they were determined to be at fault in the fire, their insurance would cover the losses of the home owner up to the limits of the policy.
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The key is that a renter is considered to be like a mini-homeowner. They are not responsible for the home and other structures except where they are the cause of losses or damages, but they are responsible for their own property, behavior, and actions. A renter's insurance policy covers these things, taking the financial threat off the renter. The structures are not a renter's responsibility, but everything within their rented space, or stored on the property, are.
For the homeowner, making sure that your tenants have proper insurance will protect you. As the actual owner of the property, someone who fails to get results from a claim against your tenant could also come after you as long as the damages or injuries occurred on your property. The liability portion of your policy will protect you to a certain extent, but the best option is if your tenants insure themselves.
Keep in mind that having a tenant living in your home increases your own risks. If you haven't already done so, it could be a good idea to pick up an umbrella policy to protect you against the added liabilities a tenant could cause. This type of policy is inexpensive, and covers excess liability coverage for all of your listed liability policies, including your car and home.
Answered August 14, 2013 by Anonymous