I want to rent out an apartment above my garage. How would this impact my homeowners coverage?
UPDATED: Jan 22, 2016
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Asked January 22, 2016
On the surface, renting out a portion of your home has no effect on your homeowner's coverage. Your policy will not have any bearing on your tenant, however, nor will it protect you if that tenant is responsible for injuries or damages that arise on the property. This can be especially troublesome, and has the potential of leaving you holding the bag for your tenant, but there is a way to cover that circumstance if you do a little creative insuring.
Your homeowners insurance will not cover your tenants. Instead, it is a good idea to require them to purchase a renters insurance policy which covers their liability and personal property. If the tenant breaks something or causes an injury to you, it will be their insurance, not yours that the claim is filed against. If you attempt to file a claim for someone who is not a qualified family member, your insurance company may terminate your policy.
Having a tenant in your home could make you vulnerable to various claims or problems. If the garage has a doorway leading into the home, put a deadbolt lock on the door that requires a key to unlock. Remember that the tenant can file claims against you for injuries. For the best protection, pick up an umbrella liability policy that will cover any costs exceeding the limits on your home policy.
Notify your insurance company that you are planning to have a tenant. Some insurance companies will not have a problem with doing so, but others may require a change in your homeowner's coverage. If the insurance company is not aware of a tenant and something goes wrong, your insurer may deny the claim on the grounds that they were not aware of the tenant. Remember, the insurance company has a lot at stake in your home, too, and they have a right to know who is living there.
Answered January 25, 2016 by Anonymous