The idea of who a landlord is has evolved dramatically over the last few years. Rather than a hidden corporate entity, many people are now seeing landlords as everyday homeowners who have rented out their finished basements, rooms, or investment properties.
With the booming Ontario housing market, low interest rates, and the rise of Airbnb culture, many homeowners may be considering renting out their own spare rooms to earn some extra cash. But before you start handing off your keys to strangers, it’s important to understand the risks of renting your home and how to acquire proper insurance coverage.
Know the risks
Renting out your spare bedroom through sites like Airbnb, Facebook, or Craigslist may sound like an appealing way to make some extra rental income. However, it’s not without potential consequences. Doing so may open you up to all kinds of risks, including vandalism, theft, and unreliable tenants who simply do not pay.
What may seem like an easy way to earn money comes with many important considerations that you should be prepared for. For example, are you covered if a paying guest is injured? Well, if you didn’t notify your insurance company that you are renting out your home and condo, the coverage included in your policy might not cover you.
Getting the right insurance
To make sure that you are properly covered, it’s important to meet with your insurance broker to acquire the protection you need. In fact, taking on a tenant can increase your home insurance premiums or even force you to get a different kind of insurance. Your insurance broker will consider a few factors in determining what type of coverage you need, such as:
- Is it a one-time or short-term rental?
- Is this going to be a series of short-term rentals on a platform like Airbnb?
- Will there be multiple tenants?
The number of tenants you rent to and the type of rental properties you own will determine your exposure to risk and your coverage requirements. A family renting an apartment unit is considered a different type of risk than a student who is renting a room for the school year. Short-term leases are often considered to be riskier than long-term, and your screening method can ultimately affect how your landlord insurance policy (also known as rental dwelling policy) is written.
In fact, some policies may not permit you to rent your home to someone else, even for a brief period. As such, it’s crucial to check with your insurer to determine what insurance coverage you need when renting your home.
What’s covered in Ontario
Don’t assume that you’re covered with your current policy. Depending on the rental scenario, your standard homeowners policy may not cover losses incurred while your home is rented out. With a rental dwelling policy in Ontario, you can expect different options such as:
- Protection for the building(s) and contents on your property from events like fire and other severe weather events
- Liability protection if someone is injured on your rental property
- Coverage for rent owing if a tenant defaults on rent income
- Coverage for appliances, furniture, electronics, and other valuables and belongings
- Coverage for theft, vandalism and break-ins
It’s no secret that a steady rental income can help pay the bills and the mortgage, or go towards a retirement fund. However, without proper coverage, all it takes is one unfortunate accident to get you in over your head. If you’re renting out a part of your home and something goes wrong, your home insurance company could very well deny your claim and cancel your policy, leaving you without any liability coverage when you need it the most.
To protect yourself and your assets, it’s important to call your insurance specialist and ask about your current policy and whether it needs to be updated or changed with your situation.
For more information on homeowners insurance or rental dwelling policies, please don’t hesitate to contact us!